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LongLongTermTermFinancingFinancingforforthetheExportExportOriented ProjectsOriented Projects ((LTFLTF--EOPEOP))

ObjectiveObjective:: The objective is to encourage technologicalThe objective is to encourage technological

upgradation of Export Oriented Projectsupgradation of Export Oriented Projects(EOPs) by provision of finance for import of(EOPs) by provision of finance for import of

machinery; and,machinery; and, Finance Export Oriented Projects (EOPs) forFinance Export Oriented Projects (EOPs) for

incentives announced by the governmentincentives announced by the governmentunder in Trade Policyunder in Trade Policy 20032003--0404::

Under LTF, banks/DFIsUnder LTF, banks/DFIstotoprovideprovidefinancingfinancingfacilitiesfacilitiesto theto theeligibleeligibleborrowersborrowers //projectsprojectsforforthetheimportimportof plantof plant,, machinerymachinery,, equipmentsequipmentsandandaccessoriesaccessoriesthereofthereof((notnotmanufacturedmanufacturedlocallylocally).).

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Contd.LTFContd.LTF--EOPEOP

PreferencePreferenceforforprovisionprovisionofof financing tofinancing toSMESME

sector.sector.AtAtleastleast 5050% of% ofthetheamountamountshallshallbebeutilizedutilizedforforfinancingfinancingto borrowersto borrowersunderunderSMESMEsector .sector .

TheTheborrowerborrowershallshallbeberequiredrequiredtotodepositdepositthethe

requiredrequiredequityequitybeforebeforeopeningopeningof Lof L//CCintointoananEscrowEscrowAccountAccountwithwithbankbankprovidingprovidingthethefacilityfacilityunderunderthe Scheme.the Scheme.

TheThefacilityfacilityshallshallnotnotbebeadmissibleadmissibleinincasecaseofofmachinery alreadymachinery alreadyimportedimportedasasalsoalsoforforcommercialcommercialimportersimportersorortradingtradinghouses etc.houses etc.ororforforestablishmentestablishment // BMRBMRofofnewnewprojectsprojectsinin

spinningspinning // weavingweavingsectorssectorsin thein theTextileTextileGroup.Group.

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Eligibility CriteriaEligibility Criteria TheTheprojects/unitsprojects/unitswhichwhichexportexportatatleastleast5050% of% of

theirtheirannualannualproduction directly orproduction directly orindirectlyindirectly..

BorrowersBorrowershavinghavingexportexportoverdueoverduebillsbillsofofmoremorethanthan 365365daysdaysshallshallnotnotbe entitled for thebe entitled for the

schemescheme.. NewNewentitiesentitieshavinghavingnonoprevious export,previous export, thethe

sponsoringsponsoring directors/partners/soledirectors/partners/soleproprietorproprietormustmust have exporthave exportrelatedrelatedperformanceperformanceatattheirtheir

creditcrediteithereitherasasananemployeeemployeeororpartnerpartnerororpaidpaiddirectordirectorofofanyany otherother existingexistingexporting entityexporting entityininthetherelevantrelevantfield.field.

Financing bank / DFIFinancing bank / DFIshallshallhavehavediscretiondiscretiontoto

evaluateevaluateandanddecidedecideaboutaboutthethepotential ofpotential ofthethe

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TermsTerms &&ConditionsConditions TheThefinancingfinancingisisavailableavailableononC&FC&Fbasisbasisand isand is

consideredconsideredbybybanksbanksatataamaximummaximumdebt/equitydebt/equityratioratioofof8080::2020. The. Thefinancingfinancingbankbankcancanask forask forhigherhighercontributioncontributionofofequity fromequity fromthetheborrowers.borrowers.

SponsorSponsorisisrequiredrequiredtotocontributecontributehishisequityequityshareshareininananEscrow AccountEscrow Accountasasaasubordinatedsubordinatedloanloantotothetheborrowing borrowing companycompany,, whichwhichshall remainshall remainsubordinatedsubordinatedtotothethebankbankforforthetheentireentireperiodperiodforforthetheloanloan..

TheTheloanloanshallshallbeberepayablerepayablein ain amaximummaximumperiodperiodofof77..55 yearsyearsincludingincludingaamaximummaximumgracegraceperiodperiodofof11..55 yearyear..

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Contd.TermsContd.Terms&& ConditionsConditions

TheTheborrowerborrowershallshallbebeunderunderobligationobligationtotomakemakerepaymentrepaymentofofthethefacilitiesfacilitiesininequalequalhalfhalfyearlyyearlyororquarterlyquarterlyinstallments.installments.

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AvailabilityAvailabilityofofFundsFunds TheThefinancingfinancingisisprovided onprovided on firstfirst--comecome--firstfirst

servedservedbasisbasiswithinwithinlimitslimitsallocatedallocatedbybySBP.SBP.

TheThecostcostofof Insurance,Insurance,transittransitinsuranceinsuranceandandotherotherimportimportincidentalsincidentalsetc shalletc shallbebeborne byborne bythethe

borrower.borrower. ThereThere willwillbebe nono maximummaximum limitlimit forfor

borrowingborrowingbyby thetheprospective entrepreneursprospective entrepreneursunderunderthisthisScheme.Scheme.

InIncasecaseofoflargelargefinancing requirementsfinancing requirementsi.e.i.e.overoverRs.Rs. 300300million,million,ititwouldwouldbebeprudentprudentforforbanks /banks /DFIs toDFIs toprovideprovidethethefacilitiesfacilitiesunderunderconsortiumconsortium

arrangementsarrangementstotodiversifydiversifyriskrisk

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SanctionSanctionofLoanofLoan This is preceded byThis is preceded byverificationverificationofofcreditcreditreportsreports

ononsupplierssuppliersofofmachinery/plant etcmachinery/plant etc asas isis alsoalsorequired.required.

ThisThisprocessprocess alsoalso includesincludes appraisalappraisal ofof thethe

manufacturer/suppliermanufacturer/supplierpreparedpreparedbybythethetechnicaltechnicalstaffstaffofofthetheBanks/DFIs oBanks/DFIs onn thethebasisbasis ofof thetheinformationinformation availableavailable fromfrom thethe existingexisting usersusersofof the machinerythe machinerysupplied bysupplied bythethesamesamemanufacturers/suppliers.manufacturers/suppliers.

SanctionSanctionisislinkedlinkedtotoriskriskprofileprofileofofborrowerborrower..

TheTheBank/DFIBank/DFIshallshallnot,not,taketakemoremorethanthantwotwomonthsmonthstotoevaluateevaluatethe requestthe requestofofthetheborrower.borrower.

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DisbursementDisbursementisisreleasedreleasedbybyfinancingfinancingbankbank// DFIDFIagainstagainstLC afterLC afterensuringensuringthatthatallallformalitiesformalitieshavehavebeenbeencompletedcompletedininaccordanceaccordancewith thewith the termsterms ofofagreementagreementbetweenbetween thethe suppliersupplier andand thethe

purchaserpurchaserofof the machinerythe machinery(borrowers).(borrowers).

DisbursementDisbursement ofLoanofLoan

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WhereWherefinancingfinancingisisavailedavailedforforaamaximummaximumperiodperiodofof77..55yearsyearsthe repaymentthe repaymentofofloanloanis to beis to bemademadeinin1212equalequalhalfhalfyearlyyearlyoror2424equalequalquarterlyquarterly installments,installments, commencingcommencing afterafter aagracegraceperiodperiod ofof 11..55 years;years;

IfIfthethefinancingfinancingisisavailedavailedforforaamaximummaximumperiodperiodofof55 years,years,the repaymentthe repaymentis to beis to bemademadeinin88equalequalhalfhalfyearlyyearlyinstallmentsinstallmentsoror1616equalequalquarterlyquarterlyinstallments,installments,commencingcommencingafterafteraa gracegrace

periodperiodofof 11year.year. ForFor financingfinancingavailedavailedforfor 33years, repaymentyears, repayment

shallshallbebemademadeinin55equalequalhalfhalfyearly installmentsyearly installmentsoror 1010equalequalquarterly installments, commencingquarterly installments, commencing

afterafteraagrace periodgrace periodofof66months.months.

Repayment ofFinance / RefinanceRepayment ofFinance / Refinance

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ForForfinancingfinancingisisavailedavailedforfor22years, repaymentyears, repaymentisis

totobebemademadeinin44equalequalhalfhalfyearlyyearlyoror88equalequalquarterlyquarterlyinstallmentsinstallmentswithoutwithoutany grace period.any grace period.

TheThebanks/DFIsbanks/DFIsshallshallnotnottaketakemoremorethanthantwotwomonthsmonthstotoexamineexaminethe feasibilitythe feasibility ofof anyanyprojectproject wherewhere financefinance isis required.required.

Contd.Repayment of Finance / RefinanceContd.Repayment of Finance / Refinance

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BankProcedureBankProcedure This is not complicated. For PartThis is not complicated. For Part--I, the exporter presentsI, the exporter presentsthe irrevocable L/C to his bank and finance is sanctionedthe irrevocable L/C to his bank and finance is sanctioned

within days.within days.

For PartFor Part--II, the exporter has already a SBP verifiedII, the exporter has already a SBP verifiedexport performance (this is done within a week, if notexport performance (this is done within a week, if not

verified). Finance is sanctioned within days.verified). Finance is sanctioned within days. However, The credit worthiness of client may be verifiedHowever, The credit worthiness of client may be verified

by bank at discretion depending on the following factors:by bank at discretion depending on the following factors:

Management Capability of theManagement Capability of theborrowerborrower

Relationship with otherRelationship with otherfinancial institutionsfinancial institutions

Market Reputation of the borrower.Market Reputation of the borrower. Security AnalysisSecurity Analysis

Customers profitabilityCustomers profitability Past Track Record.Past Track Record.

Risk Analysis / SensitivityRisk Analysis / SensitivityAnalysis.Analysis.

Industry Trade Outlook.Industry Trade Outlook.

Financial condition / health.Financial condition / health.

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Finances are made available for purchase of theFinances are made available for purchase of thelocally manufactured machinery to the investors /locally manufactured machinery to the investors /

industry for their projects by the approved DFIsindustry for their projects by the approved DFIs

and commercial banks.and commercial banks.

While the facility is sanctioned to the purchaser,While the facility is sanctioned to the purchaser,

responsible to repay funds so disbursed, theresponsible to repay funds so disbursed, the

finance is provided to manufacturer.finance is provided to manufacturer.

It is ensured that appropriate debt equity ratio andIt is ensured that appropriate debt equity ratio andother Prudential Regulations are observed in allother Prudential Regulations are observed in all

cases.cases.

LMMSchemeLMMScheme

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Finances are made available for purchase of theFinances are made available for purchase of thelocally manufactured machinery to the investors /locally manufactured machinery to the investors /industry for their projects by the approved DFIsindustry for their projects by the approved DFIsand commercial banks.and commercial banks.

Competitive PricesCompetitive Prices: Selection of machinery is: Selection of machinery isdone on competitive price basis by obtainingdone on competitive price basis by obtaining 33quotations/bids from manufacturers.quotations/bids from manufacturers.

Approval of quotationsApproval of quotations: The quotations/bids are: The quotations/bids are

to be approved on price competitiveness.to be approved on price competitiveness. In case of acceptance of quotations other thanIn case of acceptance of quotations other than

lowest one, Banks should exercise special care.lowest one, Banks should exercise special care.Justifications and specific reasons should beJustifications and specific reasons should be

recordedrecorded

LMMScheme: ProcedureLMMScheme: Procedure

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InspectionReportInspectionReport: Banks have to ensure that: Banks have to ensure that

manufacturer has the capability of manufacturingmanufacturer has the capability of manufacturingthe machinery. For this, Inspection Report on thethe machinery. For this, Inspection Report on themanufacturer has to be prepared by the Bank aftermanufacturer has to be prepared by the Bank afterconducting inspection facilities of manufacturers.conducting inspection facilities of manufacturers.

The reports contain information on manufacturingThe reports contain information on manufacturingcapability of machinery involved, adequacy ofcapability of machinery involved, adequacy oftechnical personnel, their knowtechnical personnel, their know--how, designhow, designfacilities and the manufacturers' previousfacilities and the manufacturers' previous

experience.experience. There is no maximum limit for borrowing. If theThere is no maximum limit for borrowing. If the

borrowing demands exceed Rs.borrowing demands exceed Rs. 300300 million it ismillion it isprovided through consortium financing.provided through consortium financing.

Contd.LMM Scheme: ProcedureContd.LMM Scheme: Procedure

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The facility is be available only to the localThe facility is be available only to the local

content of machinery. Where this value fallscontent of machinery. Where this value fallsbelowbelow 2020%, it shall not qualify for the financing%, it shall not qualify for the financingfacilities.facilities.

Banks have to ensure that the machinery beingBanks have to ensure that the machinery being

manufactured is supported with a valid contractmanufactured is supported with a valid contractfor supply and the buyer has the capability tofor supply and the buyer has the capability toinstall, operate and produce desired results.install, operate and produce desired results.

The repayment period ranges from six months toThe repayment period ranges from six months to

two years for the manufacturers and up to atwo years for the manufacturers and up to amaximum of sevenmaximum of seven--andand--aa--half years for thehalf years for thepurchasers of LMM.purchasers of LMM.

Financing facilities under the scheme are notFinancing facilities under the scheme are not

available for trading purposes.available for trading purposes.

Contd.LMM Scheme: ProcedureContd.LMM Scheme: Procedure

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SBP will reimburse the amount disbursed bySBP will reimburse the amount disbursed bybanks. It will sanction a refinance limit tobanks. It will sanction a refinance limit toindividual banks.individual banks.

The banks can receive refinance uptoThe banks can receive refinance upto 100100% of% ofthe finance which it provides for purchase ofthe finance which it provides for purchase of

machinery.machinery. Application for this is submitted to the ChiefApplication for this is submitted to the Chief

Manager, State Bank of Pakistan, Islamabad.Manager, State Bank of Pakistan, Islamabad.

Banks deposit the recoveries realized by themBanks deposit the recoveries realized by themwith the SBP withinwith the SBP within 33 days.days.

The banks are not allowed to take more thanThe banks are not allowed to take more thanone month to examine the feasibility of anyone month to examine the feasibility of anyproject seeking financial facilities.project seeking financial facilities.

Reimbursement by the SBPReimbursement by the SBP

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The bank has to decide about approval orThe bank has to decide about approval or

disapproval of the borrowers request withindisapproval of the borrowers request within 6060days.days.

Contd.Reimbursement by the SBPContd.Reimbursement by the SBP

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The list of eligible industries includes: FisheriesThe list of eligible industries includes: Fisheries

/dairy and livestock products; light engineering;/dairy and livestock products; light engineering;marble and granite; gems & jewellery; leathermarble and granite; gems & jewellery; leathermanufacturers & garments; boat manufacturing;manufacturers & garments; boat manufacturing;local vendors manufacturing parts of automobile;local vendors manufacturing parts of automobile;

powerlooms/auto/ airjet for powerloom clusterspowerlooms/auto/ airjet for powerloom clustersin different parts of Pakistan; units to be set up inin different parts of Pakistan; units to be set up inthe ceramic clusters being established in thethe ceramic clusters being established in thecountry; equipments for cutting and polishingcountry; equipments for cutting and polishing

marble & granite and manufacturing ofmarble & granite and manufacturing ofhandicrafts.handicrafts.

Eligible IndustriesEligible Industries

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Financing under the scheme can also be availedFinancing under the scheme can also be availed

of for setting up of units for preservations /of for setting up of units for preservations /packaging of fruits and vegetables; woodenpackaging of fruits and vegetables; woodenfurniture & handicrafts; machinery for knitwearfurniture & handicrafts; machinery for knitwearand hosiery industries; machinery/equipmentsand hosiery industries; machinery/equipments

used in the thermal/hydro power projects;used in the thermal/hydro power projects;machinery for setting up of flour mills (for SMEsmachinery for setting up of flour mills (for SMEsonly); machinery for rice husking units (only inonly); machinery for rice husking units (only inthe SME sector); agriculture equipmentsthe SME sector); agriculture equipmentsincluding water sprinklers; transport equipmentsincluding water sprinklers; transport equipments

excluding cars but including commercial vehiclesexcluding cars but including commercial vehiclesfor business use, manufactured/assembled infor business use, manufactured/assembled inPakistan with at leastPakistan with at least 5050% deletion; and% deletion; andmachinery for manufacturing of the pulp board.machinery for manufacturing of the pulp board.

Contd.Eligible IndustriesContd.Eligible Industries