Karachi: According to a news source, the State Bank of Pakistan (SBP) has created the ‘SME Asaan Finance’ or SAAF scheme for Small Medium Enterprises (SMEs) to acquire loans without collateral. SMEs that were previously unable to acquire funding due to a lack of collateral will be able to obtain a clean loan of up to PKR 10 million under the new scheme.
These loans will be used to fulfill SMEs’ long-term fixed capital investment and working capital financing needs, according to SBP. The decision, according to Shaukat Tarin, the Federal Minister of Finance and Revenue, will herald in a new era of growth and industrialization in the country. Commercial banks, he thinks, will join the project as well.
According to the SBP, “selected banks will get refinancing from the SBP at 1% per annum and lend credit to SMEs at an end-user rate of up to 9% per annum, which is quite favorable compared to informal finance costs.”
After three years, banks will repay the refinance in ten equal annual installments.
To help banks, the government will provide risk coverage of 40-60 percent dependent on the loan amount to chosen institutions. The risk cover will be:
• 60% for small loans up to PKR 4 million
• 50% for loans between PKR 4 million and PKR 7 million
• 40% for loans between PKR 7 million and PKR 10 million