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Friday March 29, 2024

Collateral-free financing, a game changer for SMEs: SBP governor

By Our Correspondent
December 22, 2021

KARACHI: The State Bank of Pakistan (SBP) governor Dr Reza Baqir on Tuesday said the Aasan Finance Scheme (SAAF) would be a game-changer in enhancing access to finance to small and medium enterprises as it addresses the long outstanding challenge of lack of collateral faced by these businesses.

The SBP’s governor visited the Multan Chamber of Commerce and Industry (MCCI) where he met the business community of the region and listened to their views directly, a statement said.

He said that with the objective of stimulating sustainable economic growth of the country, the SBP has been taking various initiatives to facilitate businesses. Some of the major initiatives include introduction of a unique collateral-free loan scheme for SMEs; SAAF, SBP’s concessionary refinance schemes for different sectors, measures taken to combat the Covid-19 effects, digitisation of banking systems and persuasion of banks to enhance financing to business community, especially priority sectors.

During his meeting with the business community, Baqir said that the proactive policy response by SBP during Covid times especially refinance schemes ie Temporary Economic Refinance Facility and Rozgar not only provided breathing space to employees of the business community, but also laid down sound foundations for medium to long term industrialisation in the country.

He also witnessed a cheque distribution ceremony held to mark the disbursement of the first set of loans by Meezan Bank under SAAF. The governor underscored the importance of the SME sector for the economy and highlighted the measures taken by the SBP for providing an enabling regulatory framework for SME financing, developing market infrastructure and creating awareness and enhancing capacity of bankers and SMEs.

He encouraged all MCCI members, entrepreneurs as well as SMEs to avail maximum benefit from the scheme to set up and upgrade their business facilities.

Bridging a major gap, SAAF provides an avenue for SMEs to secure collateral-free financing from banks, thereby increasing their financial inclusion. Under the scheme, SMEs can avail collateral free financing of up to Rs10 million at the concessionary end-user rate of up to 9 percent per annum to meet their long-term capital expenditure and short-term working capital needs. The scheme also offers reasonable spread to banks to enable them to invest in their processes, systems, human resource and technology; so that when the SAAF scheme concludes, banks are able to continue the collateral free financing on a sustainable basis. SAAF is a unique facility, wherein, refinance is provided by SBP, while risk coverage of up to 60 percent is provided by the government of Pakistan.

The SAAF scheme was launched by SBP on August 16, 2021 and eight banks were selected after a transparent bidding process. Besides Meezan Bank, the seven other banks including Habib Bank Ltd, United Bank Ltd, Bank of Punjab, Bank Alfalah Ltd, JS Bank Ltd, Bank of Khyber and Allied Bank Ltd will start disbursement under SAAF from early next month.