functions of dfsd and credit guarantee schemes final
TRANSCRIPT
April 15, 2023
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DEVELOPMENT FINANCE SUPPORT OPERATIONS &
CREDIT GUARANTEE SCHEMES
Development Finance Support Department (DFSD) State Bank of Pakistan, SBP BSC, Head Office Karachi
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Session 1: Financial Inclusion Program
Session 2: Role & Functions of DFSD
Session 3: Credit Guarantee Scheme for Small & Rural Enterprises
Session 4: Microfinance Credit Guarantee Facility
Session 5: Funds Management under Schemes
Session 6: Socio-Economic Indicators & Developmental Impact
Roadmap & Session Plan
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Developmental Role of SBP Inclusive Financial System Financial Inclusion Program (FIP) Tool for Financial Inclusion
Financial Inclusion Program3
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Role to Play - State Bank of Pakistan
Basic Mandate:
“WHEREAS it is necessary to provide for the constitution of a State Bank to regulate the monetary and credit system of Pakistan and to foster its growth in the best national interest with a view to securing monetary stability and fuller utilization of the country’s productive resources”. – (The State Bank Of Pakistan Act, 1956)
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Role to Play - State Bank of Pakistan
Functions of the Bank may be classified into two groups: (a) the primary functions including issue of notes, regulation and
supervision of the financial system, bankers’ bank, lender of the last resort, banker to Government, and conduct of monetary policy, and
(b) the secondary functions including the agency functions like management of public debt, management of foreign exchange, etc., and other functions like advising the government on policy matters and maintaining close relationships with international financial institutions. The non-traditional or promotional functions, performed by the State Bank include development of financial framework, institutionalization of savings and investment, provision of training facilities to bankers, and provision of credit to priority sectors. The State Bank also has been playing an active part in the process of islamization of the banking system
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Developmental Role of SBP
The scope of Bank’s operations has been widened considerably by including the economic growth objective in its statute under the State Bank of Pakistan Act 1956. The Bank’s participation in the development process has been in the form of rehabilitation of banking system in Pakistan, development of new financial institutions and debt instruments in order to promote financial intermediation, establishment of Development Financial Institutions (DFIs), directing the use of credit according to selected development priorities, and development of the capital market.
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Inclusive Financial System (IFS) – Recent Priority
Coverage:
A financial system that caters to the financial needs of under-served, un-banked segments of society and increases outreach to all sectors/sub-sectors of the economy.
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Inclusive Financial System (IFS)
Scope & Objectives: Critical for Macro-economic Growth Extending the Economic Gains to all segments of
society, particularly to the low income population
Providing Income generation/enhancement opportunities
Broadening and deepening of financial system- Strategic Objective of SBP
Developmental mandate of SBP
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Financial Inclusion & Financial Exclusion
Financial Inclusion- bringing un-banked sectors/individuals under the banking system i.e. Increasing the banks’ outreach levels and geographic coverage
Financial Exclusion- the policies and strategies that reduces the masses/public’s access to the financial system-e.g. high service charges , high interest rates, closure of branches in rural/far flung areas etc.
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Financial Inclusion Program (FIP)
The Financial Inclusion Program was established under a MoU between UK’s Department for International Development (DFID), Government of Pakistan (GOP) and State Bank of Pakistan (SBP)
DFID provided a grant of GB Pounds 50 Million for launching of Financial Inclusion Program, out of which GB Pounds 13 M was allocated for Credit Guarantee Scheme for Small & Rural Enterprises (CGS) and GB 15 M for Microfinance Credit Guarantee Facility (MCGF)
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Financial Inclusion Program (FIP)
Objective:
1. To foster economic growth and to improve income and life opportunities for poor and marginalized groups in Pakistan.
2. To improve access to financial services by marginalized groups as well as by micro, small and medium enterprises
3. To promote access to finance to SMEs and to encourage banks towards cash flow based lending for fulfilling credit requirements of potential businesses that lack collateral.
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Tool for Financial Inclusion
Development Finance:
An extended branch of development economics that explores strategies for providing financial resources to productive sectors of the economy- that enhances the economy’s productive capacity and promotes socio economic development e.g. Infrastructure Development, Industrial Projects, SMEs, Agriculture etc
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Development Finance
Focus: Provision of financial services to SMEs,
Agricultural & Rural communities, Micro-enterprises and Housing & Infrastructure projects.
These sectors are largely un-banked/under banked; not served under normal market mechanism;
Banks/private investors reluctant to invest/finance in these sectors due to their perceived un-viability
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Establishment of DFG & DFSD Key Functions of DFSD Development Finance-Key Issues Achievements of DFSD
Role & Functions of DFSD 14
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Development Finance Group(DFG)
Intro: Established in 2007 to lead and steer all SBP
initiatives for increasing outreach of financial services in agriculture/rural communities, SMEs, Microfinance and Housing & Infrastructure finance ;
AC&MFD and IH&SMEFD are the two Departments in the Group
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Development Finance Support Department(DFSD)
Established in 2007 Presence across Pakistan through its 13 Field
Offices Operational Arm of DFG Main Functions Include
Implementation of SBP Credit Guarantee Schemes
Operational Management of SBP Export Finance Schemes
Awareness Programs & Monitoring of Development Finance Policies of SBP
Research Studies & Surveys
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Key Functions of DFSD
Monitoring regional trends in growth of DF as well as build-up of banks’ DF related capacity
Developing linkages with local stakeholders to make collaborative efforts for increasing outreach of financial services
Linkages with educational institutions to sensitize them about the emerging DF market and create demand for DF related courses in the institutions
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Network Force of DFSD
Field Units (Access to Finance Units-AFUs & Refinance Schemes Units-RSUs) established in SBP BSC offices
Each Field Unit assigned a geographic area comprising various districts for the purpose of undertaking DF activities;
AFUs- Focal Points for all DF related functions, programs, projects and continuous interaction with stakeholders;
RSUs- Units for operational implementation of SBP Export Finance & Other Refinancing Schemes
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AFUs’- Key Functions
Coordination with Banks Purpose
To assess progress towards development & build-up of banks’ DF portfolio and DF related Capacity
Instruments Regional Plans:
To collect, compile, consolidate and analyze the Regional Plans from banks for increasing outreach of DF in the region;
Operational Data
Reviewing periodical operational data to monitor banks’ progress on implementation & Execution of the Regional Plans. Units don’t collect operational data from banks; the data is collected centrally by SBP Data Warehouse and units receive processed data about their regions
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AFUs’ - Key Functions
Awareness & Information Dissemination Instruments
Linkages with Stakeholders through personal visits, formal & informal meetings- CMs to at least have one formal meeting with the senior management of the stakeholders
workshops/seminars/Melas for SMEs and farming community in collaboration with stakeholders
Participation in workshops/seminars etc organized by the stakeholders as speakers/participants
Encouraging banks to devise their awareness campaigns Focus Groups meetings for dissemination of policies &
collection of feedback
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AFUs’ - Key Functions
Research Studies & Surveyso Initiate studies, surveys etc in consultation with
DFSD HOK to explore the market and or investigate the burning questions/issues of DF
o Gujranwala SMEs Survey, Gujranwala Agri Survey
o Sukkur SME and Agri Surveyo Cotton Belt Survey o Regional profileo Cluster Studies
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AFUs’ - Key Functions
Focus Groupso Agriculture Finance Focus Group ( AFFG)o SME Finance Focus Groupo Microfinance Focus Groupo Islamic Banking Focus Groupo Housing Finance Focus Group
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Development Finance- Key Issues
Dispersed population in rural areas; Weak credit culture due to long era of public
sector banks’ dominance Lack of Information symmetries Low absorptive capacity of the target population Absence of Research & Development Low product variety
Programs Arranged & Attended FY08* FY09 FY10 FY11 FY12 FY13 Total
Focus Group & LCAC Meeting 39 101 65 72 67 66 410Awareness Programs on DF 12 14 51 53 93 56 279Workshop/ Seminar 7 5 24 68 86 34 224Mela/ Fair/ Exhibition/Conference/ Festivals
03 11 12 24 23 15 88
Others i.e., Présentations, Lectures, Conférence etc.
26 85 74 79 77 37 378
Capacity Building Program 18 33 23 51 52 48 225$Research Activities (Cluster Studies)• Study on Under Utilization of Export Finance Scheme • Overview of Livestock & Exploring Tannery Cluster• Study on Export & Import Procedure & Documentation
- - - - - 03 03
Onsite Visits/ Review Meetings for implementation of :
89 76 61 162 138 98 1,098
• Agri Credit Target vs Achievements & OWO of Agri Financing• Farmers Financial Literacy Program• Linkages with Academia
•Linkages with Government & other departmentsTotal 194 325 310 509 536 357 2,705* From October-2007 to June, 2008
Snapshot of Achievements
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Scope & Objective Scheme Dynamics & Target Sectors Salient Features of Scheme Standard Operating Procedures (SOPs)
Credit Guarantee Scheme for Rural & Small Enterprises (CGS) 25
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Scope & Objective: Credit Guarantee Schemes are programs that
ensure partial repayments of a loan in order to motivate Banks/PFIs to lend to borrowers which would not have access to credit under normal circumstances.
Access to formal finance is a major problem hindering the growth of small & micro enterprises, particularly in rural areas as such impediment to raise financing from Financial Institutions, Credit Guarantee Scheme shall help in resolving severe credit rationing.
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Scheme Dynamics & Target Sectors
Credit Guarantee Scheme for Rural & Small Enterprises (CGS)
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Capital Structure
Funds:
The seed money viz GBP 13 Million & Rs. 300 Million for Credit Guarantee Scheme for Rural & Small Enterprises was provided by UK’s Department for International Development (DFID) under Financial Inclusion Program (FIP) and Government of Pakistan (GoP) respectively.
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Small & Rural Enterprises
Snapshot: Total No. of Economic units: 3.2 Million SME share: 90% Employee share: 75% of Non-agriculture force Contribution to GDP: 30% Financing to SME Sector: Rs. 253 Billion which is
about 7% of banks total advances
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Barriers to SME Growth
Govt. & SME Interaction Taxation Finance Labor Legislation Human Resource Development Technology Market & Industry Information Lack of Infrastructure Environmental issues & compliance Social compliance issues
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Demand Side Issues
Assessment of total demand by region/ sector Access to Industry/ Business Benchmarks Informal accounts and management systems Proposal Formulation Securitization of Business operation Difficulties in managing loan documentation
(volume/language) Inadequate capitalization particularly for New
Business and issues of risk mitigation start-up financing collateralization
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Why Important?
Growth of small & rural businesses performs as an engine of economic development.
Inadequate access to formal finance has been a major hindrance in growth of small and micro enterprises in rural areas.
Despite immense significance and potential, SME sector remained largely financially excluded.
Insufficient financing and lack of development finance activities for SME & Agri
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Salient Features of Scheme
Credit Guarantee Scheme for Rural & Small Enterprises (CGS)
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Basic Features
Scheme was launched in March,2010 Operational management by Credit Guarantee
Office (CGO) of DFSD, SBP BSC SBP sharing to bonafide losses to the extent of
60% of PFIs fresh financing to small & rural enterprises
Two components of the schemeComponent-I for Khyber Pakhtunkhwa, FATA &
Gilgit Baltistan and all banks/PFIs will be eligible to apply for limits
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Basic Features
Component-II for priority clusters/areas for of other parts of the country. Few banks will be selected as PFIs
Banks to develop a fresh portfolio of borrowers who are credit worthy but can not fit into their usual parameters, especially when collateral is required.
Banks to assess Small & Rural Enterprises ( Annual Turnover Rs. 75.0 M with up to 20 employees) on the basis of Cash Flows.
Mark up Rates capped at KIBOR (3 Months) + 300 BPS
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Basic Features
Priority will be given to small farmers with landholding up to 5 acres for purchase of inputs like fertilizers & seed etc.
Major priority areas are Cutlery, Surgical instruments, Fisheries, sports goods, Agriculture services ( viz cold storage, quality seeds & fertilizers, Bio Gas etc) Ceramics, Retail Enterprises
Tenure for Short & medium Term loans will be up to 3 years for working capital and medium term capital needs for maximum amount Rs. 5.0 Million
Loan limit to subsistence farmers will not exceed Rs. 0.5 Million
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Basic Features
Eligibility Criteria: Clean e-CIB Record Eligible under PRs for SMEs/Agri. Financing Regular and estimable positive cash flows Eligible under Credit Policy of PFI Borrowers within defined target market Preference to Fresh Customers; or existing
borrowers who need enhancement
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Basic Features- Revisions
Loan Amount:
Maximum Loan amount for Small Enterprises enhanced from 5.0 Million to Rs. 15.0 Million whereas for farmers, Rs. 0.5 Million to Rs. 2.0 Million
Tenure
Short and Medium term loans of up to 3 years enhanced to 5 years and for Agri loans to 3 years.
Pricing
Mark-up Rate cap abolished, allowing banks to adjust loan pricing based on risks.
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Basic Features- Revisions
Guarantee Coverage:
Risk sharing was reduced from 60% to 40% Landholding:
Farmers with landholding of 5 acres replaced to farmers with economic landholding as under:
Small Enterprises or a farmer with economic landholding (50 Acres in Punjab & Sind whereas 64 acres for KPK/Baluchistan)
Bifurcation into Components:
Bifurcation into Components-I & II and restricted scope of clusters removed.
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Selection of PFIs
SBP selects eligible PFIs based on Camel Ratings Agri-Portfolio SME Portfolio Branch Network Share/Expertise in Agri/small financing
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Guarantee Limits-allocation
SBP allocates limits to eligible PFIs based on Previous performance Guarantee allocation request Availability of funds for issuance of limits
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Standard Operating Procedures (SOPs)
Credit Guarantee Scheme for Small & Rural Enterprises
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Roles & Responsibilities
Technical Committee on Credit Guarantee(TCCG)
IH & SME Finance Department Credit Guarantee Office (CGO), DFSD Banking Inspection Department(BID) Agriculture Credit & Microfinance
Department(AC&MFD)
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Technical Committee on Credit Guarantee (TCCG)
TCCG is apex body (headed by DG-BPR & DF or ED (DFG) and responsible for taking all policy decisions regarding the operations/functioning of the CGS. The apex body also reviews performance of the CGS and approve changes/modifications in the Scheme.
TCCG comprises of representatives from: 1. UK’s Department for International Development
(DFID)2. Pakistan Banking Council (PBA)3. State Bank of Pakistan (SBP)-IH&SMEFD 4. SBP BSC, DFSD
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Role of IH&SMEFD
Serves as secretariat of TCCG Liaise among all stakeholders including PFIs,
DFSD (CGO unit), PBA, donor agencies, government and Small and Rural Enterprises.
Support to stakeholders to assess the efficiency and effectiveness of scheme
Take measures/ initiatives for improvements in the operational and policy matters of the scheme
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Role of Credit Guarantee Office (CGO), DFSD
Responsible for handling all operational matters of CGS and oversee performance of PFIs
Maintenance of proper record of the operations of the CGS.
DFSD (CGO) may also carry out surprise verification of the PFIs for ensuring compliance with the instructions of the scheme.
Providing Monthly and quarterly reports to IH&SMEFD for onward submission to TCCG & DFID
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Role of Banking Inspection Department
Regular Inspection: BID will carry out inspection of the guarantee portfolio on sampling basis using its own sampling techniques. The Report of the inspection will be provided to the IH&SMEFD for its necessary action - using it as an important input for reviewing the Scheme and assessing its effectiveness.
Claims Inspection:DFSD (CGO unit) will forward all approved claim requests of PFIs to IH&SMEFD which will advise BID to carry out inspection of preferably all claim requests and forward a report of inspection to the DFSD (CGO) for necessary action under intimation to IH&SMEFD. On the basis of this report, the DFSD may cancel those claims launched by PFIs in violation of the approved criteria and will call back the funds by debiting accounts of the concerned bank.
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Role of AC&MF Department
Reviews performance of PFIs on Agri side Supports TCCG for finalization of Credit
Guarantee Limits Coordinates with IH&SMEFD for onward
feedback & consolidated proposal to TCCG
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Process Under Guarantee Scheme
Selection of PFIs: IH&SMEFD invites all Banks to participate in
CGS as PFI. Willing banks apply for allocation of Limits IH&SMEFD and AC&MFD jointly evaluate banks,
selects PFIs and recommend guarantee limits to each PFI
TCCG reviews proposal and formally approves it IH&SMEFD conveys approvals to CGO-DFSD
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Process Under Guarantee Scheme-----Cont’d
Target Market for CGS:
TCCG is the right forum for any review of broader guidelines of target market.
Maintenance of PFI Records of Guarantee Limits and Claims:
1.The Credit Guarantee Limits (CGL) of each PFI is conveyed by IH&SMEFD to DFSD(CGO).
2. The DFSD (CGO) maintains separate record of guaranteed loans of PFIs and the claims against those guarantees.
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Process Under Guarantee Scheme-----Cont’d
Guaranteeing:1. Evaluation Criteria
Small enterprise or a farmer with economic landholding
Clean e-CIB Eligible under relevant PRs Regular & estimable positive cash flows Eligible under Credit Policy of Bank Preferable a fresh customer Existing borrower can also be relaxed Tenure of 3 years/5 years for Agri/SME Loan Limit- Rs.15.0 M for SME & Rs.2.0 M for farmers
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Process Under Guarantee Scheme-----Cont’d
2. Improvements/changes in Borrowers evaluation criteria will be approved by TCCG.
3. The loan applicant shall preferable present a business plan, showing adequate cash flow and ability of debt serving.
4. The borrower meeting criteria will avail finance from PFI and eligible for credit guarantee facility
5. No evaluation on the part of CGO-DFSD & prime responsibility placed on PFIs
6. Partial guarantee of max 40% to eligible borrower. PFIs to ensure exposure under allocated limits.
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Process Under Guarantee Scheme-----Cont’d
Authorized Contact Officials: PFIs to nominate at least two senior officials in their
Head Offices along with their duly verified signatures, names, designations and contact address as Authorized Contact Officials/ Signatories (ACOs) to communicate with the Development Finance Department-CGO Office, SBP BSC (Bank), Karachi and State Bank of Pakistan, Karachi.
Only those guarantee/ claims requests which are signed by at least two ACOs will be entertained by CGO Office on merit. Branches/ regional offices and other officials of the banks are strictly prohibited to approach for the Guarantee Facility under the scheme.
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Process Under Guarantee Scheme-----Cont’d
Customer Identification Number: Each bank issues a unique Customer Identification
Number (CIN) in the format of ABC-xxxx-yyy where ABC is the abbreviated/acronym reference of the bank ‘ABC Bank Limited’ and xxxx is four digit number issued to each successive customer in ascending order and yyy is three digit loan number for the customer bearing number xxxx.
For example, XYZ Bank Limited may issue Identification Number XYZ-0158-005 for the 5th guaranteed loan to its 158th customer.
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Process Under Guarantee Scheme-----Cont’d
Guarantee Reporting Mechanism for PFIs: The PFIs are required on monthly basis (i.e.
within first 15 days of every month) apply for the guarantee facilities for their borrowers who were extended lending facilities during the previous month.
Contact Persons of the bank. Each PFI will have the primary responsibility of ensuring that its total Guaranteed Loans does not exceed its allocated CGL at any point in time.
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Process Under Guarantee Scheme-----Cont’d
CGS Reporting Mechanism: Each PFI reports its outstanding position of all previously
guaranteed loans on monthly basis on format CG-2. DFSD (CGO) ensures that the outstanding guaranteed amount of any PFI does not exceed its allocated limit.
DFSD (CGO) consolidates the position of fresh issuance and existing position of guarantee facility, status of claims and recoveries etc of all the PFIs and submits the report to IH&SMEFD (on monthly basis) for review and presentation to the TCCG (in its regular/special meetings).
DFSD (CGO) intimates the concerned bank regarding acceptance of their Request of Guarantee through Issuance of Guarantee Letter.
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Process Under Guarantee Scheme-----Cont’d
Claims launched by PFIs: Under the scheme borrowers will preferably be
those who fail to provide required collaterals to the banks. In the absence of collaterals, the internal controls and monitoring mechanism of the banks under the scheme should be strong enough to cater the adverse selection issues.
If a particular borrower falls under the category of Loss , the bank will have the right to lodge a claim of the guaranteed amount on quarterly basis (i.e. within first 10 days of every quarter) against all loans of Loss category in the previous quarter on the format CG-3 duly audited and authenticated by their Internal Audit Department.
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Process Under Guarantee Scheme-----Cont’d
After receipt of claim, DFSD (CGO) will internally scrutinize the claim request in the light of information submitted by the bank to assess any deviation and seek clarification from the PFI, if so required. In case the claim is as per the instructions of the Guarantee Scheme, the DFSD (CGO) will reimburse the guaranteed amount within 6 working days after receipt of complete information relating to the claim request. However, DFSD (CGO) will intimate the requesting PFI that the reimbursement of the guarantee claim is subject to final clearance by Banking Inspection Department based on their on-site inspection of the guarantee claims during regular inspection of the bank.
DFSD (CGO) Unit will send an intimation summary regarding approval of the claims to IH&SMEFD for inspection of individual claims of each PFI through BID.
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Process Under Guarantee Scheme-----Cont’d
Recoveries: The re-imbursements of the claim(s) by State Bank shall not
obviate lending bank from right of recovery of the defaulted amount.
The banks should continue with their regular procedure for recovery of loan and status shall be reported to the CGO on yearly basis.
In the event of recoveries, all such recoveries will be treated as the recovery of principal and the concerned bank will remit proportionate share of the Guarantee Scheme to State Bank immediately (within 2 working days) along-with duly filled-in format CG-4, delaying which may attract penal action.
The costs incurred on recovery efforts will be borne by the concerned PFI and will not be passed on to the Guarantee Fund.
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Process Under Guarantee Scheme-----Cont’d
Management Information System: PFIs will report their fresh cases on format CG1outstanding
position of guaranteed limits as per the format CG-2 to the DFSD (CGO) on monthly basis.
DFSD (CGO) has the right to call information from the PFIs for its own monitoring and reporting to the IH&SMEFD/TCCG.
DFSD (CGO unit) will also issue instructions to the PFIs for submission of data as per the requirements of IH&SMEFD/ TCCG.
The DFSD (CGO) will maintain proper records of the guarantee portfolio and submit periodic monthly reports of total outstanding guarantees, claims approved, reimbursements against recoveries by the PFIs and the new guarantees issued to the IH&SMEFD.
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Supremacy & Precedence of TCCG
1. Objective of these operating procedures is to facilitate smooth functioning of the credit guarantee Scheme.
2. The duly approved Credit Guarantee Scheme and improvements/ modifications thereon by the Technical Committee on Credit Guarantee/IH&SMEFD will have precedence/supremacy in events of any confusion/ contradiction.
3. IH&SMEFD will bear responsibility in case any interpretation/ clarification is required in the guarantee Scheme, SOPs and the instructions of the TCCG.
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Verification of CGS Cases
BID to conduct inspection of guaranteed portfolio & re-imbursement claims during its routine inspection.
Claim reimbursement on “Loss” categorization under relevant PRs.
DFSD may also conduct surprise visits/verification of CGS cases
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Scope & Objective Scheme Dynamics & Target Sectors Salient Features of Scheme Process of Issuance of Guarantee
Microfinance Credit Guarantee Facility (MCGF) 63
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The aim was to give incentives to banks/DFIs to channelize funds to MFBs/MFIs for onward lending to low income segment of the population.
To provide funding to viable Microfinance Banks (“MFBs”), to enable them to achieve the outreach targets
Under the facility, the SBP BSC shall provide partial Guarantee to minimize the perceived risk premium by covering part of the losses incurred on funds made available to MFBs/MFIs.
Scope & Objective
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Scheme Dynamics & Target Sectors
Microfinance Credit Guarantee Facility (MCGF)
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Capital Structure
Funds:
The seed money viz GBP 15 Million for Microfinance Credit Guarantee Facility was provided by UK’s Department for International Development (DFID) under Financial Inclusion Program (FIP)
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Coverage under MCGF
MFBs/MFIs can avail MCGF against:
Bilateral Financing arrangements with Banks Issuance of Redeemable Capital (TFCs) by MFBs
SBP Initiatives for Microfinance
Conducive regulatory framework Separate MF department Initiation of Financial Inclusion Program (FIP) Microfinance Credit Guarantee Facility MF Focus Groups MF Melas Linkages with local stakeholders MF profiles of MFBs/MFIs in each region
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Requirements under MCGF
Guarantee Coverage shall not be more than the available guarantee fund
Interest rate shall be not more than 6 month KIBOR plus 200bps.
Tenure of the credit facility should not be more than five years.
SBP NOC has been issued to MFBs. In case of MFIs, SBP NOC does not require.
MFBs/Is Board approval for availing the credit facility Terms of finance should in accordance with the guidelines.
No clause or section of the loan agreement / term sheet is in conflict with any of the provisions of the guidelines / regulations of SBP
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Requirements under MCGF
Dates of first and last disbursement and Frequency of repayments
Any clause or section of the loan agreement does not place undue responsibility on SBP BSC or harm to SBP BSC interest except issuance of credit guarantee and entertainment of claims as envisaged in the guidelines.
Any other matter to be overseen. Meeting of the MCGF Technical Committee will be
called for approval of the case. After approval, guarantee will be issued.
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Salient Features of Scheme
Microfinance Credit Guarantee Facility (MCGF)
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MCGF was introduced by SBP in 2008. All task relating to process and appraisal of loan
applications, evaluation of business plan, loan appraisal , approval ,disbursement ,recovery ,supervision, monitoring, follow up on problem loans and legal action in case of default will be performed by lending institution.
The Development Finance Support Department in SBP BSC(HOK) will facilitate the issuance of NOCs to MFBs/MFIs from BPRD for creation of charge on there assets, issuance of guarantees to lending banks/DFIs and payment of the claims under the MCGF.
The interest rate charged from borrowing institutions under the guarantee facility shall not exceed 2(two)% over and above the prevailing 6 month KIBOR.
Basic Features
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The guarantee shall commence from the date of first disbursement to the borrowing institution and the tenure of the credit facility shall not exceed five year
The funds channelized under the facility to MFBs/MFIs shall be deductable from DTL of the banks/DFIs for the purpose of SLR and CRR calculation. SLR incentive shall be withdrawn if partial claim is paid.
There are two options available to banks/DFIs to avail this facility:
1. A partial Guarantee 0f 40 % on the losses incurred by the bank on principal outstanding.
2. 25% First Loss Guarantee on Principal disbursed. Maximum Tenure= 5 years
Basic Features
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Process of Issuance of Guarantee
Microfinance Credit Guarantee Facility (MCGF)
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Step 1: Issuance of NOC under MCGF
The MFB will submit a request for issuance of NOC for creation of charge on its assets and shall be accompanied with following documents: Approval of board of directors of MFB for creating such
charge List of assets on which charge is to be created and their
book value in PKR Audited last year’s financials Business plan for availing the credit facility Any other document as prescribed in guidelines from
time to time
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Step 2: Vetting of Loan Agreement
The lending bank will submit a request for issuance of the guarantee and shall be accompanied with the following documents/information: Term Sheet / Offer letter from the banks/DFIs addressed
to MFBs/Is Loan Agreement made between the bank/DFI and MFB/I
along with all the terms and conditions, Bank/DFI policy for providing financing under MCGF, duly
approved by its Board (if exist). Any other Documents prescribed by SBP from time to
time.
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Step 3: Lodging of claims
The lending institution shall submit claim to DFSD along with the following information: The Bank shall submit the claim form as specified in
guidelines. Attested Copy of MCGF Loan Guarantee Agreement. Documents evidencing the loan classified as Loss in
accordance with MCGF guidelines and other SBP rules and regulations.
Documentary evidence of calling back of the loan given under MCGF
An undertaking by the bank to reimburse, the subsequently recovered amount from borrower, to the Guarantor as stipulated in the MCGF guidelines.
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Funds under Schemes Funds Investment Committees Funds Investment Process
Funds Management under Schemes 78
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Funds under Schemes
CGS Funds
DFID Seed Money: GB 13 M plus
GoP Funds: Rs. 300 M MCGF Funds
DFID Seed Money: GB 15 M Funds are invested in SBP approved securities
(MTBs/PIBs) and partly in remunerative account for ready availability for settling any claims
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Funds Investment Committee-CGS
CGS Funds are supervised by a committee comprising of following members
1. Executive Director, DFG, SBP- Chairman2. Director IH&SMEFD, SBP-Member3. Director DMMD, SBP-Member4. Director DFSD, SBP BSC-Member
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Funds Investment Committee-MCGF
MCGF Funds are supervised by a committee comprising of following members
1. Managing director, SBP BSC- Chairman2. Director AC&MFD, SBP-Member3. Director DFSD, SBP BSC- Member
Expert advice is usually sought from Director DMMD, SBP who advises committee investment in appropriate tenure based on return and distribution of funds evenly in different maturities
04/15/2023DFSD-HOK
82
Funds Investment Process
DMMD issues quarterly calendar of auction of MTBs/PIBs DFSD sends its investment request as a non-competitive
bidder The maximum limit for non-competitive bidder is 0.25% of
target amount or Rs. 250 million, whichever is higher The CGS & MCGF current accounts are being maintained at
Banking Unit SBP BSC Karachi Office while SGLA account is being maintained with Securities Unit, Karachi Office
April 15, 2023
Utilization Trend Demographic Impact Diversification of CGS Funds Performance of PFIs/banks
Socio-Economic Indicators & Developmental Impact
83
04/15/2023
Dec, 2010 Dec, 2011 Dec, 2012 Dec, 2013 -
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
ABLAKBLBurjFBLHBLMCBNBPTMFBLBoKUBLTotal
Utilization Trend-Sanctioned Amount
04/15/2023
Dec, 2010 Dec, 2011 Dec, 2012 Dec, 20130
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
ABLAKBLBurjFBLHBLMCBNBPTMFBLBoKUBLTotal
Utilization Trend-No. of Borrowers
04/15/2023
ABL AKBL Burj FBL HBL MCB NBP TMFBL BoK UBL
CGL-2013 200 30 40 210 880 700 200 30 280 54
Limit Uti-lized
71.7236 18.626 26.4419152
139.95 575.6068 547.5404 128.85691200000
1
10.6541024
140.574 19.6892
50
150
250
350
450
550
650
750
850
950
PFIs Utilization Trends towards Allocated Limits
(Amounts in Million Rs)
04/15/2023
Dec, 2013 Dec, 2012
Days Outstanding No. Of borrowers Amount Sanctioned (Rs in M)
No. Of borrowers Amount Sanctioned (Rs in M)
91-180 73 21.248 101 35.5
181-365 94 25.905 28 12.3
Above 1 year 65 26.87 0 0
Total 232 74.023 129 47.8
Infection Ratio in Percentage of CGS Agri Lending
4.18 3.44 3.02 2.91
Aging Profile of CGS Agri Borrowers
04/15/2023Credit Guarantee Office. DFSD. SBP BSC
91%
5%
3% 2%
AgricultureNon-FarmAgri businessRetail Enterprise
Overdue-Business Sector Wise Position
04/15/2023Credit Guarantee Office. DFSD. SBP BSC
88%
5%
3% 2% 2%
HBL
FBL
MCB
UBL
BoK
Overdue-PFI Wise Posi-tion
04/15/2023
Dec, 2013 No. of bor-rowers
Dec, 2013 Amount Sanctioned (Rs in Mil-
lion)
Dec, 2012 No. of bor-rowers
Dec, 2012 Amount Sanctioned (Rs in Mil-
lion)
Up to 1 year 3753 1500.4 1767 636.614
Above 1& up to 2 years
666 150.00048 234 54.40915
Above 2 & up to 3 years
1058 446.28 2270 954.947999999998
Above 3 & up to 5 years
70 52.35 0 0
250
750
1,250
1,750
2,250
2,750
3,250
3,750
Tenor wise break up of Agri Lending
04/15/2023
Dec, 2013 No. of bor-rowers
Dec, 2013 Amount Sanctioned (Rs in Mil-
lion)
Dec, 2012 No. of bor-rowers
Dec, 2012 Amount Sanctioned (Rs in Mil-
lion)
Up to 1 year 1038 2117.6 773 1679.83
Above 1& up to 2 years
27 23.13132655 4 6.5
Above 2 & up to 3 years
10 19.1 4 16.11
Above 3 & up to 5 years
2 11 2 11
250
750
1,250
1,750
2,250
Tenor Wise Break up of SME Lending
04/15/2023
Dec-13 No. Of borrowers Dec-13 Amount Sanctioned (Rs. in Millions)
Dec-12 No. Of borrowers Dec-12 Amount Sanctioned (Rs. in Millions)
Rural 5672 2447.15 4307 1752.68914999999
Urban 952 1872.7 744 1605.322
500
1,500
2,500
3,500
4,500
5,500
Urban/Rural Lending under CGS
04/15/2023
Dec-13 No. of borrowers Dec-13 Amount Sanctioned in Million Rs.
Dec-12 No. of borrowers Dec-12 Amount Sanctioned in Million Rs.
Female 107 65.180137 80 51.537
Male 6517 4254.6 4976 3312.87415000001
500
1,500
2,500
3,500
4,500
5,500
6,500
Gender Wise Distribution of CGS Borrowers
04/15/2023
Dec-13 No. of borrowers
Dec-13 Amount Sanctioned (Rs.
in Millions)
Dec-13 Avg. Loan Size (Rs. in
M)
Dec, 2012 No. of borrowers
Dec, 2012 Amount Sanc-tioned (Rs. in
Millions)
Dec, 2012 Avg. Loan Size (Rs. in
M)
Farmer 5547 2149.1 0.387434649360017
4271 1645.97115 0.385383083586984
SME 994 2144.2 2.15714285714286
783 1713.44 2.18830140485313
Microen-terprises
83 26.6352554300001
0.320906691927715
0 0 0
500
1,500
2,500
3,500
4,500
5,500
Agri/SME Distribution of CGS Lending
04/15/2023
Dec-13 No. of bor-rowers
Dec-13 Amount Sanctioned (Rs. in
Millions)
Dec-12 No. of bor-rowers
Dec-12 Amount Sanctioned (Rs. in
Millions)
Upto 5 Acres 1438 379.483207999999 1305 420.849800000002
Above 5A to 12.5
2572 797.267765 1367 413.60335
Above 12.5A to 25
838 459.184995 237 111.555
Above 25A 537 483.1573 446 324.913999999998
250
750
1,250
1,750
2,250
2,750
Landholding Pattern of Agri Borrowers
04/15/2023
Dec-13 No. of borrowers Dec-13 Amount Sanc-tioned (Rs. in Millions)
Dec-12 No. of borrowers Dec-12 Amount Sanc-tioned (Rs. in Millions)
1-5 employees 861 1455.64122947 606 1096.38
6-10 employees 82 340.945 90 311.21
11-20 employees 134 374.210025959999 66 273.5
100
300
500
700
900
1100
1300
1500
Size of SEs-No of Employees
04/15/2023
Dec-13 No. of borrow-ers
Dec-13 Amount Sanc-tioned (Rs. in Millions)
Dec-12 No. of borrow-ers
Dec-12 Amount Sanc-tioned (Rs. in Millions)
Upto 1M 41 20.8906488 334 101.711
Above 1M to 5M
143 93.7448253400009 80 68.305
Above 5M to 20M
432 584.06578129 211 428
Above 20M to 40M
294 749.53 217 547.04
Above 40M to 75M
212 739.33 145 596.035
250
750
1250
1750
2250
Size of SEs-Sales Turnover
04/15/2023
51%
35%
6%
5%
1% 1% 1%
Agriculture Production
Trading
Manufacturing/Processing
Services
Non-Farm
Construction
Agri business
Business Sector Wise Distribution- Amount Sanctioned
04/15/2023
Dec-13 No. of borrow-ers
Dec-13 Amount Sanc-tioned (Rs. in Millions)
Dec-12 No. of borrow-ers
Dec-12 Amount Sanc-tioned (Rs. in Millions)
Sole Proprietor-ship
978 1886.5 897 1431.238
Partnership 97 274.8 90 267.12
Private Lmited Company
2 9.5 7 36.88
100
300
500
700
900
1100
1300
1500
1700
1900
Ownership Structure of SEs
Dec, 2013 No. of borrow-ers
Dec, 2013 Amount Sanc-tioned (Rs. in Millions)
Dec-12 No. of borrowers Dec-12 Amount Sanc-tioned (Rs. in Millions)
Clean 88 22.4263265499998 17 1.55
Below 100% 51 108.53392888 28 82.55
100% 2407 1943.303048 1676 1723.57115
Above 100% 4078 2245.54272 2610 1202.499
250
750
1,250
1,750
2,250
2,750
3,250
3,750
4,250
04/15/2023
Collateralization of CGS Lending
04/15/2023
19%
17%
12%4%
3%2%
3%2%
2%1%
36%Sargodha JhangMianwaliGujranwalaRawalpindiPeshawarFaisalabadLahoreChitralGujratOthers
Regional Distribution of SE Financ-ing
04/15/2023
9%8%
7%
7%
6%
4%4%3%3%
3%
45%
D.I.Khan
Sialkot
Sargodha
Bahawalnagar
Jhang
Faisalabad
Rahim Yar Khan
Bahawalpur
Gujranwala
Sahiwal
Others
Regional Distribution of Agri Fi-nancing
04/15/2023Credit Guarantee Office. DFSD. SBP BSC
11% 8%
7%
6%
6%
5%4%
3%3%3%
45%
D.I.Khan
Sargodha
Jhang
Faisalabad
Sialkot
Bahawalnagar
Mianwali
Sahiwal
Charsadda
Rahim Yar Khan
Others
Overall Diversification of CGS-No. of cases
04/15/2023Credit Guarantee Office. DFSD. SBP BSC
13%9%
7%
4%
4%
4%4%4%
3%3%
46%
SargodhaJhangMianwaliSialkotD.I.KhanGujranwalaBahawalnagarFaisalabadRawalpindiRahim Yar KhanOthers
Overall Diversification of CGS-Amount Sanctioned
04/15/2023Credit Guarantee Office. DFSD. SBP BSC
74.1%
19.7%
6.0% 0.1% 0.1% 0.0% 0.0%Punjab KPK
Sindh AJK
Federal Capital FATA
Gilgit -Baltistan
Province Wise Distribution of CGS Cases-No. of borrowers
04/15/2023Credit Guarantee Office. DFSD. SBP BSC
79.6%
13.5%
6.2% 0.5% 0.2% 0.1% 0.0%Punjab
KPK
Sindh
Federal Capital
FATA
AJK
Gilgit -Baltistan
Province Wise Distribution of CGS Cases-Amount Sanctioned
04/15/2023DFSD-HOK107