Temporary working capital

SBP plans a program of own loans for the cottage industry

LAHORE: The State Bank of Pakistan (SBP) has planned a clean lending program for the cottage industry with funding of up to Rs 10million, the governor said and suggested a likely resumption of concessional lending for imports of machines.

SBP Governor Reza Baqir said the program would finance the cottage industry without any guarantees. Speaking to members of the board of the Lahore Chamber of Commerce and Industry (LCCI), Baqir said the government will guarantee banks against losses and invite banks to show interest in being part of the program.

SBP has launched various concessional financing programs for businesses in addition to aggressively lowering interest rates by 7%, by over 13% in a matter of months, to save businesses and people economically crippled by the foreclosure. COVID.

Baqir said more than 90 percent of the beneficiaries of the principal amount restructuring program were small borrowers. More than Rs600 billion of loans have been restructured. In total, the State Bank has provided over Rs.2 trillion in corporate relief to get the economy back on track.

“The government deserves to be appreciated for its various initiatives during the COVID period. The debt to GDP ratio did not increase during the COVID period whereas in developed economies it increased by 10-15%, ”he said.

On the proposed clean loan for small businesses, the SBP governor said the end-use rate for small businesses and cottage industries in this program would be 9%, compared to around 24% currently.

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

The SBP governor said Rs 436 billion in funding had been approved under the Temporary Economic Refinancing Facility. Once the total amount has been disbursed, “then we can think about extending this mechanism further. We also need to control import payments, because this program is mainly about importing machinery. “

Baqir said the wage funding plan was an emergency measure to prevent layoffs and was used by many sectors. The State Bank can launch a separate scheme for their working capital needs.

The State Bank encourages banks to increase their loans for low cost housing. LCCI President Tariq Misbah said the Temporary Economic Refinancing Facility aims to provide long-term financing facility at preferential rates for the purchase of new locally imported / manufactured plant and machinery for new projects. It is expected to be further extended as it expired on March 31, 2021.

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