SBP increases loan limits, expands relief measures for microfinance borrowers

KARACHI: The State Bank of Pakistan (SBP) announced on Monday sweeping increases in the limit for housing microenterprise loans, as well as income eligibility, in a bid to promote low-cost housing in the country. 

The limit for housing finance and microenterprise loans has been increased to Rs3 million, according to a statement released by the central bank. Previously, the existing limit for borrowings from the microfinance banks was Rs1 million. 

In addition, the maximum size of general loans has been increased from Rs150,000 to Rs350,000.

To accommodate enhanced loan sizes, the annual income eligibility for general loans has been increased to up to Rs1.2 million, while for housing loans has been increased to up to Rs1.5 million. 

However, the central bank said that the aggregate exposure against the microenterprise loans shall not exceed 40pc of the microfinance bank’s gross loan portfolio.

The limit for lending against gold collateral to meet borrowers’ immediate domestic or emergency needs has also been enhanced, though this restriction expires after one year. The aggregate loan exposure of a microfinance bank against the security of gold shall not exceed 50pc of its gross loan portfolio. 

In making this decision, the central bank said the increases had been made in view of the fact that the existing loan limit was insufficient to promote low-cost housing finance through microfinance banks.

Similarly, limits for lending to microenterprises needed to be enhanced considering the large unmet demand from micro and small enterprises (MSEs). 

“These initiatives would further support the micro borrowers and enterprises and an early revival of economic activities in the current challenging times,” the SBP said. 

However, in order to ensure sustainability, the enhanced loans sizes for housing and microenterprises would be allowed to those microfinance banks which are on a sound footing and have the capacity to successfully cater the higher loan sizes.

In addition, the SBP Relief Package for microfinance banks, which included deferment of principal and restructuring of microfinance loans to deal with the adverse implications of the ongoing Covid-19 pandemic, has now been expanded with three measures. 

First, the relief measures that were earlier available from Feb 15, 2020, have now been allowed to borrowers from December 31, 2019. This will allow more borrowers to avail the regulatory relief who were previously not eligible. 

Second, to facilitate microfinance banks, the provisioning requirements have been extended by two months. 

Third, a client’s consent through recorded lines has been allowed to facilitate the customers to avail the relief package.