The State Bank of Pakistan (SBP) has planned a clean loan scheme for cottage industry for up to Rs. 10 million financing without needing collateral, Governor SBP, Reza Baqir, announced while talking to officials of Lahore Chamber of Commerce and Industry (LCCI).
The end-user rate for the small businesses and cottage industry in this scheme will be 9 percent compared to the current rate of nearly 24 percent.
Baqir said the government would provide a guarantee against losses to the banks. SBP will also invite expression of interest from commercial banks for becoming part of the scheme, he added.
The governor added that concessionary loans scheme for machinery imports will also be likely resumed, a national daily reported.
SBP governor said that Rs. 436 billion financing has been approved under a temporary economic refinance facility, which can be further extended once this amount is fully disbursed. “We also have to keep the import payments in check as this scheme is mainly for importing machinery,” he added.
Baqir also said that the foreign exchange laws have been relaxed, and that will be beneficial for foreign funding in the IT sector. He said that now the IT firms can get web and digital services from abroad for up to $200,000 without the approval of State Bank as the banks have been fully empowered to handle payment issues of the IT sector. This limit is revised from the previous limit of $10,000.
After the COVID-19 lockdown and the resulting impact on the economy, the SBP had initiated several concessionary financing schemes for businesses. The central bank also brought down interest rates to 7 percent from over 13 percent within a couple of months to counter the negative impacts brought on by the pandemic.
Baqir informed that more than 90 percent of the beneficiaries of restructuring of the Principal-amount scheme were small borrowers, while over Rs. 600 billion loans were restructured.
Overall, the SBP provided relief of more than Rs. 2 trillion to the business community to get the economy back on track. He said, “Government deserves appreciation for its various initiatives during COVID times. Debt-to-GDP ratio did not increase during the COVID period while the in the developed economies, it increased 10 to 15 percent.”