Pakistan’s central bank is prepared to launch a programme for lending up to Rs10 million to cottage industry entrepreneurs without requiring collateral, State Bank of Pakistan (SBP) Governor Dr Reza Baqir said.
Baqir told senior members of the Lahore Chamber of Commerce and Industry (LCCI) that the government would insure banks against losses and would ask banks to submit expressions of interest to be included in the programme.
The central bank governor said that the end-user rate for small firms and cottage industries will be 9% under the scheme, compared to 24% under the current system.
“To facilitate the growth of the information technology sector, particularly startups, foreign exchange laws have been relaxed and made more business-friendly,” Baqir said, adding that loosening the restrictions will encourage foreign funding in the IT sector.
He stated that banks have been tasked with the responsibility of resolving payment issues for IT companies.
“IT firms can now acquire web and digital services from abroad for up to $200,000 without obtaining State Bank approval. Previously, this cap was set at $10,000,” he noted.
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The governor stated that the SBP had initiated numerous programmes to assist businesses during the Covid-19 outbreak, including principle loan restructuring, the Temporary Economic Refinance Facility (TERF), and a refinance programme for salary payment.
He emphasised that more than 90% of borrowers who benefited from the programme for primary loan restructuring were small borrowers. “Loans totaling more than Rs600 billion have been restructured,” he revealed. “Overall, the central bank provided relief to the business community of more than Rs2 trillion through various schemes to assist the economy in regaining its footing,” Baqir said, adding that due to the government’s prudent policies, the debt-to-GDP ratio did not increase during the pandemic, whereas in developed economies, it increased by 10-15 percent.
He informed the businesses that Rs436 billion in funding had been approved and the majority of cash had been disbursed. The remainder of the funds were on the verge of being disbursed.