KARACHI: The State Bank of Pakistan (SBP) on Friday launched a refinancing scheme to save hundreds and thousands of jobs in the private sector by providing cheaper loans to businesses at 4 to 5 per cent for payment of wages and salaries.

The ‘Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns’ will be available to all businesses across the country through banks and will cover all types of employees including permanent, contractual, daily-wage workers as well as outsourced workers, said the SBP in a press release.

A grace period of six months will be allowed to the borrowers while the repayment of the principal amount will be made in two years. Banks will provide weekly reporting to the central bank on the take up of the scheme and in particular the reasons for any denials of financing requests under this scheme, said the SBP.

“The scheme will provide financing for wages and salaries expenses for three months from April to June for those businesses which do not layoff their employees for these three months,” it added.

The scheme will ease the liquidity constraints of the businesses and they can use their available financial resources to meet other working capital requirements.

Repayments will be made in two years with a grace period of six months

The loss of economic activity in the wake of coronavirus pandemic has caused thousands of job losses jobs across the country. “The core objective of this facility is to incentivise businesses which do not lay off their workers during Covid-19 pandemic,” said the SBP.

Under the scheme, businesses can avail loans at five per cent mark-up whereas borrowers on the active taxpayers list will be able to get loans at a further reduced mark-up rate of 4pc.

The SBP said the scheme has been designed to benefit small- and medium- sized enterprises. “Businesses with a three-month wage and salary expense of up to Rs200 million will be able to avail the full amount of their expense in financing while those with a three-month wage and salary expenses of greater than Rs500m will be able to avail up to 50pc of expense,” said the SBP.

Businesses in the middle category will be able to avail up to 75pc of their three-month salary and wage expenses. In addition, the banks will not charge any loan processing and credit limit fees or prepayment penalties for loans under this scheme.

Businesses can access details of the scheme at (http://www.sbp.org.pk/smefd/circulars/2020/C6.htm and http://www.sbp.org.pk/smefd/circulars/2020/C7.htm) or call at (021-111727273) during working hours.

The SBP expects that one of the main benefits of the scheme is that employers who have retained workers on their payroll will be able to restore or increase production quickly once the situation normalises.

Published in Dawn, April 11th, 2020