Functions of dfsd and credit guarantee schemes final

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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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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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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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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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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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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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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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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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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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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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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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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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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


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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


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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

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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


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)



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


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



lion)



lion)

Up to 1 year 1038 2117.6 773 1679.83

Above 1& up to 2 years

27 23.13132655 4 6.5


10 19.1 4 16.11


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)


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)



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





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)


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


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


13%9%

7%

4%

4%

4%4%4%

3%3%

46%

SargodhaJhangMianwaliSialkotD.I.KhanGujranwalaBahawalnagarFaisalabadRawalpindiRahim Yar KhanOthers

Overall Diversification of CGS-Amount Sanctioned


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


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

Functions of dfsd and credit guarantee schemes final

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