MICROCAPITAL BRIEF: Pakistani Government Asks Commercial Banks to Lend $940m More to Small Businesses Owned by Younger People

The Pakistani government reportedly has asked state-owned commercial banks such as the National Bank of Pakistan and First Women Bank Limited to provide loans ranging from PKR 500,000 (USD 4,720) to PKR 2 million (USD 18,900) to 100,000 borrowers within the next year. The Small and Medium Enterprise Development Authority (SMEDA) will work with banks to prepare plans for the new disbursals.

In order to be eligible for a business loan under the initiative, applicants must: (1) be under the age of 35, (2) mortgage their business, and (3) put up additional collateral or have two guarantors co-sign the loan. Borrowers will be required to pay a one-time charge of 8 percent in lieu of interest while the government will cover the remainder of the loan fees. The Pakistani government has allocated PKR 5 billion (USD 47.2 million) to cover this expense.

By Megan McGowan, Research Associate

About the State Bank of Pakistan (SBP):

Established in 1956, the State Bank of Pakistan (SBP) is the nation’s central banking authority. SBP is responsible for the following primary functions: to regulate and supervise the nation’s financial system, to carry out monetary policy and to manage public debt. In addition, SBP performs the following non-traditional functions: developing the financial framework of the country, providing credit to priority sectors and furthering the Islamization of the banking system.

Sources and Additional Resources

The Express Tribune, “Credit Line: Govt Unveils Microfinance Scheme Worth Rs125b,” http://tribune.com.pk/story/608749/credit-line-govt-unveils-microfinance-scheme-worth-rs125b/

MicroCapital Article, September 24, 2013, “Microfinance Providers in Pakistan Report 19.4% Increase in Savings, 5.55% Increase in Microinsurance Clients in Second Quarter of 2013,” https://www.microcapital.org/microcapital-brief-microfinance-providers-in-pakistan-report-19-4-increase-in-savings-5-55-increase-in-microinsurance-clients-in-second-quarter-of-2013/

MicroCapital Article, July 7, 2013, “Islamic Development Bank (ISDB), Government of Punjab Provide $195m for Microfinance Facility in Pakistan,”https://www.microcapital.org/microcapital-brief-islamic-development-bank-isdb-government-of-punjab-provide-195m-for-microfinance-facility-in-pakistan/

MicroCapital Article, January 24, 2013, “Pakistan’s Tameer Microfinance Bank Lists Term Finance Certificate Worth  $10m on Karachi Stock Exchange,”?https://www.microcapital.org/microcapital-brief-pakistans-tameer-microfinance-bank-lists-term-finance-certificates-worth-10m-on-karachi-stock-exchange/

MicroCapital Article, August 22, 2011, “State Bank of Pakistan (SBP) Reports 13% Quarterly Decline in Microfinance Bank Deposits, Slow Recovery After 2010 Floods,”?https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-reports-13-quarterly-decline-in-microfinance-bank-deposits-slow-recovery-after-2010-floods/

MicroCapital Universe Profile: State Bank of Pakistan (SBP), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=State+Bank+of+Pakistan+%28SBP%29

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