KARACHI: Under the recently launched policy for the promotion of financing for small and medium enterprises (SMEs), Rs6 billion will be available at a subsidised rate of six per cent for renewable energy projects of up to 50 megawatts in hydro, solar, wind and biogas categories.

According to the document issued by the State Bank of Pakistan (SBP) on Friday, the subsidised loan will be available for up to 12 years. The scheme also incentivises the establishment of small-scale renewable energy solutions of less than 1MW to promote solar usage among consumers.

The policy paper said the financing will be available for the new imported and local plant and machinery and the purchase of new generators of up to 500 kilo volt ampere (kVA) with a subsidised rate of 6pc for 10 years.

The SBP said an innovation challenge fund will also be launched to explore new solutions to promote SME financing through technology.

The SBP will also be collaborating with universities and fin-tech companies to initiate pilot projects for the purpose. The central bank has recommended that the Ministry of Commerce should encourage SME start-ups to export their handicrafts and set up a marketplace website for on-boarding these entrepreneurs on a single platform.

The policy paper said the credit processing time for small enterprises loans has been reduced from 30 days to 15 working days and maximum turnaround time for loan processing of these entities has been fixed at 25 working days.

“The condition of obtaining insurance for financing up to Rs2 million (previously Rs1m) has been made optional for small-enterprise and medium-enterprise financing,” said the SBP.

The central bank has set new targets to achieve the goals for the promotion of SMEs. The key benchmarks to be achieved till 2020 included an increase in the SME share from 8pc of private-sector credit to 17pc and a rise in the number of borrowers from 174,000 to 500,000.

In an effort to improve access to finance for women entrepreneurs in the underserved areas, a refinance and credit guarantee scheme has been offered by the SBP under which financing is available for the setting up of new businesses or expansion of the existing ones.

The SBP’s refinance rate is kept at zero per cent while the end-user rate is up to 5pc. Additionally, 60pc risk coverage is also available against an outstanding principal of banks. Under this scheme, the financing limit is up to Rs1.5m for five years. At least 20pc limits have been allocated for financing in Balochistan, it said.

The SBP, in collaboration with the Sindh Enterprise Development Fund (SEDF), has launched a mark-up subsidy and guarantee facility for rice-husking mills in Sindh. Under this scheme, the SBP provides the refinancing facility and SEDF provides the mark-up subsidy of 4.75pc plus risk sharing of 30pc against lending for the purpose of balancing, modernisation, revamping (BMR) of the rice-husking mills.

The SBP is also supporting the Punjab government in designing a subsidised refinance scheme for the BMR of SMEs in the province.

“The Punjab government is evaluating the possibility of establishing a credit guarantee company,” the SBP said.

Published in Dawn, December 24th, 2017