a. Scope: Exporters (including SMEs) can avail financing under this facility through Participating Financing Institutions (PFIs) for new imported and locally manufactured plant and machinery. The facility will be available to the export oriented projects with at least 50% of their sales constituting exports or if their annual exports are equivalent to US$ 5 million, which ever is lower

b. Eligible Financial Institutions: Under the new facility financing shall be available through commercial banks including Islamic Banks and DFIs approved as Participating Financial Institutions (PFIs). Islamic Banks will be eligible for offering LTFF subject to availability of Shariah compliant compatible product under the facility duly approved by the bank’s and SBP’s Shariah Advisor and cleared by SBP’s Shariah Board. SBP in FY 08 will refinance upto 70% of the Facility sanctioned by banks while the remaining amount of 30% or more of LTFF shall be financed by PFIs from their own resources to a borrower.

c. Period of financing: The loans availed under the Facility shall be repayable within a maximum period of 10 years including a maximum grace period of 2 years from availment date. However, where financing facilities have been provided for a period of upto five years maximum grace period shall not exceed one year.

d. Provision of Refinance: (i) SBP shall allocate an overall yearly limit under the facility which shall be sanctioned to individual PFIs on first come first serve basis in line with the internal criteria developed by the State Bank. For January-June 2008, this amount has been fixed at Rs 8 billion. This allocation will be assigned among the individual PFIs by the State Bank. PFIs are instructed to submit their requests for allocation of sub limit within 15 days from issuance of this circular. Subject to the above, there will be no maximum limit for borrowing by the prospective entrepreneurs under the Facility subject to compliance of the relevant Prudential Regulations.

(ii) Refinance under the limit shall be provided to the PFIs on service charge basis which shall be announced on yearly basis effective from 1st July each year and shall be applicable till end June during the following year. For the FY 08 the service charges and rates for end users have been fixed as per the followings: -

Period of financing	Rate of Refinance	PFI Spread	End User’s rate
Upto 3 years	6.50%	1.50%	8.00%
Over 3 years and upto 5 years	6.50%	2.50%	9.00%
Over 5 years and upto 10 years	7.00%	3.00%	10.00%

(iii) Funds provided by the PFIs from their own resources shall be eligible for deduction from the time and demand liabilities determined for the purpose of computation of both Cash Reserve Requirements and Statutory Liquidity Requirements.

2. Lending under the facility shall also be subject to compliance with the Prudential Regulations as prescribed by the State Bank from time to time for different categories of borrowers. PFIs shall consider financing based on the debt equity ratio as prescribed in applicable Prudential Regulations for each type of the borrower. The financing PFI may however ask for higher contribution of equity from the borrowers keeping in view their individual risk profile.

3. The new scheme shall be effective as from 1st January 2008. Details of the Scheme are provided in the attached Annexures.

Please acknowledge receipt.