SBP Refinance Scheem - MBL Apr 2019

MEEZAN BANK LIMITED
SBP’s Incentive Schemes

Refinance Schemes
 Refinance facilities are targeted Financing from State Bank of
Pakistan (SBP) to support Exports and Industrial growth with the
ultimate objective of promoting overall economic development of
the country.
 Over the years, SBP has introduced Special Schemes under its
refinance window to ensure adequate supply of financing to the
value added industries at competitive rates for enhancing their
production capacity and meeting working capital requirements.
 These schemes mainly include the followings,
1. Short Term Financing Facility “Export Finance Scheme” (EFS) to

ensure short term credit availability for exporters
2. Long Term Financing Facility (LTFF) for encouraging export led

growth on the long term basis.
3. Medium to Long term refinance facilities Financing Scheme for

Renewable Energy.
Refinance Schemes
 In addition to promoting exports of the country, SBP has also

introduced other special refinance facilities at subsidized rates for
other sectors such as schemes on renewable energy,
establishment of silos, warehouses & cold storages for storing
agricultural produce and purchase of machinery for SMEs. These
schemes are regularly reviewed to effectively achieve the desired
objectives.
Short Term Financing Facility
 Islamic Export Refinance Scheme (IERS)
 The scheme operates on profit and loss sharing basis with IBIs
based on Musharkah principle between IBI & SBP.
 Islamic Banking Institutions (IBIs) sanctioned limit for IERS create

a Musharkah Pool containing financing to exporters through IERS
and their own financing.
 The State Bank shall provide the refinance facilities under the
Scheme to Islamic Bank(s) / Stand alone dedicated branches of
commercial banks under Section 17 6-B of the SBP Act 1956 (the
“SBP Act”) on Musharkah basis.
Objectives of IERS
 To boost the export of value added commodities

by ensuring liquidity to exporters availing
financing facility from Islamic Banking Institutions
(IBIs)
Objectives of IERS
 Shariah’ compliant Short term Financing Facility
to exporters
 Islamic Financing at Concessionary rate to
encourage exporters
 Strengthening Pakistan Export (SPE)
 Growth of Economy- (by rising GDP)
 Inflow of FOREX-International trade
 Value added & finished products
 Diversification of Exports
 Manufactured goods (by asset based financing)
 Expansion & spreading out new markets
Coverage of IERS
 All manufactured & value added products will be eligible with
the exception of basic & primary commodities/raw materials
as mentioned in Negative List issued vide BPRD Circular
Letter No. 5 dated February 24, 2003.
 The facilities initially shall be allowed against a single or

multiple underlying transaction(s), designed on the basis of
Islamic Modes of financing approved by the Shariah Board of
the concerned Bank.
 Apart from conventional sectors Textile’ edibles, leathers and

leather garments, sports goods, surgical goods, machinery,
metal products etc, Financing facility under EFS is also
available for Software & IT, Gold Jewellary.
Classification of IERS
 IERS is categorized in two parts
• Transactions Based
Part-I
Part-II
• Performance Based
IERS PART-I
 Part‐I is a transaction based facility.
 The commercial banks provide export finance to the exporters on

case‐to‐case basis at pre‐shipment and/or post‐shipment stage
against Firm Export Order/Contract/LCs. The exporter has to show
export proceeds equivalent to the Financed amount as performance.
 The tenor of the facility is up to 180 days

IERS PART-II
 It is a performance based facility, where entitlement of
exporter for revolving export finance limit is equal to
50% of the export proceeds realized through export of
eligible commodities in the preceding financial year.
 Export performance of an exporter is matched annually against total

Financed availed during the financial year on daily product basis.
 The exporter has to realize export receipts from the export of eligible
commodities, excluding any exports for which finance is obtained under
Part‐I of the Scheme during the relevant period.
 The maximum tenor of the loan under Part‐II of the scheme is also 180
days
IERS
(Eligibility Criteria – Period & Rate
Wise)
Profit Rates for the borrowers of both Textile & Non-Textile

Sector is 3% p.a. w.e.f. 02-07-2016
Islamic Mode of Financing
offered by MBL
 MBL provides funds to client (exporter) under

Islamic Mode of Financing which mainly
comprises of the following products,
◦ Murabaha
◦ Musawwamah
◦ Istisna
◦ Tijarah
◦ Commodity Salam
◦ Running Musharkah
MUSAWWAMAH: (undisclosed
cost)
 A short term facility for purchasing raw
material and assets by bank and its
onward sale to customer.
 in which the seller is not obligated to

disclose the price paid to create or obtain
the good or service.
 This defers from murabaha, where a buyer

knows the cost of the underlying asset.
ISTISNA’: (Order to Manufacture)
 A short term financing facility extended to

client (exporter) giving an order &
advance payment to the exporter for
manufacture of the finished goods.
 Goods manufactured as per the

specification of export order/ L/C, for bank.
 The finished goods are then sold &

exported to the foreign buyer by exporter
as bank agent.
TIJARAH: (Finished Goods
Financing)
 Meezan Tijarah is a Sale & Agency based
financing facility for Customers who sell
Finished Goods on Credit basis.
 The facility will enable the Customers to

sell their Finished Goods stock.
 By this customer can meet their working

capital requirements.
Commodity Salam
 Commodity Salam is a forward financing
transaction, where the financial institution pays in
advance, the whole sale price, for buying specified
commodities, which the seller will supply on a pre-
agreed date.
 Salam can be effected in those commodities only

the quality and quantity of which can be specified
exactly.
 The commodity should be generally available in the

market at the time of delivery.
RUNNING MUSHARKAH: (Partnership
Based)
 It offers a Shariah Compliant alternative to
Running Finance
 Design to cater the demand of customers
regarding working capital requirement.

 Bank and customer will participate in the
profits/(loss) generated by the Musharakah

in proportion to their respective Profit
sharing Ratios.
 Used to finance Customer’s Operating
Activities
Long Term Financing Facility
 Islamic long term financing facility – ILTFF
o The scheme operates on profit and loss sharing basis with

IBIs based on Mudarabah principle between IBIs & SBP.
o SBP will act as Rab-ul-Maal by providing Mudarabah

investment facility to the Participating Islamic Banking
Institutions (PIBIs), in the form of investment in the PIBI’s
general pool, and the PIBI shall act as the Mudarib of general
pool.
o SBP shall make Mudarabah investment in Islamic Banking

Institutions (IBIs) participating in the scheme under section 17
(6B) of the SBP Act, 1956 (the “SBP Act”).
Objectives
 State Bank of Pakistan (SBP) Long term
refinance facility to promote export
oriented industries in the country for plant
and machinery' through commercial banks
and development finance institutions. The
facility provides necessary finance to the
exporters for adoption of new technologies
and modernizing their plant and
machinery in line with the international
competitive environment.
Coverage of ILTFF
(General Terms and Conditions)
 The facility shall be available to the export oriented projects only
if their annual export is at least equivalent to USD5,000,000
(USD five million only) or if at least fifty percent (50%) of
their sales constitute exports, whichever is lower.
 Export oriented SME customers may purchase imported

machinery from commercial importers or authorized dealers of
foreign manufacturers in Pakistan, and/or authorized suppliers in
case of locally manufactured machinery and plant.
 PIBIs shall ensure that financing under the Scheme, when taken
together with other financing facilities of the SME, does not
exceed the borrowing ceiling fixed for SMEs under the PR for SME
financing.
ILTFF
(Eligibility Criteria – Sector Wise)
Sectors Eligible for ILTFF

 Only new plant, machinery & equipments to be used by the export oriented
projects in following sectors for producing exportable goods shall be eligible for
financing under the scheme, subject to compliance with the terms and
conditions of this scheme and the applicable laws, rules and regulations.
Core Categories
 1. Textile & Garments
◦ a. Fabrics
◦ b. Garments
◦ c. Made up
◦ d. Towels
◦ e. Art silk & synthetic textiles
 2. Rice Processing
 3. Leather & Leather products
 4. Sports goods
 5. Carpets & Wools
 6. Surgical Instruments
ILTFF
Developmental Categories
1. Fisheries
2. Poultry & Meat
3. Fruits/Vegetable & Processing, Cereals
4. I.T. – Software & Services
5. Marble & Granite
6. Gems & Jewelry
7. Engineering goods
ILTFF
OTHER SECTORS / SUB-SECTORS:
8. Generators / Captive Power Plants

9. Ethanol
10. Furniture
11. Pharmaceutical
12. Spinning and Ginning Sectors
13. Regeneration of textile waste
14. Glass Sector
15. Dairy Sector
16. Soda Ash
ILTFF
(Eligibility Criteria – Period & Rate Wise)
Islamic Mode of Financing
offered by MBL Under ILTFF
 MBL provides funds to client (exporter) under
Islamic Mode of Financing which mainly
comprises of the following products,
◦ Ijarah
◦ Diminishing Mmusharkah
IJARAH UNDER IFAS II
 Literally Ijarah means “To give something

on rent”
 Ijarah is an Islamic alternative of Leasing.
 Ijarah is a contract whereby the owner of

an asset, other than consumable, transfers
its usufruct to another person for an
agreed period for an agreed consideration.
Diminishing Musharkah (DM)
 Musharakah is a form of partnership (Shirkat)
 In Diminishing Musharakah based financing,

the Bank enters into a Musharakah based on
Shirkat-ul-milk for financing an agreed share
of fixed asset (e.g. house, land, plant or
machinery) with its customers and enters
into periodic profit payment agreement for
the utilization of the Bank’s Musharakah
share by the customer.
Medium to Long Term Financing
Facility
 Islamic Financing Facility for Renewable Energy –
IFRE
 State Bank of Pakistan has introduced the Islamic

Financing Facility for Renewable Energy (IFRE) to facilitate
and support the energy sector of the country via new and
alternate energy projects to fulfill the individual and
industry need of the energy.
 Financing under IFRE shall be available for power projects

/ installations using alternative / renewable energy
sources (solar, wind, hydro, biogas, bio-fuels, bagasse
cogeneration, and geothermal as fuel).
Classification of IFRE
 Currently financing under IFRE is available in
following two categories.
Category I
Financing to the prospective sponsors desirous of setting up of renewable energy power projects with a capacity ranging
from more than 1 MW to 50 MW shall fall under Category – I of this facility.
Category II
Financing to the consumers (domestic, commercial or industrial) for installation of facility using renewable energy source
for generation of electricity ranging from 4 KW to 1000 KW (0.004 MW to 1 MW) for own use or for supply to the
distribution company shall fall under Category II of this facility.
Shariah Structure of the
Facility
 MBL finance the asset to the customer under
the following modes
 Ijarah,
 Diminishing Musharaka,
 Murabaha/Musawamah,
 Istisna or
 a combination of two or more modes.
Shariah Structure of the
Facility
 However, the appropriate Islamic mode of financing will be
decided as per the customer specific business need.
 The facility disbursed under IFRE shall be fully reimbursed by

SBP within two days.
 The relationship between MBL and SBP will be that of

Mudarabah in which SBP will be Rabbul Maal and MBL will be
Mudarib.
 However in order to mitigate the risk of the Rabbul Maal and

as per the scheme guidelines, SBP’s reimbursed funds will not
be allocated to any particular IFRE financing rather it will be
placed in general pool and it shall be governed under Pool
Management Guidelines of SBP.
Session
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MEEZAN BANK LIMITED

SBP’s Incentive Schemes

1. Short Term Financing Facility “Export Finance Scheme” (EFS) to

2. Long Term Financing Facility (LTFF) for encouraging export led

3. Medium to Long term refinance facilities Financing Scheme for

 In addition to promoting exports of the country, SBP has also

 Islamic Banking Institutions (IBIs) sanctioned limit for IERS create

 To boost the export of value added commodities

 The facilities initially shall be allowed against a single or

 Apart from conventional sectors Textile’ edibles, leathers and

 The commercial banks provide export finance to the exporters on

 The tenor of the facility is up to 180 days

 Export performance of an exporter is matched annually against total

Profit Rates for the borrowers of both Textile & Non-Textile

 MBL provides funds to client (exporter) under

 in which the seller is not obligated to

 This defers from murabaha, where a buyer

 A short term financing facility extended to

 Goods manufactured as per the

 The finished goods are then sold &

 The facility will enable the Customers to

 By this customer can meet their working

 Salam can be effected in those commodities only

 The commodity should be generally available in the

regarding working capital requirement.

profits/(loss) generated by the Musharakah

o The scheme operates on profit and loss sharing basis with

o SBP will act as Rab-ul-Maal by providing Mudarabah

o SBP shall make Mudarabah investment in Islamic Banking

 Export oriented SME customers may purchase imported

Sectors Eligible for ILTFF

8. Generators / Captive Power Plants

 Literally Ijarah means “To give something

 Ijarah is an Islamic alternative of Leasing.

 Ijarah is a contract whereby the owner of

 In Diminishing Musharakah based financing,

 State Bank of Pakistan has introduced the Islamic

 Financing under IFRE shall be available for power projects

 The facility disbursed under IFRE shall be fully reimbursed by

 The relationship between MBL and SBP will be that of

 However in order to mitigate the risk of the Rabbul Maal and

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