1. finance

SMEDA Business Guide Series
How to obtain Finance
from
First Women Bank Limited
2(Fin-5)/R-0
(July 31st, 2003)
Prepared By: Policy Planning & Strategy
Small and Medium Enterprise Development Authority
Government of Pakistan
www.smeda.org.pk
HEAD OFFICE
Waheed Trade Complex, 1st Floor , 36-Commercial Zone, Phase III, Sector XX, Khayaban-e-Iqbal, DHA Lahore
Tel: (042) 111-111-456, Fax: (042) 5896619, 5899756
[email protected]
REGIONAL OFFICE
PUNJAB
Waheed Trade Complex,
1st Floor, 36-Commercial Zone,
Phase III, Sector XX,
Khayaban-e-Iqbal, DHA Lahore.
Tel: (042) 111-111-456
Fax: (042) 5896619, 5899756
[email protected]
REGIONAL OFFICE
SINDH
REGIONAL OFFICE
NWFP
REGIONAL OFFICE
BALOCHISTAN
5TH Floor, Bahria
Complex II, M.T. Khan Road,
Karachi.
Tel: (021) 111-111-456
Fax: (021) 5610572
Ground Floor
State Life Building
The Mall, Peshawar.
Tel: (091) 9213046-47
Fax: (091) 286908
[email protected]
Bungalow No. 15-A
Chaman Housing Scheme
Airport Road, Quetta.
Tel: (081) 831623, 831702
Fax: (081) 831922
[email protected]
[email protected]
Table of Contents
Page #
Contents
1.
Introduction of SMEDA
02
2. Role of Policy Planing & Strategy Department
02
3. Loan Process Flow Chart
03
4. First Women Bank Limited
04
5. Financial Products of FWBL
04
6. Running Finance
04
7. Demand Finance
05
8. Small Loan
05
9. Business Loans for Women
05
10. Home Improvement Scheme
06
11. Information Technology Finance
06
12. Asaish Scheme
06
13. Loans for Salaried/ self-employed Women
07
14. Agricultural Financing
07
15. Non-Fund Based Facilities
07
16. Loan Process
08
17. Annexes
Annex- I
10
Annex –II
11-14
Annex-III
15
Annex-IV
16-18
Annex-V
19
1
INTRODUCTION OF SMEDA
The Small and Medium Enterprise Development Authority (SMEDA) was established in 1998, with the
objective to provide fresh impetus to the economy through the launch of an aggressive SME development
strategy.
SMEDA initially focused on nine priority sectors on the sole criterion of SME presence and in order to
stimulate growth, sector strategies were developed and regulatory reforms were also proposed. In depth
research was conducted and comprehensive plans were formulated after identification of impediments and
retardants. These strategies as proposed by SMEDA comprehensively covered all important areas of
business operation such as regulatory environment, finance, marketing, technology and human resource
development. Resultantly, SMEDA successfully formulated strategies for sectors, including fruits and
vegetables, marble and granite, gems and jewellery, marine fisheries, leather and footwear, textiles, surgical
instruments, transport and dairy.
After successfully qualifying in the first phase of sector development SMEDA reorganised its operations in
January 2001 with the task of SME development at a broader scale and enhanced outreachreach in terms of
SMEDA’s areas of operation. Currently, SMEDA along with sectoral focus offers a range of services to
SMEs including over the counter support systems, exclusive business development facilities, training and
development and information dissemination through a wide range of publications. SMEDA’s activities can
now be classified into the three following broad areas:
1. Creating a Conducive Environment; includes collaboration with policy makers to devise facilitating mechanisms for
SMEs by removing regulatory impediments across numerous policy areas
2. Cluster/Sector Development; comprises formulation and implementation of projects for SME clusters/sectors in
collaboration with industry/trade associations and chambers
3. Enhancing Access to Business Development Services (BDS); development and provision of services to meet the
business management, strategic and operational requirements of SMEs
The aforementioned reorganisation of SMEDA is driven by enhanced interaction with the stakeholders and
suggests that SMEDA is truly a learning organization and has always been ready to take the lead in SME
development arena.
ROLE OF POLICY PLANNING AND STRATEGY DEPARTMENT
The Policy Planning and Strategy (PP&S) department of SMEDA is the hub of policy and regulatory
research that feeds national, provincial and local government institutions, SME associations, industrial
clusters and individual entrepreneurs with the ultimate objective of creating a conducive business
environment. It has a mandate to identify and where suitable initiate strategic projects. Library and
Information resource center of SMEDA is an integral part of PP&S while development of Regulatory
Procedures is a part of an overall information dissemination function of the department.
One of the major problems that SMEs face and women entrepreneur in particular is regarding availing
financing options. The aim of this document is to provide information pertaining to various financing
options offered by FWBL along with their lending procedure. This will enable them to be fully comfortable
with the procedure of attaining financing facility from FWBL.
2
Loan Process Flow Chart
Opening an account with FWBL
The applicant has to have/open an account with FWBL
in order to apply for loan.
Loan Application Form
The applicant fills the loan application and submits loanprocessing fee along with required documents.
Documents Required
1. National Identity Card
Copy.
2. Credit/s stock reports
3. Form 29 & Form A for
private limited company.
4. Memorandum & Article of
Association for private/
limited company
5. Board resolution signed by
all directors in case of
private/public Ltd company.
Certificate
6. Certificate of incorporation
&Business commencement.
7. Partnership deed on stamp
paper for partnership
concerns.
Branch Verification
The Branch officer visits the business site of the
applicant to verify and assess the project viability.
Evaluation and Appraisal
Evaluator of the Bank’s choice evaluates collateral.
Other Documents
Required ( In case of
Property)
1.
2.
3.
Loan Approval
If all acceptable, then the case is forwarded for approval
to authorities.
4.
5.
6.
Loan Disbursement
After approval, loan is disbursed to the borrower.
Repayment
Repayment of loan starts according to the schedule
agreed by the bank and borrower.
3
Original
Registry/Transfer
letter.
Farad Milkiyat (From
Patwari/Tehsildar)
Non Encumbrance
Certificate. (NEC)
PT-I Form (From
Property Tax
Department)
Valuation of
Property.
Legal opinion.
FIRST WOMEN BANK LIMITED (FWBL)
FWBL was established in 1989 as a nationalized commercial bank to cater to the financial needs of Women
Entrepreneurs (WEs). The FWBL was given the task of improving the socio-economic status of women
both in urban and rural areas by creating opportunities for their development through enhanced economic
participation. FWBL is serving not only as a commercial bank but also is a development finance institution
for women in Pakistan. FWBL is currently providing financial assistance to those;
1. Private business operated by women entrepreneurs but not restricted to women
2. Partnership firms or private limited companies in which
a) women are 50% shareholders,
b) woman is managing director of the company, or
c) 50% workers are women
FINANCIAL PRODUCTS OF FWBL
First Women Bank Limited offers following financial products/schemes to women entrepreneurs.
1. Running Finance
2. Demand Finance
i)
Small loans
ii)
Business Loans for Women
iii) Home Improvement Scheme
iv) Information Technology Finance
v)
Asiash Scheme
vi) Loan for Salaried Women
3. Agricultural Loans
4. Non-Fund based facilities
The brief of each of the above mentioned products is as follows:
Running Finance
Running finance is a short-term finance where a revolving fund limit is provided to the borrower and
borrower may withdraw or deposit funds as desired. This loan facility is for the purpose of expansion of
business. This multi-transactional account is maintained in borrower’s favour for period of one year. This
may be renewable after expiry depending on the turn over and recovery of mark up. The mark up payments
are made on quarterly basis. However, the loan amount depends on value of security and business volume.
As per rules of FWBL, it retains 25% margin against cash collateral and 50% against property.
Eligibility Criteria
• Businesswomen between the ages of 25-55 years.
• Women in business for at least 5 years, with 50% equity
• Women who is or has availed a bank loan, for business purpose
• Satisfactory credit history of business loan (if has taken any)
• The purpose of obtaining finance should be for investment in business as working capital or for the
purchase of fixed assets such as machinery, raw materials etc.
• Business loans can be obtained against property, cash and stock as a collateral
• In case of financing for working capital, there has to be time-to-time adjustments of principle, with full
adjustment to be made at least once a year.
• For cases involving purchase of machinery, raw material, etc., repayment period extends from 12
months to 36 months with grace period of (3 months maximum).
4
• The mark-up rate1 ( it is negotiable )depends on nature of security as follows:
Mark-up Rate
Type of Collateral
Mark-up Rate
Type of Collateral
11% per annum
Cash Collateral
16% per annum
Govt. employees salaries under lien
14% per annum
Property
18% per annum
2 personal guarantees
Demand Finance
Finance or a loan that is repayable whenever required or recalled by the lender prior to maturity date is
called Demand Finance or Loan. The important feature of this category is that Loan amount is disbursed in
lump sum to the borrower’s account (and the borrower may withdraw cash partially, from time to time or
entirely in one go). Loan amount disbursed depends on the value of security and volume of business. Mark
up and principle repayment mode is negotiable, i.e. it could be either monthly or quarterly etc. Bank
retains 25% margin against cash collateral and 50% against property. The demand finance can be utilised
for business purposes as well as for domestic purposes. The difference being; for domestic loan only cash
collateral is acceptable.
Eligibility Criteria
Eligibility or lending criteria is the same as that of Running Finance.
Various Categories of Demand Finance Facility:
In the demand finance category various schemes are being offered by FWBL which are:
i) Small Loans
The small loans are given up to Rs. 25, 000 and this facility could be availed by existing small businesses.
Under this scheme two personal guarantees are acceptable and the physical presence of guarantors is must
while signing the guarantee paper.
•
Eligibility Criteria
• The domestic purpose should be clear and well defined and for business purpose, the business
should be already existing.
• Two personal guarantees preferably of government employees are required.
• Stocks double of loan amount are hypothecated as security if loan is obtained for business
purpose.
• The bank may also take lien on salary of any one of he guarantors
• The repayment period of loan is 2 years or 24 monthly instalments.
• Annual mark up on the loan is 18%.
ii) Business Loans for Women
Financing between Rs. 0.1 Million to 0.5 Million for businesswomen. It is available against two personal
guarantees. Guarantors having a net worth of atleast Rs. 2 Million, with credentials as acceptable to the
Bank accompanied with documentary evidence of assets.
•
1
Eligibility Criteria
• Businesswomen between the ages of 25-55 years.
• Women in business for 3-5 years.
• Borrowing: Equity ratio –50:50.
• Satisfactory credit history of business loan.
• Financing can only be sought for business investment as working capital or for the purchase of
fixed assets e.g. Machinery.
Mark up rate may subject to change however, mark-up rate and the nature of security can be negotiated.
5
• The mark up rate for this loan is as follows: Against Cash Collateral: 13% p.a./ Against Property:
16% p.a./ Against Jewellery: 18% p.a./ Against Pledge: 18% p.a.
iii)
Home Improvement Scheme
This scheme provides loan facility for home improvement. Maximum loan limit is Rs. 200,000. It is
available against mortgage of concerned house and two personal guarantees are required.
•
Eligibility Criteria
• Eligibility is based on the evidence of regular income source.
• House should be owned by a female or in joint name of male and female.
• Loan repayment period is 1 to 5 years or 12 to 60 instalments. The instalment should not exceed
1/3rd of take home salary.
• The mark up rate is 16% p.a. (Mark up rate may subject to change at any time)
Documents Required
• Attested copy of NIC
• Salary certificate from employer
• Sale deed/ Title deed/ Transfer letter
• No Objection Certificate (NOC)
• Non Encumbrance Certificate
• Aks Shajra
• Fard
• P.T I Form from Property Tax Department
• Site Plan
iv)
Information Technology Finance
This loan facility may be utilized by firms, individuals and students. In this way this facility can be utilised
for business as well as domestic purposes. Loan amount is determined by the category of borrowers.
• Individuals (Qualified professional users, businesswomen, and domestic user).
• Women employees of Govt. institutions / Autonomous & Semi autonomous bodies, Multinational
and Public Ltd can apply for loan.
• Borrower’s salary is underlien.
• One personal guarantee is required.
• Cash Collateral and property both acceptable.
• Repayment period is 1 to 2 years.
•
Students ( purpose-payment of tuition fee)
• Students of recognised Federal & Provincial Govt Institutions can apply.
• Two personal guarantees and recommendation of parents/ guardians required.
• Repayment period is 1 to 3 years depending on the course duration.
• Both cash and property are acceptable as collateral.
• Mark up rate depends on nature of security:
• 16% against property.
• 13% against cash collateral.
• 18% against other assets (e.g. paper security, hypothecation etc)
v)
Asaish Scheme
Asaish Scheme is available for buying electrical appliances up to value of Rs. 50,000 maximum. The
duration is between 1-3 years and personal guarantees of Government employees are also required for it.
6
vi)
Loans for Salaried/Self Employed Women
FWBL provides financing to salaried women on easy terms. Financing is provided up to Rs.50, 000.
Women may apply jointly with her spouse or next of kin. Spouse’s income will be combined with that of
applicant, to determine the loan amount and repayment capacity. Repayment period for this scheme
extends between 1- 3 years, depending on the applicant’s requirement.
•
Eligibility Criteria
• Salaried women should be between ages 25-55 years.
• Monthly repayment not to exceed 1/3rd of employees Take- Home salary.
• Employee should have a service contract valid for 18 to 36 months at the time of applying for loan
and be in service for the past 3 years.
• Two personal guarantees and the guarantors should be of sufficient capacity to repay.
• Employer has to give an undertaking that her/his salary will be deposited into the account with
FWBL each month.
• Employer shall have to assign his/her Provident Fund/Retirement Benefits in the Bank’s favour.
• The loan repayment period is 2-3 years.
• The mark up rate is 16%.
Documents Required.
• Attested copy of NIC
• Salary Certificate with details of deduction duly certified by the employer.
• Income Tax certificate
• Bank Statement for the past 12 months.
• Life Insurance Policy of sufficient amount in the favour of FWBL.
• Confirmation from department that they continue to send salary in FWBL account till adjustment.
Agricultural Financing (rural based)
Agricultural finance facility is purely for business purpose and further classified into;
1. Production Finance
Under this scheme finance is provided for purpose of buying seeds, fertiliser, pesticides and
insecticides etc. This finance can be availed for a particular crop or season and it has to be repaid in 2
months after harvesting.
2. Development Finance
Development finance is provided for purpose of tractors, tub-well, farm machinery and land
improvement. In this case financing is done for a period of 18 months to 7 years, depending upon
purpose of loan. Usually finances are allowed for 3 years, repayable in half-yearly instalments.
Non- Fund Based Facilities
1. Letter of Credit
FWBL is providing facilities of various types of Letters of Credit, Acceptance L/C, Negotiation L/C,
and Back-to-Back L/C for their clients.
2. Bank Guarantees
Bank also is issuing various types of guarantees such as; performance Guarantee, Bid Bond, Shipping
Guarantee, Guarantees for Advance Payments, Mobilisation Guarantees, Security Deposit Guarantees,
Guarantees for Payment of dues/ court Guarantees. These guarantees are only issued for clear and
well-defined purpose. Guarantees are issued in favour of shipping companies, Govt. Departments,
guaranteeing specific payments at future dates by customers on whose behalf the guarantee are issued,
or guaranteeing completion of a particular performance by the customers. Guarantees are issued
against 100% cash margin.
7
LOAN PROCESS
Step 1
• To apply for any kind of loan to FWBL, the applicant must have an account with the bank.
• If not, new current account has to be opened with an amount of Rs.1, 000
• The applicant submits loan application (Annex I), along with the following documents.
• Attested copy of NIC
• Original Business Plan
• Bank statement for past 6 months
• Financial statement for the past 3 years
• Borrower’s Basic Fact Sheet (Annex II)
• Stock reports (Annex III)
• Credit Report (Annex IV)
• If property is offered as collateral following additional documents are required
• Sale deed/ Title deed/ Transfer letter
• Non Encumbrance Certificate
• Fard Milkiyat
• P.T I Form from Property Tax Department
• Against cash collateral, required documents are
• Defence Saving Certificate (DSC) along with letter of pledge.
• Special Saving Certificate (SSC) along with letter of pledge.
• National Saving Certificate (NSC) along with letter of pledge.
However, specific scheme may require other documents to be submitted to the bank which have already
been mentioned while discussing the various schemes.
Step 2
• The processing fee charged for different services vary from Rs. 2000 to Rs. 3000.
• The applicant fills the application form along with the Borrower’s Basic Fact Sheet. (Annex I & II)
• The applicant has to attach the required documents according to the loan scheme she is applying for.
The applicant must be very careful in this regard as the required documents vary from scheme to
scheme.
Step 3
• After the loan application is received, the credit department goes through the application.
• Two branch officers visit the business sight of the applicant to check the project viability and verify the
sight as well.
Step 4
• After the branch verification, the credit department carries out the evaluation and appraisal of the loan
request.
• The bank obtains legal opinion certificate from the lawyer for the clearance of the title of applicant’s
property in case of property offered as collateral and gets it evaluated from professional evaluator of its
own choice.
• If all this turns out to be positive, the case is forwarded to the approval authority.
Step 5
• The regional office approves the loan up to Rs.450, 000 against cash collateral while head office
approves loan above Rs.450, 000 against cash or property.
• If the loan the loan is sanctioned, then
1. Legal documents are prepared and executed.
2. The collateral is mortgaged in bank’s favour.
8
•
3. If necessary, the bank takes lien on salary of borrower/guarantor.
4. The business assets/stocks/immovable assets may be hypothecated or pledged as required by the
bank.
The loan is disbursed to the borrower.
9
Annex (I)
10
Annex (II)
Page 1of4 of Annex (II)
11
Annex (II)
Page 2of4 of Annex(II)
12
Annex (II)
Page 3of4 of Annex(II)
13
Annex (II)
Page 4of4 of Annex(II)
14
Annex (III)
15
Annex (IV)
Page 1of3 of Annex (IV)
16
Annex (IV)
Page 2of3 of Annex (IV)
17
Annex (IV)
Page 3of3 of Annex (IV)
18
Annex (V)
19