SBP plans convertible debts for startups

Published February 10, 2021
The State Bank of Pakistan (SBP) is working on a new type of loan scheme to meet the specific needs of startup companies. ─ Wikimedia Commons/File
The State Bank of Pakistan (SBP) is working on a new type of loan scheme to meet the specific needs of startup companies. ─ Wikimedia Commons/File

KARACHI: The State Bank of Pakistan (SBP) is working on a new type of loan scheme to meet the specific needs of startup companies keeping in view the issues they are facing in raising capital in the form of convertible debt from abroad.

According to a working paper titled “Raising of convertible debt from abroad by startup companies” issued by the State Bank on Tuesday, startups and venture capital firms maintain that foreign investors intend to invest in their companies in the form of convertible debt (ie loan convertible into equity) instead of directly investing as equity while the current foreign exchange regulations remain unable to provide this facility.

Startup firms also face funding issues due to unavailability of collateral or security. Foreign investors including equity funds and angel investors show interest in startups. However, they try to cover the risk through alternative means like high return on loan, the SBP noted.

“A company may raise funds from abroad in the form of convertible debt ie the lender shall have the option to convert the loan into equity of the borrowing company,” said the SBP.

Published in Dawn, February 10th, 2021

Opinion

New engagement
19 Apr 2021

New engagement

Better Pak-India ties mean a better regional outcome.
Inequality and ideology
19 Apr 2021

Inequality and ideology

Hunger and want, and the constant reminder of inequality,may condition religious mobilisation, but they are not solely sufficient.
Ties of sentiment
19 Apr 2021

Ties of sentiment

Pakistan-UK relations have been remarkably stable and increasingly energised by the Pakistani diaspora.

Editorial

19 Apr 2021

Vaccine shortfall

THE hope that the slew of Covid-19 vaccinations approved for use since the end of last year would vanquish the ...
19 Apr 2021

Another package

FEW will disagree that infrastructure across Sindh — from the megalopolis of Karachi to the districts in the...
19 Apr 2021

Cricket triumph

TEAM Pakistan have a number of reasons to rejoice after their 3-1 T20 series win over hosts South Africa on Friday....
18 Apr 2021

More cabinet changes

PRIME MINISTER Imran Khan has reshuffled his cabinet yet again in what is obviously another attempt to shore up his...
Blocking social media
Updated 18 Apr 2021

Blocking social media

FOR four hours this week, all social media platforms in the country were shut down, a measure the government said ...
18 Apr 2021

Peasant rights in Sindh

IN a seminar held in Nawabshah recently, the Sindh Human Rights Commission and Hari Welfare Association reiterated a...