1. Considering the critical importance of SMEs in inclusive economic growth and employment creation, the Government of Pakistan, on the recommendation of the SBP, has approved a Risk Coverage Scheme for securing banks’ fresh exposure against SMEs. The scheme is part of the Government and the SBP efforts to double the size of SME financing to Rs.1,100 billion in next 5 years. The key features of the scheme are given below:
   

S. No	Particulars	Key Features
1	Proposed Outlay	Fresh/Incremental financing from July 1, 2024
2	Credit Guarantee Limits	SBP to allocate Risk Coverage Limits to each Participating Financial Institution (PFI) against fresh SME finance
3	Eligibility Criteria	SMEs (new and existing businesses) as per SBP definition of SME finance Prudential Regulations
4	Loan size	As per SBP Prudential Regulations for SME Finance (or as amended by SBP from time to time) Upto Rs 25 million for Small Enterprises (SEs) Upto Rs 200 million for Medium Enterprises (MEs)
5	Loan type	All types of loans including working capital loans/running finance and long term loans
6	Loan Tenor	Upto 5 years
7	Security Requirements	As per Prudential Regulations for SME Finance
8	Risk Mitigation	Government will absorb credit loss (principal portion only) on the banks’ fresh exposure against SMEs 20% first loss coverage against banks’ fresh exposure to SEs 10% first loss coverage against banks’ fresh exposure to MEs
9	Loan loss criteria	The loans classified as loss on the time based criteria as mentioned in SBP Prudential Regulations for SME Finance for SEs and MEs will be considered as the defaulted portfolio for the purpose of payment of claims against the risk coverage.
10	Executing Agency	All commercial banks/ Islamic Banks
11	Submission of Risk coverage claims by banks	Risk coverage Claims will be lodged by banks electronically with Financial Inclusion Support Department (FISD), SBP BSC within 15 working days after completion of respective quarter.
12	Recoveries against classified/ loss loans	Payment of risk coverage claim shall not obviate banks from the right of recovery of the defaulted amount. Banks shall continue with their regular procedure for recovery of loans. The recoveries from delinquent borrowers may be treated in three ways. A bank receives recovery from delinquent borrowers and it has pending subsidy claims with SBP under the scheme. In such scenario, the bank may adjust the recovered amount from the quarterly claims by netting it off from the risk coverage claims. A bank receives recovery from delinquent borrowers and it has no pending subsidy claims with SBP under the scheme. In such case, the concerned bank will deposit the recovered amount with FISD-SBP-BSC. FISD will adjust it with any other bank having pending risk coverage claims under intimation to SME Housing & Sustainable Finance Department and Finance Division. In case where all the banks submit nil claims then the recovered amount will be deposited in a child account “Miscellaneous account (FG MISC)” under Central Account Non Food 1 on quarterly basis under intimation to Finance Division.