Circulars/Notifications - Infrastructure, Housing & SME Finance Department  
 SMEFD Circular No. 01 of 2010
March 19, 2010 

The President
All Banks,

Dear Sirs/Madam,


Introduction of Credit Guarantee Scheme for Small and Rural Enterprises

          With a view to motivate the banks to lend to borrowers, which would not have access to credit under normal circumstances, State Bank has launched the Credit Guarantee Scheme (CGS) for Small and Rural Enterprises with the assistance of Government of Pakistan and donor agencies.

2. The Scheme would allow the banks to develop a portfolio of fresh borrowers who are creditworthy, but cannot fit into their usual credit parameters, especially when collaterals are required. It will allow banks to assess Small and Rural Enterprises on the basis of Cash Flows.

3. Further, the Scheme should not be construed as a permanent source of support; rather an opportunity for the banks to make necessary alignments in strategic direction and meet SME financing needs on a sustainable basis.

4. The Scheme has been bifurcated into two segments-One for NWFP, FATA and Gilgit-Baltistan; whereas the other is reserved for priority clusters/areas of other parts of the country. The eligible Participating Financial Institutions (PFIs) will be allocated limits, wherein SBP will share bonafide losses on the loans to the extent of 60% of PFI’s fresh portfolio of financing to Small & Rural Enterprises. In NWFP, FATA and Gilgit-Baltistan, all banks would be eligible to apply for limits, while for other areas; few banks will be selected as PFIs. The banks are, therefore, advised to apply for status of PFIs after which limits will be allocated to selected PFIs as per criteria outlined in the scheme.

5. The Credit Guarantee Scheme is attached as Annexure-I while the Standard Operating Procedures (SOPs) of the Scheme are placed at SBP Website

Encl: Annexure I: Credit Guarantee Scheme for Small & Rural Enterprises

Standard Operating Procedures (SOPs)

Yours faithfully,

(Mansoor H. Siddiqui)

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