Circulars/Notifications / Infrastructure, Housing & SME Finance Department  

 IH&SMEFD Circular No. 01 of 2017
January 13, 2017

The Presidents/Chief Executives,
All Banks/Microfinance Banks

Dear Sir/Madam,

Credit Guarantee Scheme (CGS) for Small and Rural Enterprises

Please refer to SMEFD Circular No 2 dated February 14, 2011 along with other instructions issued from time to time on the captioned subject.

In order to improve the effectiveness of the subject scheme, following changes have been made in CGS:

1. With effect from January 01, 2017:

a) Guarantee coverage has been increased to 60 percent for loans extended to:

i. Start up businesses,
ii. Women borrowers and
iii. Small and Rural enterprises operating in under-served areas of the country with respect to SME financing.

b) For eligible borrowers, other than those mentioned above, the risk coverage ratio will be linked with the level of collateralization and will operate in the following manner:

Guarantee Cover Value of Collateral
60 Percent Clean Lending
40 Percent Upto 100 Percent of Loan Value.
20 Percent Value of Collateral more than the Loan Amount

In cases, where a loan falls in two categories, higher risk coverage shall prevail.

2. Participating Financial Institutions (PFIs) will manage the loans under this risk coverage scheme keeping in view their assigned limits, which are dependent on the availability of funds under the scheme.

3. The maximum financing that can be extended to small enterprises under the scheme has been enhanced upto the maximum financing allowed to Small Enterprise under SBP’s Prudential Regulations on Small Enterprises which is currently Rs 25 million.

4. Any amount recovered from defaulted cases against which SBP had paid the claims may be deposited to SBP BSC on quarterly basis. Recovered amount should be deposited by last date of the respective quarter.

5. The Development Finance Support Department (DFSD), SBP BSC will henceforth process the guarantee claims of PFIs in 15 working days after receipt of complete information.

6. Leasing companies have been included as participating financial institution in CGS. The leasing companies intending to avail this credit guarantee facility may apply to SBP for the same.

7. Since PFIs have been encouraged under the Scheme to serve collateral deficient borrowers, they may amend their credit policies for this purpose.

Updated Scheme along with Annexures is enclosed.

Encl.: 1. Revised Credit Guarantee Scheme

2. Form CG-1
3. Form CG-2
4. Form CG-3
5. Form CG-4

Yours sincerely,

(Syed Basit Aly)


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