KARACHI: Banks have approved financing of Rs125.9 billion for payment of salaries of over 1.2 million employees under the State Bank of Pakistan (SBP) refinance scheme to support employment and prevent layoff of workers (Rozgar Scheme).

To counter the negative impact of Covid-19 on the economy, SBP introduced Rozgar Scheme, in April 2020. The scheme provides concessional financing to businesses for wages and salary expenses, provided they commit to not lay off their employees for the period of the loan.

The Scheme was later complemented by a Risk Sharing Facility (RSF) of the Government of Pakistan for SMEs and Small Corporate with turnover of up to Rs2 billion.

Under this facility, the federal government bears up to 60 percent of first loss on the principal amount portion of disbursed portfolio for SME borrowers whereas 40 percent risk coverage is available for Small Corporate.

The objective of this facility is to incentivize banks to extend loans to SMEs and Small Corporate, to whom they may not cater to for risk considerations. Initially, the Scheme was available till end June 2020 earlier, however, seeing the Covid-19 pandemic situation, SBP decided to extend the validity of this scheme by another 3 months to end Sep 2020.

The SBP has issued a detailed progress report on banks' performance on Rozgar Refinance Scheme with Risk Sharing Facility. Under the Scheme, on overall basis, up till 10th July 2020, financing of Rs125.9 billion has been approved by banks for 2068 businesses covering wages and salaries of over 1.2 million employees.

Soon after the introduction of the Scheme, a large number of applications to avail financing were received by banks but their approvals remained slow. However, with the continuous efforts of SBP, banks streamlined their processes and pace of loan approvals increased. At the end of April 2020, only 18 percent of loan applications were approved and now this has increased to 76 percent by 10th July 2020.

Similarly, the acceptance ratio for amount of financing increased from 26 percent at the end of April 2020 to 82 percent on 10th July 2020. Consequently, the number of employees benefitting from the scheme in terms of acceptance ratio has also increased from 26 percent to 85 percent during the same period.

Out of the total approved amount, Rs31 billion were for 1449 SMEs and Small Corporate under the RSF as of 10th July 2020 providing benefit to 280,437 employees.

The acceptance ratio, both in terms of number of applications and amount increased from 35 percent and 37 percent respectively on 15th May to 72 percent and 71 percent on 10th July.

According to SBP, the performance of banks, however, in terms of processing the number of applications and financing approved is limited to few banks.

Among the Top Performing Five Banks, for both, JS Bank Limited, Habib Bank Limited (HBL), Bank Al-Habib Limited, Bank Alfalah Limited and Askari Bank Limited have contributed the highest in terms of both approving the number of applications and amount since the beginning of this scheme (RSF) till 10th July.

These top performing five banks provided Rs18.1 billion or 58 percent of the overall approved financing amount eligible under SBP Rozgar Scheme up till 10th July.

Their individual performance is also reflected from the fact that the cumulative approved financing by these banks ranged from Rs2.2 to Rs4.6 billion. The rankings of these banks have remained unchanged since inception of the RSF till 10th July.

In contrast, the least performing five banks comprise Bank Islami, MCB Bank, First Women Bank, Standard Chartered Bank (Pakistan) Ltd. and Bank of Khyber. In these banks both the number of applications and amounts approved are very low, ranging in meager 7 to 29 and Rs103 to Rs389 million, respectively up till 10th July. Among these Least Performing Five Banks, there was some improvement as a major bank, NBP, exited the list and was replaced by Bank Islami.

In terms of acceptance ratios for the amount and number of applications approved for financing, JS Bank, HBL, Bank Al-Habib, Bank Alfalah and Askari Bank, continued to remain in the list of Top Five Performing Banks. The acceptance ratios of these banks were in the ranges of 62 percent to 86 percent and 65 percent to 89 percent, respectively. Their rankings, however, changed within the group except for JS Bank Limited that remained at the top throughout.

Among the least performing five banks, four banks - NBP, UBL, MCB and Standard Chartered Bank Limited continued to remain in this group. The acceptance ratios for the Least Performing Five Banks were also in the similar low ranges of 19 percent to 41 percent and 13 percent to 57 percent, respectively. Only ABL exited the list improving its position and was replaced by the Bank of Khyber.

Copyright Business Recorder, 2020