MICROCAPITAL BRIEF: State Bank of Pakistan’s Credit Guarantee Scheme for Small, Rural Businesses Extends Loan Repayment Term to 5 Years

The State Bank of Pakistan’s (SBP’s) Credit Guarantee Scheme for Small and Rural Businesses (CGS), which aims to increase financing to small and medium-sized enterprises (SMEs) in rural areas via retail banks, reportedly will extend client loan terms from three years to five years in an effort to increase economic opportunities by facilitating the purchase of tractors and other agricultural tools. To minimize portfolio concentration, funding for agricultural tools and equipment will be limited to 20 percent of the guarantee limit of each bank [1].

Since August 2011, CGS has assisted SMEs and farmers in 105 districts across the country in gaining access to PKR 2.8 billion (USD 28.7 million) via nine larger banking institutions. CGS also serves small commercial banks by providing loans with an average loan size of PKR 390,000 (USD 3,100) for agriculture and PKR 2.1 million (USD 21,300) for small enterprises [2].

By Jennifer Young, Research Associate

About State Bank of Pakistan
Established in 1948, the State Bank of Pakistan (SBP) is the central bank of the nation of Pakistan. Its primary functions include “issue of notes, regulation and supervision of the financial system, bankers’ bank, lender of the last resort, banker to Government, and conduct of monetary policy.” Its secondary functions include “management of public debt, management of foreign exchange, and other functions like advising the government on policy matters.”

Sources and Additional Resources

[1] Pakistan Observer Story, “Credit guarantee scheme tenure enhanced,”
http://pakobserver.net/detailnews.asp?id=206885

[2] State Bank of Pakistan Press Release, “Small Enterprises/Farmers Get Rs 2.83 Bln Bank Financing Under SBP Credit Guarantee Scheme,”
http://www.sbp.org.pk/press/2013/CGS-20-Feb-2013.pdf

MicroCapital Story, January 25, 2013, “MICROCAPITAL BRIEF: Banks Finance Fewer Small and Medium-sized Enterprises in Pakistan,”
https://www.microcapital.org/microcapital-brief-banks-finance-fewer-small-and-medium-sized-enterprises-in-pakistan/

MicroCapital Story, March 23, 2010, “MICROCAPITAL BRIEF: State Bank of Pakistan (SBP) Launches Credit Guarantee Scheme for Small and Rural Enterprises Funded by United Kingdom’s Department for International Development (DFID) and Pakistan’s Financial Inclusion Program (FIP),” https://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-launches-credit-guarantee-scheme-for-small-and-rural-enterprises-funded-by-united-kingdoms-department-for-international-development-dfid-and-pakist/

MicroCapital Story, August 12, 2009, “NEWS WIRE: Pakistan: State Bank Amends Microfinance Credit Guarantee Facility Guidelines,”
https://www.microcapital.org/news-wire-pakistan-state-bank-amends-microfinance-credit-guarantee-facility-guidelines/

MicroCapital Story, January 30, 2009, “MICROCAPITAL STORY: State Bank of Pakistan Launches Three Microfinance Development Funds With Proceeds from the UK Government Financial Inclusion Programme and the Asian Development Bank,”
https://www.microcapital.org/microcapital-story-state-bank-of-pakistan-launches-three-microfinance-development-funds-with-proceeds-from-the-uk-government-financial-inclusion-programme-and-the-asian-development-bank/

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