SBP introduces Islamic financing scheme for SMEs

KARACHI: The State Bank of Pakistan will introduce a Modaraba-based Islamic Refinance Scheme for the working capital financing of small and medium enterprises, the central bank announced on Wednesday.

Under the scheme, SBP will make Modaraba investment in the general pool of Participating Islamic Financial Institutions (PIFIs). Initially, the facility will be available for IT, furniture, gems and jewellery, leather industry, surgical goods, dates processing, fruits, vegetables and food processing and packaging, and printing and packaging.

All small enterprises are eligible, however, for medium enterprises to become eligible, the annual sales turnover of the company should be up to Rs300 million.
Maximum financing limit

Financing limit for medium enterprises is Rs50 million, with a maximum tenure of one year.
Who can submit the applications?

All banks and DFIs can apply to SBP for the status of PIFI and for the allocation and assignment of the limit under the scheme. Such requests can be submitted within 30 days from the date of circular issuance.
Expected rate of return

Once fixed, the expected rate of return on financing will remain the same and locked for the entire financing duration, provided customers pay the scheduled amounts timely.

“The SBP’s investment in the general pool will be assigned profit sharing ratio and weight keeping in view SBP’s expected rate of return as well as PFI’s policy and practice for such type of depositors in the general pool. Such weights shall be used to calculate profits on SBP investments,” said the SBP.

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