ISLAMABAD: The government has allocated Rs30 billion under a credit risk-sharing facility spread over four years for banks to support bank lending to Small & Medium Enterprises (SMEs).
Ministry of Finance and State Bank of Pakistan (SBP) have introduced risk-sharing mechanism to support bank lending to SMEs and small businesses to avail SBP’s Refinance Facility to Support Employment, according to a statement issued on Wednesday.
The Ministry of Finance has stepped forward to shoulder risk sharing with banks after taking cognizance that SMEs are facing difficulties in arranging adequate collateral and banks’ risk averseness in taking exposures for such lending under the SBPs Refinance Scheme to Support Employment and Prevent Layoff of Workers. Accordingly, the federal government has allocated Rs30 billion under a credit risk sharing facility for the banks spread over four years to share the burden of losses due to any bad loans in 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 SMEs and small corporates with
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