PLGMEA demands deferment of mark-up on export finance loans

20 Feb '09

4 min read

Mr. Fawad Ijaz Khan, Chairman Pakistan Leather Garments Manufacturers & Exporters Association (PLGMEA) has requested the Governor State Bank of Pakistan to allow deferment of mark-up for one year on Export Refinance loans (Part-I & Part-II) to Leather Garment Exporters for the calendar year 2009 keeping in view the present Global financial crisis and declining exports. PLGMEA Delegation led by Mr. Fawad Ijaz Khan met Governor SBP Syed Salim Raza yesterday and apprised him of the problems being faced by the industry.

The meeting was attended from PLGMEA by Mr. M. Saleem Ahmed, Mr. Rashid Arshad Zahur, Mr. Rizwan Ahmed Khan and Mr. Irfan Iqbal. SBP officials who attended the meeting were Mr. Samar and Mr. Mansoor Siddique. Syed Salim Raza and his team listened to the problems of Leather Garment Exporters and assured to bail out this industry from crisis as done also previously by the SBP.

Mr. Fawad apprised the Governor that Leather Garment is the value-added export industry experiencing sharp decline in exports since November 2008. September onward is the selling season for Leather Garments in most parts of the world but due to Global financial crisis the sales have decreased worldwide. The exporters of Leather Garments are especially feeling the crunch and facing severe liquidity problem. SBP had also allowed deferment of Mark-up in 2002-03. Mr. Fawad urged the Governor SBP to kindly consider the present problem of Leather Garment exporters and allow deferment of Mark-up for one year.

Syed Salim Raza suggested that SBP might consider deferment of principal amount but not the Mark-up amount. Mr. Fawad elaborated that Export Refinance Loans are performance based loans which are continually renewed by exporters and hence principal payment is automatically rolled-over on expiry of Loan. There will not be much incentive to Leather Garment Exporters on deferment of principal amount but deferment of Mark-up will provide much needed financial support. Governor SBP stated that he will look into this proposal and consult Pakistan Banking Council.

Mr. Fawad stated that the Leather Garment Exporters will not be able to meet their Export Performance Targets for the year 2008-09 due to sharp decline in exports. He requested the Governor SBP to allow relief to the industry in Part – I as well as Part – II loans. In case of Part – I loans the Leather Garments Exporters may be asked to provide shipments to the extent of 75% of loans instead of 100%. Under Part – II loans the required performance target for financing can be reduced to 1.5 times from 2.0 times. Mr. Salim agreed to look into this proposal.

Mr. Fawad complained about the exorbitant charges of Commercial Banks from exporters including mark-up of upto 25%. He urged the Governor SBP to review the Schedule of charges of Commercial Banks.

Mr. Fawad requested the Governor SBP to allow exporters to swap their import currency requirements with their export proceeds. Mr. Fawad stated that many exporters of Leather Garments are also importing raw materials. They face losses in conversion of currencies in settling their Import & Export Bills. Syed Salim Raza stated that SBP will consider this proposal in the light of economic implications for the Forex market.

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