PESHAWAR: The Khyber Pakhtunkhwa government and Bank of Khyber on Thursday signed a memorandum of understanding (MoU) to launch Rs12 billion refinancing schemes to meet the capital and modernisation needs of the province’s small and medium enterprises (SMEs).

The schemes are likely to be available for SMEs in the second week of next month and will be executed by the BOK in coordination with the industries department.

BOK managing director Ali Gulfaraz and provincial industries secretary Zulfiqar Ali Shah signed the MoU during a special ceremony, where provincial finance minister Taimur Saleem Jhagra and special assistant to the chief minister for industries Abdul Karim Khan Tordher were also present.

The finance minister said the initiative was taken in line with the vision of Prime Minister Imran Khan for the development of SME sector in the province.

Disbursement of money likely to begin in second week of next month

A BOK official told Dawn that under the initiative, Rs12 billion would be disbursed by 2030 to all established businesses falling in the SME sector.

“Rs2.5 billion will be disbursed each year under the programme,” he said.

The official said that the programme would have two modes, including the meeting of the capital requirements of SMEs as well as the modernisation of their machinery and Rs6 billion had been allocated for each of them.

He said that under the schemes, the SMEs would be eligible to receive the Rs1-Rs20 million capital.

The official said that the SMEs wouldn’t pay anything back to the bank in the first year and would paytwo per cent of the profit earned on the money in the second year.

“It is nearly afree loan initiative for the province’s SMEs. Established businesses in all sectorsare eligible for it,” he said.

The official said that the bank was working to fast-track the launch of the programme, which would be available to SMEs by March 15.

Meanwhile, a statement issued here said that the Shariah compliant and government supported subsidised refinance schemes were unique as applicable pricing for modernisation of SMEs was zero per cent annually for the first year and two per cent annually for the next four years for the purchase of new local and imported machinery and generator with capacity up to 500 kilovolt-ampere.

It added that on the other hand, the applicable pricing in working capital was zero per cent per annum for the first year and two per cent per annum for the maximum two more years.

Last month, the provincial cabinet had approved the subsidy schemes for SME sector of the province. It was part of the KP Industrial Policy, 2020.

The programme will have two components, including Raast modernisation financing scheme and Raast working capital financing scheme for SMEs. It is aimed to address the issue of SMEs’ access to the credit.

The provision of financing facility to the SME sector on attractive terms in the current scenario will support liquidity needed to sustain the businesses and associated employment. Besides, it will encourage the growth of the existing and new businesses as well.

Published in Dawn, February 19th, 2022