State Bank urged to modify export refinance scheme
By Our Staff Reporter
KARACHI, Feb 14: The Pakistan Leather Garments Manufacturers and Exporters Association (Plgmea) has requested the State Bank to modify the export refinance scheme (ERS) Part-I to provide facilities to genuine exporters.
In a recent meeting with SBP Governor Dr Ishrat Husain, Plgmea Chairman Fawad Ijaz Khan pointed out that many exporters of leather garments availed the facility of scheme in obtaining loans from banks, but they found the scheme complicated and unfeasible.
In order to make the scheme simpler and with less documentation, Mr Khan proposed modifications in the scheme, suggesting that the Part-I should be made similar to the export refinance scheme Part-II.
"At the same time, while obtaining loan from a bank, an exporter should provide only an undertaking and a demand promissory note just like the Part-II scheme. After the expiry of a six-month period, the exporter should furnish shipping documents of different shipments pertaining to the loan within one month of the expiry of loan," Mr Khan added.
He said the SBP should only ensure that the exporters had actually made the shipments and foreign exchange realized against the loans obtained by them. He said that most of the Part-I loans were obtained on the basis of non-genuine contracts between the exporters and buyers and subsequently the exporters had to go through a lot of formalities like substitution of contract, etc., while making export shipments.
According to a recent trend in leather garments export, he says, customers do not open letters of credit and in most cases. They have their own inspectors or buying officers in Pakistan. These buyers send payment before the shipment only after garments are inspected and approved.
Technically, this method of payment is treated as an advance payment, and the form-I is passed against advance payment. The shipment against advance payments is not entitled towards the adjustment of export refinance Part-I loans.
Another major problem is that after making one or more export shipments against one particular contract under the Part-I, the exporter has to apply each time for fresh loan to the extent of his shipment value which he has adjusted. This way, the exporter has about 90 to 120 days instead of 180 days available with him for the utilization of loans.
