AKHTIAR AHMED JOINT DIRECTOR IH&SME FINANCE DEPARTMENT STATE BANK OF PAKISTAN JANUARY 26, 2016 SBP ROLE FOR PROMOTION OF SME BANKING SME BANKING 1

1. LEGAL & REGULATORY FRAMEWORK 2.FINANCIAL INFRASTRUCTURE / MARKET DEVELOPMENT MEASURES 3. PROVIDE A FACILITATIVE ROLE IN GOVERNMENT INTERVENTIONS 1. LEGAL & REGULATORY FRAMEWORK Revised PRs on SME Finance Targets for SME Finance 2.FINANCIAL INFRASTRUCTURE / MARKET DEVELOPMENT MEASURES Credit Guarantee Schemes Capacity Building/Awareness Programs/Focus Groups Secured Transaction Registry Surveys SME Credit Rating/Credit Scoring/SME Credit Bureaus 3. PROVIDE A FACILITATIVE ROLE IN GOVERNMENT INTERVENTIONS Government Subsidy Schemes PMYBL SBP ROLE FOR PROMOTION OF SME BANKING 2

Markup Subsidy and Guarantee Facility for the Rice Husking Mills in Sindh  The Scheme was issued vide IH & SMEFD Cir No. 06 dated March 12, 2013  Objective is to facilitate establishment of new rice husking units and modernization of existing units to reduce production costs and improve profitability  Financial Support for the Scheme was provided by Sindh Enterprises Development Fund, Government of Sindh.  The Scheme incorporates feedback of all stakeholders, particularly banks.

Facilities under the Scheme Mark-up Subsidy for Rice Husking Mills :  The End User mark-up rate has been reduced to the bank spread level i.e. 2.75%  Mark-up rate remains the same as under the Refinance Scheme i.e. Tenor Rate of Refinance Banks’/DFIs’ Spread End Users’ Rate Over 3 years and up-to 5 years 4.75%2.75%7.5%  The refinance component of mark-up rate i.e. 4.75% is borne be borne by SEDF.

Facilities under the Scheme: Cont… Credit Guarantee facility :  A partial Credit Guarantee risk coverage of 30% is also available under the Scheme.  The guarantee is invoked on categorization of borrower as ‘Loss’  Loss: Overdue by two years or more  The lending bank can lodge claim for reimbursement of 30% of outstanding principal from State Bank.  The claim will be reimbursed from the guarantee and subsidy fund provided by SEDF and kept with SBP.

Major Features of the Scheme: Purpose:  BMR of Existing Rice Husking Mills in Sindh  Establishment of New Rice Husking Mills in Sindh Eligible Borrowers under the Scheme  Rice Husking Mills in Sindh  Eligible under the existing lending criteria of the bank  Verified as eligible/ deserving borrower by SEDF through its Letter of Comfort to the lending bank. Tenor of Loans  Maximum tenor of 5 years; including  Maximum grace period of six months Maximum per party Loan Limit  Rs. 10 million for a single borrower

Procedure to avail facility:  The borrowing Rice Husking Mill will approach the bank for facility under the Refinance Scheme with additional facilities of Guarantee and Subsidy.  The Bank will evaluate the borrower as per its own lending criteria  If eligible, the bank will forward loan request to the SEDF for issuance of Letter of Comfort  The borrower can also approach SEDF for issuance of Letter of Comfort  The bank will append the Request for Refinance facility with request for Subsidy and guarantee facility along with Letter of Comfort  The Concerned field office will forward request for guarantee and Subsidy to the Development Finance Support Department (DFSD), SBP BSC Head Office.  The DFSD will approve guarantee and subsidy facilities from the date of refinance facility.

Procedure to avail facility: Cont……  The Concerned field office will forward request for guarantee and Subsidy to the Development Finance Support Department (DFSD), SBP BSC Head Office.  The DFSD will approve guarantee and subsidy facilities from the date of refinance facility.  No Formal evaluation required by DFSD.  After approval, the borrower will pay mark-up of only 2.75%. Refinance rate is charged to the subsidy and guarantee fund.

Procedure for Guarantee Claim  The bank will forward its request to DFSD through the concerned field office.  The DFSD will after preliminary examination reimburse guarantee claim to the concerned bank.  Upon any subsequent recovery of defaulted amount from the borrower, the bank will return SBP guarantee share of 30% to SBP.

Which banks can avail this facility for their borrowers?  Banks which already have refinance limit under the Refinance Scheme approach State Bank for allocation of Exposure Limits.  Following Limits have been allocated to the banks

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