The Union of Small and Medium Enterprise (Unisame) Vice President, Mohammad Hassanally has suggested that the State Bank of Pakistan (SBP) should cut post-shipment export refinance on grains at least by 2 percent. In a proposal to Governor SBP Dr Ishrat Hussain, Hassanally said that for the post-shipment refinancing banks should consider the documents, whether against L/C or contracts, as collateral. For such lending, SBP may specifically entertain some exporters having clean record.
The Unisame VP pointed out that at the end of year 2003 and early 2004, the union raised voice against low-rated financing offered by the banks as funds, besides being utilised by speculators, proved high fiesta was for hoarders of wheat, rice, various edible grains and other commodities.
In 2004, again soft-rated loans were advanced to rice milling sector the result being that the millers, mostly of Sindh, released stocks at a slow pace keeping local rates on higher side, but now they are stuck with stocks most of which is damaged due to un-seasonal rains. Had these been sold by them in peak export season (jan/April) their funds would have been released and the country would have earned approximately 70 million dollars more.
Though late, now the correction has been done but unfortunately this has placed SME exports under heavy financial burden. Mark-up rate for export refinance is exorbitantly high. One of the reasons for such high rate is certain suspicion regarding ill usage of such funds.
He said that there are two categories of export refinance; one is pre shipment and the other is post shipment. Mohammad Hassanally suggested that mark-up rate on pre-shipment refinance be kept on current level and an interest cut of at least 2 percent be given on post-shipment.