Ministry of Finance, SBP introduce risk-sharing mechanism for banks

Federal Government has allocated Rs 30 billion under a credit risk sharing facility for the banks spread over four years to share the burden of losses due to any bad loans in future.

According to the latest press release by State Bank of Pakistan Federal Government has allocated thirty billion rupees to support bank lending to small businesses.

Ministry of Finance and State Bank of Pakistan have introduced risk-sharing mechanism to support bank lending to Small and Medium Enterprises and small businesses to avail SBP’s Refinance Facility to Support Employment.

The government has allocated this amount under a credit risk sharing facility for banks spread over four years to share the burden of losses due to any bad loans in future. Under this risk sharing arrangement, Federal Government will bear 40 percent first loss on principal portion of disbursed loan portfolio of the banks. This facility will incentivize banks to extend loans to collateral deficient SMEs and small corporates with sales turnover of upto two billion rupees to avail financing under SBP refinance scheme.

Under the SBP’s Refinance Scheme to Support Employment and Prevent Layoff of Workers due to the impact of COVID-19, businesses that commit to not lay off workers in the next three months can avail credit through banks for the three months of wages and salaries expenses at a concessional mark-up rate.

1/4 Ministry of Finance and #SBP introduce risk-sharing mechanism to support bank lending to #SMEs and small businesses to avail SBP’s Refinance Facility to Support Employment. For details: https://t.co/ZaxuXUIlbP

— SBP (@StateBank_Pak) May 6, 2020

2/4 Federal Government allocates Rs30 billion under a credit risk sharing facility for the banks spread over four years to share the burden of losses due to any bad loans in future.

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— SBP (@StateBank_Pak) May 6, 2020

3/4 Under this risk sharing arrangement, Federal Government will bear 40% first loss on principal portion of disbursed loan portfolio of the banks.

— SBP (@StateBank_Pak) May 6, 2020