Please refer to SMEFD Circular No. 01 of March 19, 2010, whereby, Credit Guarantee Scheme (CGS) for Small and Rural Enterprises was introduced with the objective to promote availability of financing for low-end fresh/collateral deficient borrowers.

2. In light of the recommendations of the Technical Committee on Credit Guarantee represented by State Bank of Pakistan, UK’s Department for International Development (UKAID) and the Pakistan Banks Association (PBA), the following amendments are being made in the Scheme:

i. The Guarantee coverage has been reduced from 60% to 40%.

ii. The interest rate cap has been removed.

iii. The bifurcation into two components (I & II) and the restricted scope of clusters have been removed.

iv. Eligibility requirement for lending to farmers has been increased from Subsistence to Economic Landholding, and the loan size has been increased from Rs 0.5 m to Rs 2 m.

v. The definition of Small Enterprises has been simplified, while the Loan size has been increased from existing Rs 5 m to Rs 15 m.

3. The mentioned improvements in the Scheme are expected to create desired momentum, thereby ensuring maximum utilization of the facility and increasing market penetration.

4. All other terms and conditions of the Scheme will remain unchanged.

5. The banks are advised to apply for allocation of fresh Credit Guarantee Limits as per criteria outlined in the Scheme and SOPs (placed at SBP website) before February 24, 2011.

• Credit Guarantee Scheme for Small & Rural Enterprises

• Standard Operating Procedures (SOPs)
  
  Appendices to SOPs:
  
  Appendix II, Appendix III, Appendix IV, Appendix V, Appendix VI, Appendix VII, Appendix VIII, Appendix IX