KARACHI - The State Bank of Pakistan has decided to enhance the scope of its refinance facility for modernization of Small and Medium Enterprises (SMEs) to cover a wide range of SME clusters/sectors. This decision has been taken by the central bank with a view to improving the access to finance for SMEs. According to a circular (SMEFD Circular No. 7) issued Thursday, the financing will be available for purchase of new imported/local plant & machinery for BMR of existing and setting up of new units. Sectors eligible for financing under the scheme include: Rice Husking, Cotton Ginning, Power Looms, Dairy & Livestock, Cutlery & Stainless Utensils, Surgical Instruments, Marble & Granite, Engineering Goods/ (Electronic), Fisheries, Packaging / Processing of Fruits / Vegetables, Furniture, Gems & Jewellery, Sports Goods and Agro-based Industry. In addition, financing for import/ local purchase of new generators up-to a maximum capacity of 500 KVA shall also be eligible under the Scheme. The capacity of generator shall, however, not be in excess of SME Units in-house energy requirements or up-to 500 KVA, whichever is less. Circular further said maximum period of financing has been enhanced from 7 years to 10 years and the scheme will remain effective till December 31, 2012. In order to further incentivize the banks/DFIs to provide financing facilities under the Scheme their spread has been enhanced. However, end users rate would remain the same. The revised refinance rate for the tenor of up-to 3 years under the scheme will be at 5050pc, banks/DFIs spread at 2.50pc with 8pc end users rate. Over 3 years and up-to 5 years the rate will be charged at 6.25pc, spread at 2.75pc with 9 per cent users rate while for 5 to 10 years the rate will be applicable at 7pc with 3pc spread and 10 percent end users rate. It may be mentioned here that SMEs play an important role in creation of employment opportunities, economic growth, poverty reduction and equitable distribution of economic prosperity. However, despite the overwhelming economic significance, SMEs have not been able to avail adequate financing facilities from the formal sources. In this regard, fixed investment financing of SMEs is of particular concern as it constitutes a small proportion of total SME financing. In order to improve the access to finance, the State Bank has decided to expand the scope of its refinance schemes.