The State Bank of Pakistan announced an incentive scheme titled Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns that enables the provision of concessional credit for payroll finance to businesses that commit to not lay off workers for the next three months.
Under this scheme, The State Bank of Pakistan has introduced further incentives in order to support employment and avoid layoffs in the country.
These additional incentives include
- Relaxations in collateral requirements
- Further reduction in the end-user rate
- Reimbursement of wages,
- Special accounts for employees to receive wages
- Borrowing from banks other than maintaining payrolls
- Simplification of application form for SMEs and bank’s exposure limits.
According to the released statement, these additional incentives will be effective from today.
Based on feedback from stakeholders, SMEs including vendors and distributors were facing the problem of providing security/collateral, said SBP.
To address this issue, the central bank has now allowed banks to provide financing against corporate guarantees of companies in value/supply chain relationships with the borrowers. Moreover, banks have also been encouraged to provide loans without any collateral, taking clean exposure of up to Rs. 5 million.
SBP has enhanced incentives for businesses that are active taxpayers by reducing the markup rate to 3% that was set as 4% earlier. Now, SBP will provide refinancing to banks at 0%. This also increases the gap between the rates charged to active taxpayers and the non-tax paying 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 their accounts on the information and documents provided by the employers along with an undertaking stating that these persons are bonafide employees/workers.
Banks will ensure verification of the employees using NADRA Verisys before the activation of such accounts. These accounts, however, should be used solely for salary disbursement and withdrawal purposes only.
Businesses have also been given the flexibility to avail loans under SBPs refinance scheme for wages from any bank and they will not be limited to avail loans from the bank that manages their payroll.
Further, businesses will also be able to get reimbursement of salaries in April 2020 that have been disbursed through their own sources, provided they have applied for financing under the scheme before disbursement, and the banks subsequently approved it.
SMEs can apply for financing on a simplified loan application form prescribed by SBP for this scheme.
To facilitate the banks further for lending under the scheme, the banks’ exposure under the scheme has been exempted from the per-party or the per-group exposure limits. It will enable them to lend to borrowers that have exhausted their exposure limits.
All these benefits will also be available to businesses availing financing under the scheme from Islamic Banking Institutions.
Further information and details on these incentives are available at the following link: http://www.sbp.org.pk/corona.asp
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