SBP Launches Scheme to Prevent Layoffs Due to COVID-19 Lockdowns

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Refinancing scheme is designed to incentivize struggling businesses to retain workforce during the ongoing pandemic

The State Bank of Pakistan (SBP) on Friday announced a new refinance scheme designed to encourage businesses to retain their workforce in the face of mounting economic challenges posed by movement restrictions meant to curb the spread of the novel coronavirus.

“The core objective of this facility is to incentivize businesses to not lay off their workers during COVID-19 pandemic,” read a press release issued by the central bank. It said the Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns was open to all businesses in Pakistan and would cover all types of employees, including permanent, contractual, daily wagers, and 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,” read the statement, which said that the loan mark-up under this scheme would be 5 percent for non-taxpayers, while borrowers on the active taxpayers’ list would be able to get loans at a 4 percent mark-up.

According to the SBP, the scheme would give preference to small businesses; companies with 3-month salary expenses of Rs. 200 million or less would be eligible to avail the full amount of their expenses through financing. Those with salary expenses between Rs. 200 million and Rs. 500 million would be eligible for up to 75 percent of their needs, while businesses that have 3-month salaries that exceed Rs. 500 million would be eligible for refinancing of up to 50 percent of their requirements.

The central bank said that no lending bank would charge any loan-processing fee, credit limit fee or prepayment penalties for loans under this scheme, adding that a grace period of six months would be allowed to the borrowers. Repayment of the principal amount would be made in two years.

To ensure businesses are not unduly harassed, lending banks would be required to provide weekly reports to the central bank about the scheme, particularly their reasons for denying any requests to avail the refinancing.

“SBP expects that one of the main benefits of the scheme is that employers that retain workers on their payroll will be able to restore or increase production quickly once the situation normalizes. The scheme will ease the liquidity constraints of the businesses and they can use their available financial resources to meet other working capital requirements,” read the central bank’s statement.

Any businesses interested in learning more about this scheme can access details of the scheme here and here. For those requiring further clarification, the central bank can be directly contacted via email (covid19.stimulus@sbp.org.pk) or phone (021-111727273).

The State Bank of Pakistan has introduced several measures in recent weeks to mitigate the impact of COVID-19 on Pakistan’s economy, including reducing the interest rate, extending repayment of loan principal amounts by one year, and concessional financing for hospitals to procure equipment to combat coronavirus.