SME Asaan Finance introduced for SMEs to get loans without collateral

SME Asaan Finance

The State Bank of Pakistan (SBP) has introduced a financing scheme for Small and Medium Enterprises (SMEs) called SME Asaan Finance, enabling them to get loans without collateral. 

“The Ministry of Finance welcomes and supports this innovative initiative of the State Bank which would enable SMEs without collateral to access bank finance. We look forward to seeing strong participation from commercial banks to take this initiative forward,” commented Shaukat Tarin, the Federal Minister for Finance on the eve of launching a scheme to provide collateral-free financing of up to Rs 10 million to small and medium enterprises.

Read more: Pakistan ranks 3rd among countries safeguarding SMEs from coronavirus impact

State Bank of Pakistan said in a statement that SME Asaan Finance or SAAF was an innovative initiative to improve SME’s access to finance in collaboration with the government. Here, the Central Bank of the country will provide refinance for the period of three years to certain banks. After this period, the refinance will be repaid by banks in ten-year equal installments.   

The banks will receive refinance from the State Bank of Pakistan at a rate of 1 percent per annum and extend financing to small and medium enterprises at an end-user rate of up to 9 percent per annum. The facility would be available to SMEs for long-term fixed capital investment and working capital finance needs. Both, the Shariah-compliant Islamic modes of finance and conventional, will be offered.  

SBP to launch SME Asaan Finance Scheme (SAAF) next month

The scheme would be fully launched by the end of next month. The government will provide risk coverage of 40 percent to 60 percent to these selected banks against losses, depending upon the amount. This is the refinance and credit guarantee facility which has been introduced through a long consultative process and the main objective of which is to assist SMEs, lacking finance but cannot access banks as they are unable to offer security, required by the banks.  

The Central Bank will provide refinance whereas the government will support through partial credit guarantees to these banks. This scheme is being launched initially for three years to facilitate investments by banks in technology, infrastructure, and team building specialized in SME lending after which SME financing by banks is likely to be sustainable without the SBP or government support.

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