KARACHI: The government has launched a Rs1.1 trillion scheme for small and medium enterprises (SMEs) to bring growth and create jobs on a larger scale.
According to a circular issued by the SBP on Thursday, the scheme is part of the government and SBP’s efforts to double the size of SME financing to Rs1,100 billion over the next five years.
Taking cognisance of the SMEs’ importance in inclusive economic growth and employment creation, the government has approved a ‘Risk Coverage Scheme’ for securing banks’ fresh exposure against SMEs, the circular said. Due to the contraction of economic growth in FY23 and 2.4pc growth in FY24, the number of jobs available has drastically reduced. Pressure is mounting on the government to enhance growth, create jobs, and reduce taxes.
The loan size is up to Rs25 million for small enterprises and Rs200m for medium enterprises. The loan tenure is up to five years.
The scheme covers all types of loans, including working capital loans/running finance and long-term loans.
The government will absorb credit loss (principal portion only) on banks’ fresh exposure to SMEs, 20pc first loss coverage against banks’ fresh exposure to small enterprises, and 10pc first loss coverage against banks’ fresh exposure to medium enterprises. All commercial and Islamic banks will provide loans.
Published in Dawn, August 2nd, 2024
