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SBP has revised the Credit Guarantee Scheme

Pakistan News: The State Bank of Pakistan (SBP) has revised the Credit Guarantee Scheme (CGS) for small and rural enterprises.The scheme has been improved in the light of  recommendations of the technical committee on credit guarantee represented by SBP, UK’s Department for International Development (UKAID) and the Pakistan Banks Association (PBA), according to a circular of the Central Bank issued  here to all banks on Monday.

State Bank of Pakistan

State Bank of Pakistan - File Photo

The improvements in the scheme are expected to create desired momentum, thereby, ensuring maximum utilisation of the facility and increasing market penetration.
The following amendments have been made in the scheme:
(i)    The guarantee coverage has been reduced from 60% to 40%.
(ii)    The interest rate cap has been removed.
(iii)    The bifurcation into two components (I & II) and the restricted scope of clusters have been removed.
(iv)    Eligibility requirement for lending to farmers has been increased from subsistence to economic landholding, and the loan size has been increased from Rs 0.5 million to Rs 2 million.
(v)    The definition of Small Enterprises has been simplified, while the loan size has been increased from existing Rs 5 mln to Rs 15 mln.
All other terms and conditions of the scheme will remain unchanged.
The banks have been advised to apply for allocation of fresh Credit Guarantee Limits as per criteria outlined in the Scheme and SOPs (placed at SBP website) before February 24. —APP

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