Credit scheme for women

In order to facilitate women entrepreneurs operating in the underserved areas of the country, the State Bank has launched a refinance and credit guarantee scheme for women borrowers. According to this scheme, financing of up to Rs 1.5 million would be provided to women entrepreneurs in the underserved areas for a period of up to five years, including a maximum grace period of up to six months at a mark-up rate of 5 percent to meet the credit needs of their businesses. Refinancing will be provided by the SBP at zero percent to participating financial institutions (PFIs) for onward lending to women entrepreneurs and such loans will be eligible for 60 percent risk coverage under the SBP's credit guarantee scheme for small and rural enterprises. According to the SBP, banks/DFIs will not take more than 30 working days in evaluating an application for financing under the scheme from the date of receipt of complete information from the borrowers and at least 20 percent of the funds would be earmarked for Balochistan. As for rescheduling of loans, the principal amount of refinance will only be rescheduled in a way that total tenor of refinancing under the scheme does not exceed maximum period of 5 years from the date of original disbursement made by banks/DFIs. If a borrower repays the loan amount or its instalment before the due date, the PFI will be under obligation to repay the amount so received within 15 days to the concerned office of the SBP, failing which, fine for late adjustment of loan will be recovered from the concerned PFIs at the rate of paisas 60 per day per Rs 1000 or at such rate as may be announced by the State Bank from time to time. In case a borrower fails to repay the amount of instalment as per the original repayment schedule, the PFIs will be entitled to charge normal rate of mark-up upon such overdue principal amount. Any recovery against the NPL shall be treated as recovery of principal and shared between SBP and PFI in the ratio of 60:40.
The latest move by the State Bank to launch a concessionary credit scheme for women entrepreneurs in the underserved areas of the country appears to be a very good initiative to empower businesswomen by nurturing their skills in various professions. Such a noble idea was made popular by the establishment of Grameen Bank in Bangladesh by Muhammad Yunus. The scheme is definitely a calculated affirmative action by the SBP to encourage the flow of funds to small enterprises run or planned to be run by women in the underserved areas and would help sustain an inclusive growth across Pakistan. The scheme has also very positive features to attract the attention of business enterprises run by women. This is for the first time in the history of the SBP that refinancing will be provided by it at zero percent interest rate to PFIs for onward lending to women entrepreneurs of underserved areas at a mark-up rate of up to 5 percent per annum. Adjusted for the rate of inflation in the country, this rate of mark-up in net terms will be almost zero. The utilisation of borrowed funds in the underserved areas could also mean the development of backward regions of the country which is a noble objective. As the provision of standard collateral is often difficult, the SBP has advised banks to provide financing under the scheme, preferably under the personal guarantee of the borrower. The provision of risk coverage under the Credit Guarantee Scheme should encourage the PFIs to venture into the field without worrying too much about the repayment of the loan. However, while the scheme is well-intentioned, it needs to be pointed out that the targeted group would not be able to get the intended benefit if the scheme is not properly popularised through media and the branches of PFIs located especially in the underserved areas of the country. Raising awareness will, therefore, be crucial in its success. Also, it is felt that the SBP is gradually shifting its focus towards the achievement of certain social goals which is the job of fiscal rather than monetary authorities. It should also try for consolidation of credit rather than segmentation of credit which could lead to sub-optimal utilisation of financial resources of the country.