KARACHI: Around half a million employees have been saved from layoffs and non-payment of salaries in the private sector during the ongoing lockdown due to the coronavirus pandemic through the refinancing scheme issued by the central bank.
According to the State Bank of Pakistan (SBP), there has been a significant take-up in the refinance scheme introduced by the central bank that provides concessional loans at three percent to any company that commits to not lay off workers for the next three months.
The central bank said, within the first two weeks of the scheme, banks and development finance institutions (DFIs) received applications from over 700 companies from different cities and various sectors worth Rs65 billion to avail refinancing facilities to pay salaries to their employees on time.
2/2 In the first two weeks of this scheme, applications from companies worth Rs. 65 bn are in process at #banks and #DFIs that will protect jobs of more than half a million employees in more than 700 companies.
— SBP (@StateBank_Pak) April 30, 2020
On 22 April, SBP introduced further incentives for businesses under refinance scheme for payment of wages and salaries to the workers and employees to prevent layoffs during the pandemic.
To address the issue of providing security/collateral for small businesses, financing has been allowed against corporate guarantees of companies in supply chain relationship with the borrowers. Moreover, banks have also been encouraged to provide loans without any collateral upto Rs. 5 million.
SBP has incentivised businesses that are active taxpayers by reducing the markup rate to 3% that was set as 4% earlier. The central bank will provide refinance to banks at zero percent markup. This increases the gap between the rates charged to active taxpayers and the non-tax payers businesses, as the latter can be charged an end-user markup rate of up to 5%.
To facilitate employees for receiving wages under the scheme directly, banks have been allowed to open accounts on information and documents provided by the employers. Banks will verify the information from NADRA before activation of accounts which will solely be used for salary disbursement and withdrawal.
Businesses have also been given flexibility to avail loan under SBPs refinance scheme for wages from any bank and will not be limited to avail loans from the bank that manages their payroll.
SMEs can apply for the financing on a simplified loan application form prescribed by SBP for this scheme. Banks have been exempted from exposure limits to enable them to lend to borrowers that have exhausted their exposure limits. The financing scheme will also be applicable to Islamic banking institutions.
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