Timeline
Monetary Easing Cycle

Scheme in Brief

Temporary Economic Refinance Facility (TERF) is a concessionary refinance facility aimed at promoting investment both new and expansion and/or Balancing, Modernization and Replacement (BMR). Financing under the facility is available through banks/DFIs to all sectors across the board except power sector where SBP’s refinance facility for renewable energy projects already exists.

Features
  • Eligibility

(i) For purchase of new imported and locally manufactured plant & machinery for setting of new projects and for existing projects/ businesses to undertake Balancing, Modernization and Replacement (BMR) and/or expansion.


(ii) All LCs/ Inland Letters of Credit (ILCs) established from the date of announcement of the scheme (i.e. March 17, 2020) till March 31, 2021 are eligible for financing. LCs/ ILCs established prior to issuance of the scheme but retired/to be retired after March 17, 2020 are also eligible for refinance.

  • Maximum Loan Limit: Rs 5 billion per project
  • Rate: End User Rate 5% p.a. inclusive of 1% refinance rate of SBP
  • Tenor: 10 years with grace period up to 2 years
  • Repayment: Quarterly/ half-yearly

  • Validity: March 31, 2021
Performance

TERF has shown significant growth over the last 12 months as reflected by increase in requested amount from Rs 36.1 billion by end April 2020 to Rs 690 billion at maturity while over the same period approved financing has reached to Rs 435.7 billion from Rs 0.5 billion.

*As of 31st March 2021, the TERF scheme has matured, consequently no further change is expected.

Mobirise

On the basis of stakeholders’ feedback, few amendments in the scheme were made since its launch in March, 2020 which has positively impacted the uptake of scheme. However, the reduction in maximum end user rate from 7% to 5% on July 08, 2020 resulted in bringing significant increase in number as well as amount of requests in following months. The apparent deceleration in growth rates can be linked to the relatively higher base compared to the initial period of the scheme. *As of 31st March 2021, the TERF scheme has matured . Moreover, last month i.e. March 2021 is showing negative growth rate as banks during this month made final decisions regarding cases under TERF within their allocated limits.

Timeline

July 08, 2020

SBP reduces markup rate to 5% on Temporary Economic Refinance Facility (TERF) and introduces other enhancements under this Facility

On July 08, 2020, SBP reduced the end user mark-up rates on TERF from 7% to 5% to further improve the incentive under the scheme. SBP will now be providing refinance to banks at 1% with banks' maximum margin of 4%. Further, SBP has also allowed the TERF facility in cases where LCs/Inland LCs were opened prior but retiring after the introduction of the scheme on March 17, 2020.

Circular:
http://www.sbp.org.pk/smefd/circulars/2020/CL20.htm 



May 08, 2020

SBP allows financing for BMR and expansion under its Temporary Economic Refinance Facility (TERF) 

On May 08, 2020, SBP to provide further stimulus to investment in the country in the context of COVID-19's impact on the economy, allows financing under TERF for modernizing or expanding manufacturing / production units. However, financing is allowed for purchase of new imported and locally manufactured plant and machinery only against LC and inland LC. The funding under the facility cannot be used for procurement of second-hand machinery, land or carrying out civil works.

Circular:
http://www.sbp.org.pk/smefd/circulars/2020/CL9.htm 



March 17, 2020

SBP announces Temporary Economic Refinance Facility 

On March 17, 2020, SBP announced TERF and its Shariah compliant version to stimulate new investment in manufacturing. The total size of the scheme is Rs 100 billion, with a maximum loan size per project of Rs 5 billion and maximum end-user rate of 7 percent for 10 years. It can be accessed by all manufacturing industries, with the exception of the power sector.

Circulars:

Conventional:
http://www.sbp.org.pk/smefd/circulars/2020/C1.htm

Islamic:
http://www.sbp.org.pk/smefd/circulars/2020/C2.htm 



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