KARACHI, Jan 1: Another subsidised lending scheme for the export-oriented industry has been launched while the State Bank will provide 70 per cent money for these lending at a rate significantly lower than the market.

The new scheme is specially designed for import of latest machines for export-oriented sector carrying major attraction of long-term loans for up to 10 years while grace period of two years is also available.

The main sectors which will benefit from the new scheme are textile and garments (fabrics, garments, made-ups, towels, art silk and synthetic textiles), rice processing, leather and leather products, sports goods, carpets and wool, surgical instruments.Funds provided by the PFIs (Participating Financial institutions) from their own resources will be eligible for deduction from the time and demand liabilities determined for the purpose of computation of both Cash Reserve Requirements and Statutory Liquidity Requirements.

The scheme is effective from the very first day of the year 2008 and all LCs established after announcement of the scheme will be eligible for financing.

The facility will provide necessary finance to exporters for adoption of new technologies and modernising their plant and machinery in line with the international competitive environment.

The SBP introduced the new long-term financing facility to promote export-led industrial growth in the country.

The rising import and slow export growth has been threatening for the country for at least four years and the widening trade deficit is feared to wash out the hard-earned foreign exchange reserves.

The State Bank said the facility will be available to the export- oriented projects with at least 50pc of their sales constituting exports or if their annual exports are equivalent to US$ 5 million, whichever is lower.

Exporters (including SMEs) can avail financing under this facility through Participating Financing Institutions (PFIs) for new imported and locally manufactured plant and machinery.

The loans availed under the facility will be repayable within a maximum period of 10 years, including a maximum grace period of two years from availing date. However, where financing facilities have been provided for a period of up to five years, maximum grace period will not exceed one year.

The mark-up on a loan for three years will be eight per cent, including 1.5 per cent spread of banks while for five-year loan carries mark-up of nine per cent, including 2.5 per cent bank spread.

For the 10-year financing, the total mark is 10 per cent, including three per cent bank spread. The SBP in FY 08 will refinance up to 70pc of the facility sanctioned by banks while the remaining amount of 30pc or more of LTFF will be financed by PFIs from their own resources to a borrower.

The SBP will allocate an overall yearly limit under the facility which will be sanctioned to individual PFIs on first-come-first served basis in line with the internal criteria developed by the State Bank. For January-June 2008, this amount has been fixed at Rs8 billion. Under the new facility, financing will be available through commercial banks, including Islamic Banks and DFIs approved as PFIs.

Islamic Banks will be eligible for offering LTFF subject to availability of Shariah compliant compatible product under the facility duly approved by the banks and SBP’s Shariah Advisor and cleared by SBP’s Shariah Board.

Period of financing: There will be no maximum limit for borrowing by the prospective entrepreneurs under this facility. However, in case of larger financing requirements, i.e. over Rs300 million, PFIs are encouraged to provide finance under consortium arrangements, said the SBP.

Other sectors which may benefit from the new scheme included fisheries, poultry and meat, fruits and vegetable and processing, cereals, I.T. – software and services, marble and granite, gems and jewellery and engineering goods.