SBP outlines financing scheme for SME exporters

KARACHI: The Small and Medium Enterprises Association said on Friday the central bank had outlined long-term financing scheme for small and medium level exporters.

In a press release, the Association said during a luncheon meeting with the Executive Committee of Small and Medium Enterprises Association (SAMEA) headed by it’s President, Zafar Iqbal and a selected group of Small and Medium level exporters, the Governor Dr Ishrat Hussain informed the gathering that SBP is initiating a new scheme to support capacity development of exporters in SME’s sector of import/purchase of machinery for existing and newly established industries.

Giving salient feature of the scheme Wasim Nawaz, Joint Director, Banking Policy Department, SBP, stated that the loan for import/purchase of machinery would be in Pak rupees and profit there against; would be based on Treasury bills rates for one year to three years, depending on the requirement of the borrower and the same would be repayable; again in Pak Rupees Providing hedge to borrower against Foreign Exchange market rate fluctuations.

Technology up-gradation of the industry and consultancy charges are also allowed; as investments against this borrowing and financing is available for a period of seven and a half years. For the first time, intangible securities like brand names acquired and franchise holding is allowed as security for advance.

As the scheme is exclusively for SMEs, spinning and weaving sectors have been excluded from this financing to keep the big fish away.

Responding to a question about prudential regulation the Governor said that it is for the first time in history when two sets of prudential regulations are in place in this country, dealing with big business and SMEs, separately. He added that it took one year to develop consensus amongst all concerned. The emphasis now, has been put on repaying capacity of the small and medium size borrows taking into consideration cash flow rather than usual collaterals and for this purpose the bankers are also being trained, accordingly.

Legal advisory committees have been constituted, at 16 places with clusters of SMEs chaired by the Chief Manger of State Bank to deal with specific problems being faxed vis-‡-vis lending banks, etc.

On a suggestion, that dollar parity rate may be brought up to Rs60 for a dollar, to help exporters and encourage foreign investment the governor disagreed saying that it would be counter productive and directed towards favouring some, at the cost of importers.

On recommendation, to activate Islamic banking in big commercial banks, still having considerable government ownership, Dr Ishart Hussain said it is the matter of preparedness of any individual bank and is not the question of size and ownership. If other private banks are more actively adopting Islamic form of banking SME’s are free to deal with them. Responding to another question about various rules and regulations with particular reference to Labour Laws, Governor mentioned that in Punjab they have had already started joint inspection and visit to places of Business specially for SME’s only once by different agencies and hoped that similar practice would be introduced in other provinces.

Addressing the issue of circulation of dirty notes, he stressed the need to educate general public to avoid misuse of paper currency which is costing the Government over Rupees two billions every year for replenishing dirty notes.

On the question about release of pledged securities, against guarantees issued in favour of government departments, he explained that times, it is more of a statutory requirement for the department concerned to hold L/G paper, and discretion is with the dealing bank depending on specific cases to release pledged securities.

On pointation by Zahid Hussain, Vice President of SAMEA about delayed tax refunds, the governor said that there is a visible improvement in the process and refund are usually made now within reasonable time and taking into consideration the exporter finance rate of 3% interest which is lowest in the region the impact of such minimum delay is negligible. About costly electricity and gas specially for the Small and Medium Size industry, he observed that this is due to losses created by expensive thermal electricity, contracted earlier, which is now going more towards hydel power generation.

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