Banks are aware that in recent years Pakistani exporters have
been striving to increase the value and quantity of their
exports to existing markets in addition to looking for new
markets. On an overall basis, banks have provided adequate
funds to such entrepreneurs in different sub sectors of the
textile sector. This is being done under “Textile Vision-2005’
for the import of machinery to meet growing production requirements.
At the same time, financing facilities for projects relating
to the Small and Medium Enterprises (SME) sector are less
than adequate. This makes it difficult for such entrepreneurs
to avail medium to long term financing facilities at competitive
rates.
2. To
augment the present efforts of banks, and to help exporters
in import of machinery, up-grading existing technology and
financing facilities availed at competitive rates, the State
Bank of Pakistan has designed a new scheme. The new scheme,
styled the “Scheme for Long Term Financing of Export
Oriented Projects (LTF-EOP)” will allow eligible financial
institutions to provide financing facilities to borrowers
on attractive terms and conditions for import of machinery,
plant, equipment and accessories thereof (not manufactured
locally) by export-oriented units. Facilities under the
Scheme shall not be admissible a) as a reimbursement in
respect of the machinery already imported by the commercial
importer or by the sponsors in respect of existing or ongoing
project, b) commercial importers or trading houses involved
in the commercial import of the machinery, equipment and
accessories thereof c) for plant, machinery, equipment or
accessories thereof for setting up of new projects or for
BMR of the existing projects in the spinning and weaving
sector of the Textile Group and d) for import of such machinery,
otherwise eligible under the said Scheme, for which LC has
already been established.
3. Financial
institutions are aware that the Federal Government in its
Trade Policy for 2003-04 had announced a number of incentives
for the establishment of projects with a view to improve
the competitiveness and efficiency of the industrial sector
in Pakistan. Under these incentives, the Ministry of Commerce
/ Export Promotion Bureau was assigned the task of selecting
certain projects for the provision of consultancy, up-gradation
facilities etc., on a cost sharing basis. The linkage of
the scheme, with the incentives announced under the current
trade policy is another important feature, as this linkage
is expected to bring synergy to the efforts of all stakeholders.
4. The
State Bank shall provide finance to the banks on service
charge basis depending upon the weighted average yields
on 12 months T-Bills and 3 & 5 years PIBs. This would
be keeping in view the period for which refinance shall
be availed by them against disbursement made for equivalent
tenures. The following rates have been fixed under the scheme
for the period upto 28-02-2005:-
Tenor |
Rate
of refinancing to the banks/DFIs |
For
borrowers requiring financing upto 2 years. |
2.0
% p.a. |
For
borrowers requiring financing over two years but upto
3 years. |
3.8%
p.a. |
For
borrowers requiring financing for period over three
years and upto maximum period prescribed under the scheme
i.e. upto 7-1/2 years |
4.9%
p.a. |
The
banks shall be entitled to earn a maximum spread of 3% on
financing provided by them.
5. While
the credit decision under the Scheme shall primarily be
made by the banks/DFIs, they are expected to give preference
for meeting the financing needs of the borrowers / projects
availing different incentives announced by the government
under the Trade Policy for 2003-04. This preference shall
be to projects, so selected, that have shown more visible
efforts at being implemented according to their feasibility.
Requirements for machinery import would be specific and
aligned to these projects, making it convenient for banks
to appraise the project. Likewise, the banks/DFIs shall
also ensure that financing needs of the borrowers from the
SME sector are given preference as 50% of the funds that
the State Bank shall allocate to each bank/DFI, shall be
utilised for meeting the financing needs of borrowers from
the SME sector. The Scheme is attached as Annexure to this
circular.
6. Banks/DFIs
desirous to provide financing facilities to their constituents
are advised to please approach the undersigned for determining
their eligibility for financing under the Scheme as well
as the amount which they project to disburse during 2004-05
under the Scheme. Banks/DFIs are also advised to circulate
the contents of this circular and the details of the Scheme
to their field offices with the instructions to disseminate
the information to the prospective borrowers. This Circular
as well as details of the Scheme can also be downloaded
from the website of the State Bank using the following link:
-
http://www.sbp.org.pk/bpd/index.htm.
Please
acknowledge receipt.