“SBP is constantly working with stakeholders and taking appropriate measures to bring financial relief and provide pragmatic support to the industries in order to maintain financial solvency and retention of the workforce especially in these trying times. SBP is constantly engaged with bankers to ensure that the initiatives undertaken by SBP are implemented on fast track basis in order to achieve the objectives”. This was stated by Dr Reza Baqir, Governor of State Bank of Pakistan, in a meeting with Directors of Employers Federation of Pakistan through a 75 minute video conference to discuss the SBP Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns.
Dr .Baqir, who was assisted by Deputy Governor Mr Jameel Ahmed and Executive Directors Syed Samar Hasnain and Dr Inayat Hussain, explained that suitable safeguards have been incorporated in the Scheme to avoid its misuse. These include direct deposit of wages and salaries into workers accounts, payment through employers to workers if the employers provide complete information to the lending banks and priority to those employers whose payroll amount is up to Rs 200 million for three months. Moreover, the active taxpayers would get a discount of 1% in the markup rates as an incentive. Dr Baqir also shared that SBP has taken into account the concerns of the SMEs while structuring the Scheme. He also assured that SBP is willing to bring about changes in the Scheme after continued consultations with the employers and the financial institutions.
The SBP Governor also informed that a one-year deferment on payment of principal has already been provided to borrowers. This is a major relief for borrowers, and until now, over 70,000 have availed this benefit and corresponding principal amount is in excess of Rs five billion. This is a definitely a huge relief since SBP has taken full cognizance of the difficult conditions faced by borrowers.
Earlier, while welcoming the top hierarchy of SBP, Majyd Aziz, President EFP, assured the Governor that EFP supports this Scheme and would encourage employers to take advantage of the Scheme. He explained that the objective ofthis video conference was to provide suggestions and seek clarification from SBP in order to better understand the Scheme and make it more favorable for all. The Directors of EFP presented the following:
01. What would be the collateral for these loans, especially if the employer is unable to provide further collateral?
02. What mechanism is available to employers in the shape of credit guarantee by a third party, such as the government?
03. What mechanism is being developed for those employers who do not procure loans from conventional commercial banks and may approach Islamic Banking Institutions?
04. Is this facility available even to those borrowers who are in the CIB list?
05. Have the banks changed their fixed mindset of insisting on excess documents while approving loans under this Scheme?
06. If employers are paying wages in cash to workers, then how would transparency be maintained?
07. Will SBP ensure through a Non-disclosure Agreement by banks that the workers data would not be shared by banks with third party private or government institutions in order to maintain confidentiality from competitors?
08. Will SBP ensure that parity would be maintained among provinces when loans are being disbursed under this Scheme?
09. How would this Scheme impact on the Export Refinance presently enjoyed by exporters and would the continuation of ERF facility be available to exporters with leverage given to them on the 180 days repayment/adjustment mode?
10. Would brokerage houses be able to get loans under this Scheme?
11. Would preference be given to industries that are not multinational and not large?
12. Would SBP interact with FBR to ensure fast track refunds to exporters in order to ease the financial burden on export-based industries?
13. Can employers make an agreement with lending banks to directly route the wages payments through mobile wallets to workers if the employers provide names and CNIC numbers to the bank since this would ensure that workers who do not have bank accounts could conveniently withdraw the money through mobile wallets?
14. Is there a possibility of a laid down special procedure for loans taken by SMEs?
15. More importantly, shouldn’t the interest rate for active taxpayers not be less than 2%?
Mr Jameel Ahmed, Syed Samar Hasnain and Dr Inayat Hussain, in their responses, stated that under this Scheme, employers could obtain loans through both conventional banks or though Islamic Banks as the scheme is available to both types of banks. The condition of collateral would vary from bank to bank and their relationship with the borrowers. This has been left for the banks to decide in each case on its own merit. They assured that SBP is determined to minimize the cost of borrowing in the larger interest of the borrowers. SBP will ensure that, if needed, the bank limits would be enhanced by SBP. They reiterated that SBP has declared a moratorium or deferral of loan payments for one year and this is a major incentive for borrowers. They also informed that under the Scheme, financial sector institutions have been specifically excluded because the emphasis is to provide loans to labor intensive industries.
The SBP top executives added that SBP would discuss the issue of non-disclosure of data with the banks and appreciated this suggestion of EFP. They assured that this Scheme is in force with immediate effect and the banks will be provided limits today. They also said that the EFP proposal for some kind of credit guarantee could also be discussed with banks as well as with the government as this would go a long way in facilitating SMEs. They disclosed that there is already a provision in place in SMEs Prudential Regulations that small enterprizes could obtain loans upto Rs five million without collateral. Many SMEs are in fact vendor industries and an integral part of the exporters supply chain. They said that principal employers could provide Corporate Guarantee for their vendors in case the vendors have difficulty in getting loans under the Scheme. They also agreed with the EFP suggestion that the use of mobile wallets would be a workable alternative as it would ensure direct payment to workers and would also be transparent and not misused. On EFP’s proposal of having 2% interest rate for active taxpayers, they informed that the rates under the scheme are already very low. However, on the issue of a further differentiated rate for the tax payers, they did not rule out the possibility of this being discussed in SBP.
EFP was represented at the video conference by Board of Directors including Vice President Zaki Ahmed Khan, Chairman EFP Economic Council Ismail Suttar, Chief of KPK Haji Muhammad Javed, Co-chief of Punjab Malik Tahir Javed, Chairman of WEBCOP and Skill Development Council Ahsanullah Khan, Iftikhar Shirazi, Yousuf Mirza, Athar Iqbal, Mehnaz Kaludi, Syed Nazar Ali, Director EFP-EC Mehmood Arshad and Secretary General EFP Fasihul Karim Siddiqui.
