Millions of SME workers to observe Eid without salaries

ISLAMABAD: Millions of employees especially belonging to Small and Medium Enterprises (SMEs) firms are going to observe Eidul Fitr without getting salaries because the disbursement of loans from commercial banks under SBP’s Refinance Scheme remained dismally slow, it is learnt.

The SBP in its latest tweet on May 18, 2020 stated that “as of 15 May, 1700 businesses have applied to commercial banks to benefit from SBP’s Rozgar Refinance Scheme for a total loan amount of Rs120 billion and covering more than 1.1 million employees. Businesses that benefit from this scheme commit to not lay off workers for 3 months”.

However, the SBP did not explain that how much amount was actually disbursed by the commercial banks under SBP’s Rozgar Refinance Scheme. The top official sources from banking sector told this scribe that they had so far disbursed few billion rupees against received application of seeking Rs120 billion loans.

The top banking officers were of the view that the disbursement was really slow because the banks were reluctant to take exposure risks despite this fact that the federal government approved Rs30 billion as subsidy for cost sharing to absorb risk of default on these extended loans.

Another official said that the disbursement of loan scheme was slow because the responsibility lied with the private firm to provide all kinds of details of accounts of their employees, so this scheme might take some time to really kick-off for providing benefits to them.

One giant SMEs head told this scribe that the lockdown and lesser staff of banks and less working hours during Ramzan forced the banks to remain slowdown to process cases but hoped that this would get pace after Eid holidays.

Another top official of one SME based in Islamabad told this scribe that the commercial bank received application but did not respond so far.

The banks are still reluctant to go ahead at the desired pace despite the fact that the Ministry of Finance placed cost sharing mechanism with the SBP for providing Rs30 billion subsidy to banks for absorbing the first 40 percent default cases out of this scheme to protect jobs after the COVID-19 pandemic.

Those who belonged to the SME sector were of the view that they were running from pillar to post to convince the commercial banks to lend them money but so far they were paying no heed towards their difficulties. There is a major reason attached to it as these banks and their staff have been trained to serve only big companies having dedicated departments to fulfill all lengthy and procedural requirements to get loan facility.

It was the crux of their discussions that most bank branches are yet to receive any guidelines from their headquarters on the refinance scheme and how to deal with the customers.

"These banks branches are simply clueless how to deal with these loan applications,” said one owner of SME living in the federal capital who is applying for the loan facility.

The SBP's April 22 circular has encouraged banks to provide clean lending up to Rs5 million, but banks are reluctant by using different excuses.