The State Bank of Pakistan (SBP) has extended the scope of the Credit Guarantee Scheme (CGS) by including Microfinance Banks (MFBs) as eligible Participating Financial Institutions (PFIs) in order to enable micro enterprises to benefit from this Scheme. Now MFBs would be able to extend loans from above Rs 150,000 upto Rs 500,000 to micro enterprises for a tenor not exceeding five years, says IH&SMEFD Circular Letter No 14 of December 4, 2012.
The Micro Finance Banks, which have already obtained prior approval of SBP for undertaking 'microenterprise' lending as per AC&MFD Circular No 02 dated March 16, 2012, can apply for allocation of Credit Exposure Limits under the Credit Guarantee Scheme, the Circular Letter added. It may be pointed out that earlier the CGS facility was open to commercial banks only. The Microfinance banks would find great comfort in taking credit risks as they now enjoy the risk coverage of 40 percent on their loans to micro enterprises.
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