State Bank extends Rozgar Scheme till September

KARACHI: The State Bank of Pakistan (SBP) on Tuesday extended its Rozgar Scheme till September and increased the risk coverage for small and medium enterprises to protect workers from unemployment and businesses from the economic fallout of the Covid-19 pandemic.

The scheme supports employers by providing concessional loans to businesses for wages and salaries’ expenses, provided they commit not to lay off their employees for the period of the loan, a statement said.

Businesses would now be able to obtain financing to pay wages and salaries for

a maximum period of six months, starting April 2020 till September 2020, a statement said.

“Effectively, this suggests that not only businesses can obtain loans to fund their wages and salaries bill up to a period of three months from July till September 2020, but can also get reimbursement for the wages and salaries paid during April-June 2020,” it said.

For those who have already availed financing under the scheme, financing limits for the months of July to September 2020 would be calculated on the same basis on which limits were calculated for the months of April to June 2020.

Under the scheme, up till June 19, 2020, financing of Rs112.8 billion have been approved by banks for 1,653 businesses covering wages and salaries of over 1.1 million employees.

The SBP said it had widened its scope in collaboration with the government soon after the Covid-19 pandemic, and had taken a number of steps to provide economic support to businesses and households.

With a view to incentivize banks/DFIs for financing to SMEs and non SME corporates, government of Pakistan introduced a Risk Sharing Facility (RSF) for SBP’s Rozgar Scheme.

Under this facility, the government bears 40 percent first loss on disbursed portfolio (principal portion only) for eligible borrowers.

The government has now decided not only to extend validity of its RSF for another three months for SMEs and small corporates with turnover of up to Rs2 billion, but also enhanced risk coverage for SMEs from 40 percent to 60 percent first loss on portfolio basis.

This higher risk coverage would help banks to provide financing under Rozgar scheme to collateral deficient SMEs which were otherwise struggling.

The SBP now expects that more SMEs would benefit from the scheme mainly due to higher risk coverage, more awareness of the scheme among the stakeholders and robust support mechanism to address queries and complaints with well organised set up comprising regional focal persons of SBP Offices and banks all across the country.

Up till June 19, 2020, RSF of Rs25.4 billion has been approved by banks for around 1,100 businesses, covering wages and salaries of over 220,000 employees.