SBP issues instructions under credit guarantee scheme for SMEs

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KARACHI: State Bank of Pakistan (SBP) has issued instructions for Credit Guarantee Scheme (CGS) for Small and Rural Enterprises and advised financial institutions to utilize 30 percent of the allocated guarantee limit for 2017 for lending to two to three specific sectors.
The SBP said that Under CGS sector specific approach, all the Participating Financial Institutions (PFIs) are now advised to utilize 30 percent of the allocated guarantee limit for 2017 for lending to two to three specific sectors.
PFIs can select and communicate these sectors of their choice to IH&SMEFD, SBP by July 31, 2017. The sectors chosen should be specific and not broad categories like manufacturing, trade & services.
In order to facilitate PFIs to target specific sectors and to align their financing products, two percent of the allocated guarantee limit will be provided as financial assistance.
In this regard, PFIs will submit to SBP a proposal outlining the activities they will undertake through these funds.
The SBP provided list some of the activities that may be undertaken under this financial assistance and another annexure provides a template for proposal on fund utilization plan.
The central bank said that these funds would be disbursed to PFIs in a phased manner. In first phase, 1 percent of the allocated guarantee limit will be disbursed upfront to a PFI against evaluation of the submitted proposal.
Effective utilization of first installment against pre-defined activities will be used as criterion for providing the remaining 1 percent amount. To track the performance of PFIs against the provided funds under sector specific approach, a quarterly performance report has been prescribed.
The instructions contained in this circular letter with respect to sector specific approach supersede the instructions issued vide IH&SMEFD Circular Letter No. 11 dated July 23, 2015 and IH&SMEFD Circular No. 1 dated January 13, 2017 respectively.

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