SBP plans clean loan scheme for cottage industry

LAHORE: The State Bank of Pakistan (SBP) has planned a clean loan scheme for cottage industry for up to Rs10 million financing, the governor said and suggested a likely resumption in concessionary loans for machinery imports.

SBP Governor Reza Baqir said the scheme will finance the cottage industry without any collateral. Talking to the office bearers of Lahore Chamber of Commerce and Industry (LCCI), Baqir said the government will give guarantee to the banks against losses and invite expression of interest from Banks for becoming part of the scheme.

SBP initiated various concessionary financing schemes for businesses in addition to bring interest rates aggressively down 7 from over 13 percent within a couple of months to rescue firms and people economically mauled by COVID lockdown.

Baqir said more than 90 percent beneficiaries of the scheme for restructuring of Principal amount were the small borrowers. More than Rs600 billion loans were restructured. In total, the State Bank provided a relief of more than Rs2 trillion to the business community to get the economy back on track.

“Government deserves appreciation for its various initiatives during COVID times. Debt-to-GDP ratio did not increase during the COVID period while the in the developed economies, it increased 10 to 15 percent,” he said.

About the proposed clean loan for small firms, the SBP governor said the end user rate for the small businesses and cottage industry in this scheme would be 9 percent compared to approximately 24 percent they bear at present.

Baqir said foreign exchange laws have been relaxed and made more business friendly. The foreign funding in IT sector will be greatly facilitated by relaxation in the laws. Banks have been fully delegated to handle the payment issues of IT companies. The IT firms can now get web and digital services from abroad for up to $200,000 without the approval of State Bank. Previously, the limit was $10,000.

SBP governor said Rs436 billion financing has been approved under temporary economic refinance facility. Once the full amount is disbursed, “then we can think of further extending this scheme. We also have to keep the import payments in check as this scheme is mainly for importing machinery.”

Baqir said the financing scheme for salaries was an emergency measure to prevent layoffs and that was availed by many sectors. The State Bank can launch a separate scheme for their working capital needs.

The State Bank is encouraging the banks to increase their lending for low cost housing. LCCI President Tariq Misbah said the temporary economic refinance facility was for provision of long-term finance facility at concessionary rates for purchase of new imported/locally manufactured plant and machinery for new projects. It should be extended further as it expired on 31st March, 2021.