The State Bank of Pakistan (SBP) announced that banks have shown an overwhelming response to an innovative financing scheme for collateral-free lending to SMEs introduced by the central bank and supported by the federal government.
As per details, out of 20 banks that competed for participating in the scheme, eight banks under four categories have been selected on the basis of the highest amount of finance and highest number of SME clients to be served.
The categories include large banks, mid-sized banks, small banks, and banks in collaboration with fintech. The winning banks are Habib Bank Ltd, United Bank Ltd, Allied Bank Ltd, Meezan Bank Ltd, Bank Alfalah Ltd, The Bank of Punjab, JS Bank Ltd and The Bank of Khyber, which were selected through a transparent bidding process.
According to a press release by SBP, the central bank, under the SME Assan Finance (SAAF) scheme, will provide refinance to the banks at 1 per cent per annum for onward lending to SMEs at a maximum end-user rate of up to 9pc per annum. The end-user rate under SAAF would be attractive for SMEs when compared with the usual cost of financing for them from informal sources which can run 25pc – 50pc per annum.
The margin available to banks will help them to make an upfront investment in human resources, technology and processes to cater to promote SME finance.
The incentive will be provided to banks for the first three years of this scheme after which it is expected to become self-sustaining whereas the government will also provide risk coverage of up to 60 per cent, the statement said.
Furthermore, under the scheme, SMEs can avail of collateral-free financing of up to Rs10 million to meet their long-term capital expenditure and short-term working capital needs.
It may be mentioned here that SBP Governor Reza Baqir has announced that a Shariah-compliant version of SAAF is also available.
