Govt allocates Rs 30bln credit risk-sharing facility for banks.

ISLAMABAD -- The federal government on Wednesday allocated Rs30 billion under a credit risk sharing facility for the banks, spread over four years, to share the burden of losses due to any bad loans in future.

The risk-sharing mechanism has been introduced by the Finance Ministry and the State Bank of Pakistan (SBP) to support bank lending to SMEs and small businesses to avail SBP's Refinance Facility to Support Employment.

Taking cognizance of the SMEs finding difficulties in arranging adequate collateral and banks' risk adverseness in taking exposures for such lending under the SBPs Refinance Scheme to Support Employment and Prevent Layoff of Workers, Ministry of Finance has stepped forward to shoulder risk sharing with banks, said a press statement issued by the ministry.

Under this risk sharing arrangement, the federal government would bear 40% first loss on principal portion of disbursed loan portfolio of the banks.

This facility would incentivize banks to extend loans to collateral deficient SMEs and small corporates with sales turnover of up to Rs2 billion to avail financing under SBP refinance scheme.

Under the SBP's Refinance Scheme to Support Employment and Prevent...