The State Bank of Pakistan (SBP) has announced a temporary refinance scheme to incentivize businesses to not lay off their workers during his global pandemic.
This scheme is expected to relieve employers ‘cash flow constraints on the timely payment of salaries and wages to their staff and employees and thus prevent layoffs in the face of the economic challenges raised by coronavirus outbreak.
The borrowers and financing banks/ DFIs will obtain this undertaking not to lay off their employees at least three months from the date of the first disbursement except in case of any disciplinary action.
SBP named this scheme as ‘Refinance Scheme or Payment of Wages and Salaries to the Workers and Employees of Business Concerns’.
As per the SBP official statement, “The scheme will be available to all businesses in Pakistan through banks and will cover all types of employees including permanent, contractual, daily wages as well as outsourced workers.”
The scheme will provide financing for wages and salaries expense for three months from April to June 2020 for those businesses which do not layoff their employees for these three months.
- The mark-up on the loans under this scheme will be up to 5%.
- Borrowers that are on the active taxpayers’ list, will be able to get loans at a further reduced mark-up rate of 4%.
- The scheme has been designed to give preference to smaller businesses.
- Businesses with a 3-month wage and salary expense of up to Rs. 200 million will be able to avail the full amount of their expense in financing while those with a 3-month wage and salary expense of greater than Rs. 500 million will be able to avail up to 50% of their expense.
- Businesses in the middle category will be able to avail up to 75 percent of their 3 months’ salary and wage expense.
- The banks will not charge any loan processing fee, credit limit fee or prepayment penalties for loans under this scheme.
- A grace period of six months will be allowed to the borrowers while the repayment of the principal amount will be made in two years.