KARACHI, May 14: The State Bank of Pakistan has designed a new long-term loaning scheme for small and medium enterprises to facilitate purchase or import of machinery against bank loan , the return of which would be based on one to three years treasury bill rates.

A fax release of the Small and Medium Enterprises Association on Friday refers to a luncheon meeting of State Bank Governor Dr Ishrat Hussain with the SMEA executive committee members in which outlines of the new loan scheme were shared.

Qasim Nawaz, Joint Director, Banking Policy Department of the State Bank, informed the SME leaders that the proposed loan would be available in local currency and repayment would also be in the same currency.

For the first time intangible securities like brand names were acquired and franchise holding is being allowed as security for advance.

The profit on this loan will be based on one-three years treasury bill rates depending on the requirement of borrowers. The borrowers will be provided hedge support against foreign exchange market rate fluctuations.

The loan will be available for technology upgradation of the industry and consultancy charges as investment against this borrowing and financing is available for a period of seven-and-a-half years.

In reply to a question, Dr Ishrat said that for the first time there were two sets of prudential regulations. "One set deals with the business and the other is exclusively for the small and medium enterprises.

The emphasis, he said, was now on the repayment capacity of the SMEs taking into consideration the cash flow rather than the conventional collateral. For this purpose the bankers are being given special training.

Legal advisory committees have been formed at 16 places with clusters of SMEs chaired by the SBP chief manager of the area to deal with specific lending problems.