The State Bank of Pakistan (SBP), Pakistan’s central banking authority, recently launched two programs to increase the supply of credit to small and rural enterprises under its Financial Inclusion Program (FIP). The first is the Credit Guarantee Scheme for Small and Rural Enterprises, in which SBP will share 60 percent of losses from short- and medium-term loans made by banks of up to a maximum of PKR 5 million per loan, the equivalent of over USD 59,000, to small- and medium-sized enterprises (SMEs). Each loan will have a tenor of up to three years and will have an interest rate equal to the 3-month Karachi Inter Bank Offer Rate (KIBOR) rate plus 300 basis points (bps). The United Kingdom’s Department for International Development (DFID) is providing GBP 8 million of seed capital for the scheme, the equivalent of over USD 12.2 million. Half of the resources for this program will be used in the North-West Frontier Province (NWFP), the Federally Administered Tribal areas of Pakistan (FATA) and Gilgit-Baltistan (GB), while the other half will be used in other unspecified “priority” areas of Pakistan. The second program is the Refinance Scheme for SMEs, which encourages further investment, including long-term investment for SMEs in NWFP, FATA and GB. Interest rates for the program will float based on a formula linked to the rates on 6-month Treasury Bills and Pakistan Investment Bonds (PIBs).
By Christopher Maggio, Research Assistant
About
State Bank of Pakistan (SBP)
Description
Established in 1956, the State Bank of Pakistan (SBP) is the nation’s central banking authority. SBP performs several primary functions: to regulate and supervise the nation’s financial system, to conduct monetary policy and to manage public debt. In addition, SBS perfoms non-traditional functions: to develop the financial framework of the country, to provide credit to priority sectors and to help in the Islamization of the banking system.
Contact Information
State Bank of Pakistan
Central Directorate
I.I. Chundrigar Road
Karachi, Pakistan
Tel: +92 111 727 111
Email: info@sbp.org.pk
About
Department for International Development (DFID)
Description
Department for International Development (DFID) is the department of the British government responsible for carrying out overseas development work. In fiscal year 2008/2009, the British government, through DFID, spent GBP 5.5 billion, the equivalent of over USD 8.3 billion, on international development. The major spending areas included Government and Civil Society (25 percent), Health (21 percent), Economic Growth (16 percent), Education (14 percent) and Humanitarian Assistance (10 percent).
Additional Resources:
SBP press release entitled ‘Salim Raza launches two new schemes to boost credit flow for SME, agri. sectors’: http://www.sbp.org.pk/press/2010/CreditSchemes-19-Mar-10.pdf
MicroCapital’s Microfinance Universe profile: SBP
MicroCapital’s Microfinance Universe profile: DFID
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