Fresh Rs.30bn re-finance scheme for small biz likely in December

• Cabinet approves proposal to borrow US$ 165mn from ADB to facilitate MSME loans 
• Loan agreement with ADB yet to be signed
• Working capital loans to MSMEs up to Rs.10mn to be provided

As the Central Bank sponsored Saubagya COVID-19 credit scheme came to an end fortnight ago, another loan re-finance scheme aimed at small businesses, this time sponsored by the Asian Development Bank (ADB) and implemented by the Finance Ministry is expected to be launched early as December. 

To this end, the Cabinet of Ministers has already approved a proposal to take receipt of US$ 165 million, which has a rupee equivalent of Rs.31 billion from ADB, upping the earlier earmarked US$ 100 million aimed at assisting the coronavirus affected micro, small and medium enterprises (MSMEs). 

Earlier the Department of Development Finance under the Ministry of Finance said they were nearing a deal with the ADB to take receipt US$ 100 million under a fresh concessional funding line to facilitate lending to MSMEs under a re-finance scheme titled, ‘Emergency Response Facility’. 

However, the line of funding has increased by a further US$ 65 million—US$ 20 million for tea smallholder assistance and US$ 45 million for ‘Small and Medium-Sized Enterprises Line of Credit Project’—which has already been in operation for the last several years, according to an official close to the discussions. 

The loan agreement with the ADB is yet to be signed. 
The Cabinet of Ministers has decided to appoint a committee to study how these funds could be deployed to the intended sectors and the recipients who were affected by the pandemic.

However, officials earlier said the scheme aimed to provide permanent working capital loans up to a maximum of Rs.10 million for eligible enterprises. While the loan will have a 3-year tenor with a grace period of six months, it is given at the concessionary rate of 6 percent or less.  

Selected local banks are expected to borrow at 3 percent from the Treasury via the new scheme to be lent-on at 6 percent, subject to changes until the new scheme is finalised.  

Under the Emergency Response Facility slated to be implemented by the Department of Development Finance, loans will be granted via 10 identified banks, which will become partners to the scheme.