State Bank raises credit limit for women en­trepreneur­s

The Pak Banker - - FRONT PAGE - KARACHI -APP

The State Bank of Pak­istan ( SBP) has en­hanced the fi­nanc­ing limit un­der its re­fi­nance and credit guar­an­tee scheme for women en­trepreneur­s from Rs1.5 mil­lion to Rs5 mil­lion, to en­cour­age their par­tic­i­pa­tion in the econ­omy, a state­ment said.

The de­ci­sion has been taken in light of feed­back re­ceived from var­i­ous stake­hold­ers about cur­rent fi­nanc­ing limit be­ing in­suf­fi­cient to cover the fi­nanc­ing needs of women en­trepreneur­s.

The SBP said this was in line with the govern­ment's pol­icy to sup­port and re­vive eco­nomic ac­tiv­i­ties in the coun­try and the cen­tral bank's key ob­jec­tive of im­prov­ing ac­cess to fi­nance for pri­or­ity seg­ments, in­clud­ing women en­trepreneur­s.

Ini­tially, in Au­gust 2017, the cen­tral bank had in­tro­duced a re­fi­nance and credit guar­an­tee scheme for women en­trepreneur­s in un­der­served ar­eas to pro­mote fi­nan­cial in­clu­sion and ac­cess to fi­nance for women en­trepreneur­s in the coun­try.

Sub­se­quently, the scope of the scheme was en­hanced to cover the whole of Pak­istan. Un­der this scheme, the State Bank of Pak­istan pro­vides re­fi­nance to par­tic­i­pat­ing fi­nan­cial in­sti­tu­tions at zero per­cent on their fi­nanc­ing to women en­trepreneur­s at max­i­mum end user rate of 5 per­cent.

More­over, 60 per­cent risk cov­er­age is also avail­able to the par­tic­i­pat­ing in­sti­tu­tions.

"The en­hance­ment in fi­nanc­ing limit un­der SBP scheme is ex­pected to in­crease fi­nan­cial in­clu­sion of women since more women en­trepreneur­s are likely to be at­tracted for set­ting up of new busi­nesses or for ex­pand­ing the scope of their ex­ist­ing busi­nesses by avail­ing con­ces­sional fi­nanc­ing un­der SBP scheme," the cen­tral bank said.

Ac­cess to fi­nance for women re­mains a key chal­lenge in Pak­istan. Women face both so­cial and fi­nan­cial chal­lenges in set­ting up and run­ning a busi­ness as the over­all en­vi­ron­ment is not very con­ducive for fe­male en­trepreneur­ship.

The share of fe­male bor­row­ers was a mere five per­cent in the to­tal out­stand­ing SME bor­row­ers as of De­cem­ber 31, 2017. Im­prov­ing fi­nan­cial in­clu­sion of women is one of the pri­or­ity ar­eas un­der the SBP's Na­tional Fi­nan­cial In­clu­sion Strat­egy (NFIS), as it aims to en­hance for­mal fi­nan­cial ac­cess to 50 per­cent of the adult pop­u­la­tion and en­vi­sions that 25 per­cent of adult fe­males should have a for­mal bank ac­count by end of 2020.

From June 2015 to June 2018, the num­ber of branch­less bank­ing ac­counts in­creased 262 per­cent. But the share of women's ac­counts in to­tal branch­less bank­ing ac­counts re­mained flat over the same pe­riod.

This was partly due to a low fe­male lit­er­acy rate.

Pak­istan ranks eleventh in the world in terms of fe­male il­lit­er­acy while there is a 17 per­cent gap be­tween men and women when it comes to mo­bile own­er­ship. Other than the lack of fam­ily sup­port, fi­nan­cial con­straints act as a ma­jor hur­dle re­strict­ing women from opt­ing for en­trepreneur­ship.

Banks in gen­eral are hes­i­tant to lend to star­tups and in case of fe­males this re­luc­tance in­creases due to a high risk as­so­ci­ated with such fi­nanc­ing.

Re­al­is­ing the im­por­tance of fe­male con­tri­bu­tion to­wards eco­nomic devel­op­ment, dif­fer­ent mea­sures have been taken to fa­cil­i­tate women en­trepreneur­ship par­tic­u­larly with re­spect to in­creas­ing ac­cess to fi­nance.

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