Federal govt allocates Rs 30 billion to support bank lending to small businesses

ISLAMABAD, Pakistan: The federal government has allocated Rs 30 billion to support bank lending to small businesses. 

The amount has been allocated by the government under a credit risk sharing facility for banks spread over four years to share the burden of losses due to any bad loans in the future.

Under this risk sharing arrangement, the federal government will bear 40 percent first loss on principal portion of disbursed loan portfolio of the banks.

This facility will incentivize banks to extend loans to collateral deficient Small and Medium Enterprises (SMEs) and small corporates with sales turnover of upto Rs 2 billion to avail financing under SBP refinance scheme.

Under the SBP’s Refinance Scheme to Support Employment and Prevent Layoff of Workers due to the impact of COVID-19, businesses that commit to not lay off workers in the next three months can avail credit through banks for the three months of wages and salaries expenses at a concessional mark-up rate.