SBP floats new refinance scheme for businesses to save workers

The State Bank of Pakistan (SBP) has introduced a temporary refinance scheme for businesses entitled Refinance Scheme for Payment of Wages and Salaries to Workers and Employees of Business Concerns.

The core objective of this facility is to incentivise businesses so that they don’t lay off their workers during the COVID-19 pandemic.

The scheme will be available to all businesses in Pakistan through banks and will cover all types of employees including permanent, contractual, daily wagers as well as outsourced workers.

The scheme will provide financing for wages and salaries expense for three months from April to June 2020 for those businesses which do not layoff their employees for these three months.

The mark-up on the loans under this scheme will be up to 5 percent. Borrowers that are on the active taxpayers list will be able to get loan at a further reduced mark-up rate of 4 percent.

The scheme has been designed to give preference to small businesses. Businesses with a three-month wage and salary expense of up to Rs200 million will be able to avail the full amount of their expense in financing while those having greater expense than Rs500 million will be able to avail up to 50 percent of their expense. Businesses in the middle category will be able to avail up to 75 percent of their 3 month salary and wage expense.

The banks will not charge any loan processing fee, credit limit fee or prepayment penalties for loans under this scheme. A grace period of six months will be allowed to the borrowers while the repayment of the principal amount will be made in two years.

Banks will provide weekly reporting to the SBP on the take up of the scheme and in particular the reasons for any denials of financing requests under this scheme.

The state bank said that the scheme will ease the liquidity constraints of the businesses and they can use their available financial resources to meet other working capital requirements.