SBP Easy Islamic Loan Scheme for Payment of Salaries

Good news for businesses! Now you don’t have to worry about keeping staff and payment of their salaries, at-least for three months. State Bank of Pakistan (SBP) has announced a historic Islamic easy loan scheme for payment of salaries for three months. The scheme will be managed by Islamic banks. Objective of this Mudarabah scheme is to ease cash flow constraints and avoid layoffs.

SBP announced refinance scheme on April 10, 2020. Original content of this post provided details of the scheme on the basis of April 10 notification. To further facilitate the business concerns, SBP made certain amendments to the original notification. I have updated the original post to reflect the changes announced through subsequent notification. 

Salient Features – SBP Easy Islamic Loan Sche0e0for Payment of Salaries 

To avail this facility, businesses will have to provide undertaking of not laying off employees during first three months. Just have a brief overview of scope, eligibility, financing limit, tenor and interest rate:

You can access the complete SBP Circular (original) here.

Message from SBP Governor

You can also have a look at announcement made by SBP governor:

Other Information

Rate/service charges for the eligible borrowers appearing in Active Payers List will be 3%, whereas, for others 5%.

Suppliers/distributors of large corporates can avail this facility by providing corporate guarantees.

To avail the scheme, the business concern should preferably approach the bank which manages its payroll. However, they can also approach other banks. SBP has allowed these banks to open employee accounts for on the basis of CNIC.

If a business concern has paid salaries for April 2020, they are eligible to get reimbursement of the same under the scheme.

Business concerns can obtain finance up to Rs. 5 million, without providing any collateral, by merely providing personal guarantees. 

The Islamic bank will determine your wage bill for three months as per the latest available financial statements, preferably audited, at the time of sanctioning of limit.

In case, reasonably current financial statements (i.e. audited financial statements as of June 2019 or later) are not available at the time of financing, Islamic bank will obtain a certificate from Head of Human Resource or Chief Financial Officer of the business concern for the last 3-months average wages and salary bill.

The Islamic banks may, at their discretion, require further information and documents from the customers to satisfy themselves about the size of the payroll.

The Islamic bank will approve the facility in 15 working days. If the bank declines your request, the bank will explicitly provide the reason for rejection.

Under this scheme, the bank will make payments directly to the bank accounts of employees. There is separate mechanism for cash payment of salaries.

So if you are impacted by COVID-19 and your business is labor intensive, you are best suited to avail SBP Easy Islamic Loan Scheme for Payment of Salaries.