STATE BANK OF PAKISTAN

(Banking Services Corporation)

SUKKUR

Internship Report on
“Export Re-Finance Scheme And Its Role In Economy Of Country & Development
Finance Activity Of State Bank Of Pakistan”

Supervised by: Mr. Abdul Hakeem

Submitted by:
Aqsa Ishaque (SALU Khairpur)

Athar Ali Channa (Sindh University Larkana Campus)

Afifa Akkas Shahid (Sukkur IBA University)

Ghulam Murtaza (SALU Khairpur)

Date: (26-07-2019)

Contents
ACKNOWLEDGEMENT .............................................................................................................. 4
EXECUTIVE SUMMARY ............................................................................................................ 5
Introduction ..................................................................................................................................... 6
Subsidiaries of State Bank of Pakistan ........................................................................................ 6
 SBP Banking Services Corporation (SBP-BSC) ...................................................................... 6
National Institute of Banking and Finance ............................................................................... 7
Pakistan Security Printing Corporation .................................................................................... 7
State Bank Pakistan-Banking services Corporation (BSC)...................................................... 7
FUNCTIONS OF STATE BANK .................................................................................................. 8
Traditional Functions ................................................................................................................... 8
Primary functions ..................................................................................................................... 8
Secondary Functions ................................................................................................................ 9
Nontraditional function.............................................................................................................. 10
Units of SBP: ................................................................................................................................ 11
Deposit Accounts Unit............................................................................................................... 11
Public Accounts Unit ................................................................................................................. 11
Foreign Exchange Operations Department................................................................................ 11
PRIZE BOND ............................................................................................................................ 11
ISSUE & TREASURY (CASH) DIVISION ............................................................................. 12
Currency Management Unit ...................................................................................................... 12
Administration Block ................................................................................................................ 13
Development finance support department ................................................................................. 13
AFU ........................................................................................................................................ 13
RSU (Refinancing scheme unit) ............................................................................................. 14
Export Refinance Scheme ............................................................................................................. 15
History of export Re-financing scheme: .................................................................................... 15
Introduction ............................................................................................................................... 15
Markup Rate .............................................................................................................................. 15
Objectives of the EFS ................................................................................................................ 15
Facility for Indirect Exporter ..................................................................................................... 16
Eligibility ................................................................................................................................... 16
Negative list ............................................................................................................................... 16
Exporter’s eligibility for availing EFS: ..................................................................................... 17
Export Finance Scheme (EF-Part-1) ............................................................................................. 17
Documents required for the Part-I: ............................................................................................ 18
Types Of Payments For Export Financing ................................................................................ 19
Pre-shipment payment: ........................................................................................................... 19
2, Post-shipment financing: .................................................................................................... 19
Export Financing Scheme Part-II.................................................................................................. 19
Explanation ................................................................................................................................ 19
Documents required for the part-II ............................................................................................ 20
 Limit Allocation under Part-II ................................................................................................... 21
Procedure of Entitlement ........................................................................................................... 21
Monitoring of Export Performance ........................................................................................... 21
Opportunity To Explore New Markets For Export Financing Scheme Part-II ......................... 22
Pre-Requisites And Procedure Of Entitlement Of Limit In Case Indirect Exporter(IDE) Is Also
Financed Through Direct Exporter (DE) .................................................................................. 22
Role of SBP in Financial Development ........................................................................................ 24
CONCLUSION ............................................................................................................................. 26
ACKNOWLEDGEMENT

First of all, we would like to express our gratitude to Almighty Allah the graceful and merciful for
giving us the strength to complete the report.
We would really like to Thank State Bank of Pakistan to giving us great opportunity to be the part
of its internship program. It increased our knowledge and gave us so much to learn and understand
related to the functions of all departments of the bank.
Besides, we would like to thank our supervisosr Sir Manthar and Sir.Munawar along with our
alternative supervisor Mr. Muzafer Ali and all the mentors of State bank unit, whose efforts and
kind teachings gave us the opportunity to take part and learn about the operations of those units
working actively in the bank.
We would like express our deepest gratitude to our internship project coordinator Mr.Abdul
hakeem (ACM) who endowed the full time to encourage and support us and whose inspiration and
guidance make all this possible.
Further, we would also like to acknowledge many appreciation, deputy chief managers (DCM),
Chief manage (CM)and other staff of State bank of Pakistan (BSC) Sukkur, who gave the
permission to youth all required equipment’s and provided us the all the necessary material to
complete tasks.
EXECUTIVE SUMMARY

State bank of Pakistan is banker of banks. As state bank of Pakistan is autonomous body and it has
full and exclusive authority to regulate the banking sector, conduct an independent monetary
policy and set limits on government borrowings. Since the independence of country, the state bank
of Pakistan is working as central bank of the country.
Since 2001, SBP-BSC (Banking Service Corporation) is a fully owned subsidiary of SBP. It
performs the operational tasks for development finance, inter-bank settlement, and sale/purchase
of savings instruments, deals with Government payments and recipients, management of public
debt, foreign exchange operations and export refinance.
During these six weeks of internship, we got the practical exposure of the functions being
performed at various departments of the bank. We learned about the different work of different
departments, like: how the clean currency is being flowed in the market, how the SBP supports
banking sectors and government, currency issuance, management of vaults and counters,
monitoring currency operations through on site examination, how SBP (BSC) distribute the notes
and coins throughout country through chest management, we also learnt the functions and
standards of chest. And how the refinance schemes help individuals to enhance their business and
how it contributes in the development of the country’s economy. We learned that how the SBP is
supporting the businesses to earn for themselves and for the country as well, by charging the lowest
interest rate in return. And it is also providing the awareness among the general public about the
banking system in order to minimize the different risks by taking the benefits of banking sectors.
And many more things we have learned at state bank of Pakistan through out internship program.
Part-1

Introduction
On January 1, 1974, when the bank was nationalized, the scope of its functions was considerably
enlarged. The state Bank of Pakistan act 1956, with subsequent amendments, forms the basis of
its operations today. The headquarters are located in the financial capital of Pakistan, Karachi with
its second headquarters in the capital, Islamabad. History: Before independence on 14 August
1947, the reserve bank of India was the central bank for what is now Pakistan. On 30 December
1948 the British Government's Commission distributed the Bank of India’s reserves between
Pakistan and India 30 percent for Pakistan and 70 percent for India. The losses incurred in the
transition to independence were taken from Pakistan’s share (a total of 230 million). In May, 1948,
Mr. Jinnah took steps to establish the SBP immediately. These were implemented in June 1948,
and the state bank of Pakistan commenced operation on July 1, 1948. Under the state bank of
Pakistan order 1948, the State Bank of Pakistan was charged with the duty to "regulate the issue
of bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and
generally to operate the currency and credit system of the country to its advantage".
Mission statement
To provide reliable banking services to Government, financial institutions, public and to act as an
operational arm of State Bank of Pakistan
Vision statement
Our vision is to develop the SBP BSC (Bank) into a strong and dynamic institution, equipped with
an efficient and professional human resource base, having the requisite technology and fully
capable of providing quality service to stakeholders, while complementing the State Bank of
Pakistan in achieving its objectives.

Subsidiaries of State Bank of Pakistan

SBP Banking Services Corporation (SBP-BSC)

It was established under SBP Banking Services Corporation Ordinance 2001 as operational wing
of State Bank of Pakistan. The Bank is a fully owned subsidiary of SBP and is mainly accountable
to carry out following main functions:
a) Currency Management: It manages currency i.e. Supply, receipt and exchange of bank
notes and coins.
b) Loan Disbursements and Advances: It Disburses loans and advances banks, government,
financial institutions and local authorities;
c) Act as Facilitator: It is also involved in facilitating inter-bank settlement system.
d) Manages Prize Bonds and Other Saving Instruments: Dealing in prize bonds and other
savings instruments of government.
e) Revenue Collection and Disbursement of Payments: It Collects revenue and make
payments for and on behalf of government, authorities, local bodies, companies, banks
and other financial institutions, and maintaining their accounts.
f) Perform Operational Work: It manages operational work related to debt and foreign
exchange.
g) Dissemination of Policies: It is also responsible for disseminating SBP policies and
initiatives for expansion of financial services.
National Institute of Banking and Finance
National Institute of Banking and Finance (NIBAF) is also subsidiary of State Bank of Pakistan
and a foremost training institute for commercial bankers, central bankers, and micro and rural
finance providers beside management professionals. Moreover, the credibility of NIBAF is well
recognized for conducting both local and international training programs and information
dissemination activities such as seminars, conferences and workshops. Since its beginning, it has
played revolutionary role in sphere of banking education and training, both in catering to training
needs of SBP as well as of banking industry. It can be regarded as best institute for banking
professionals that are interested in enhancing their knowledge and skills in modern banking
concepts and practices including specialized disciplines like Islamic Finance and Agri Finance. Its
functions are:

o Designing of Training Programs: It Designs and develops training programs for

SBP staff at all levels, national and international levels. Along with this, it is also
responsible for designing training curriculum and develop training
modules/programs.
o Ensure Smooth Training Business Plans Implementation: To ensure smooth
implementation of SBP training business plan

Pakistan Security Printing Corporation

It was established as joint venture, Pakistani securities printing company by Government of
Pakistan on March 10, 1949 and is subsidiary of Pakistan.I prints security notes and prize bonds.
Previously, company was also performing functions like print passports, national identity
cards and stamp papers, which was disjointed in 2017 under new company named, National
Security Printing Company. In July 2017, it was sold by the Government of Pakistan to State Bank
of Pakistan for ₨ 100 billions. The key function is that it supports SBP in its currency
management policy by ensuring that production of Banknote and Prize Bond from printing to
packing is as per required indent and specification of denominations, and that delivery is as per
schedule provided by SBP-BSC. In doing so, it also adheres to Clean Note Policy.

State Bank Pakistan-Banking services Corporation (BSC)

The State Bank of Pakistan (SBP) is incorporated under the State Bank of Pakistan Act, 1956,
which gives the Bank the authority to function as the central bank of the country. The SBP Act
mandates the Bank to regulate the monetary and credit system of Pakistan and to foster its growth
in the best national interest with a view to securing monetary stability and fuller utilization of the
country’s productive resources.
The SBP Banking Services Corporation (SBP-BSC) was established as a wholly owned subsidiary
of State Bank of Pakistan in January 2002, under the SBP Banking Services Corporation
Ordinance 2001.
As an operational arm of the Central Bank, SBP Banking Services Corporation is engaged in
managing currency, foreign exchange operations and foreign exchange adjudication; providing
banking services to the federal and provincial governments and financial institutions regulated by
State Bank of Pakistan, conducting development finance activities in support of the development
finance group of the SBP, implementing export refinance schemes, and performing agency
functions like sale/purchase of national prize bonds including managing prize money draws, sale
and purchase of national saving schemes or any other functions assigned by State Bank of Pakistan.
  Vision
To develop SBP-BSC into a dynamic and efficient organization equipped with requisite
technology and human resource capable of extending sustainable support to the State Bank of
Pakistan in achieving its objective.

 Mission
To provide excellent banking and financial services to stakeholders besides ensuring
implementation of SBP policies in order to command their trust and respect.

FUNCTIONS OF STATE BANK

State Bank of Pakistan performs both traditional and nontraditional functions to achieve its goals.
Traditional functions further classified into two groups that are primary and secondary.

Traditional Functions
Primary functions
1. Issuance of notes
a. Sole right.
b. Accountability of currency notes in circulation.
c. Supply of currency notes in the country.
d. Issuance of fresh notes, withdrawal of solid notes from circulation.
e. State Bank clean note policy.
2. Conduct of Monetary policy
a. Frames and operates.
b. Control volume of money and credit supply

3. Regulations and supervision of banks

a. Full control

4. Banker’s Bank
a. Services to schedule banks.
b. Deposits of Schedule Banks.
c. Remittance facilities.
d. Clearing house.

5. Banker to Government
a. It maintains the accounts of federal and provincial governments.
b. It fulfills the banking functions on the behalf of Federal and provincial governments.
c. It accepts deposits of cash, cheques and drafts on the behalf of Government drawn on other
banks.

6. Render of last resort

a. Provides cash.
b. Rediscounting BOE, Treasury bills.
c. Liquidity and Solvency.

7. Advisor to the Government

a. Financial matters.
b. Economical matters.
c. Commercial banks and other financial institutions.

Secondary Functions

1. Agency functions like management of public debt

a. Subscribing Federal and Provincial government’s securities at the time of their issue.
b. Sale/purchase of such securities in the Money Market (through auction, OMO or discount
window)
c. payments of interest to holders of Public debt instruments.

2. Management of foreign exchange

a. Act as Custodian.
b. Act as an agent of Govt.
c. Official rate of exchange.

3. Maintaining close relationships with international financial institutions:

4. Clearing
a. Where representatives of different banks meet.
b. To exchange cheques withdrawn.
c. The state bank then settle difference.
Nontraditional function

1. Development of financial institution.

a. Commercial banks.
b. Microfinance.
c. Islamic banking.

2. Training facilities to bankers

a. provides knowledge.
b. provide training scheme.
c. NIBAF
d. IBP
c. Library services.

3. Credit to private sectors:

a. Different credit funds from time to time are allocated to motivate sectors like agriculture,
industry, etc. in area where there is a potential of gaining product for the purpose of commercial
export etc.
Example:
Rural credit fund.
Export finance scheme.

4. Islamisation of banking sector:

Part-2

Units of SBP:
Deposit Accounts Unit

 Maintenance of Current Accounts of all Scheduled Banks.

 Recovery of fine / penalty as and when levied by SBP.
 Maintenance of complete banking transactions of Bahawalpur Office and keeping record
of various accounts.
 Issuance and Encashment of Govt. Draft, Bank Draft to various quarters for collection.
 Issuance & encashment of D.D. / M.T etc.
 Dealing with the public complaints against commercial banks

Public Accounts Unit

 Payment on account of Federal / Provincial/ District Govt. and Pakistan Railways through
Cash, Transfer and Clearing.
 All Receipt on account of Federal / Provincial / District Govt. and Railways through Cash,
Clearing and Transfer and maintenance of account of Zakat Funds.
 Interbank Transactions through clearing house.

Foreign Exchange Operations Department

 Verification of Import /Export cases.

 Checking the Foreign Exchange Returns submitted by Authorized Dealers.
 Circulation of different directives issued through F.E Circulars.
 Deal with the matters pertaining to Exchange Companies, Exchange Companies of ‘B’
Category etc.

PRIZE BOND

 Receipt and Payment of prize Money Claims.

 Maintain Prize Bond Draw Record.
 Preparation of PB 35 list, Checking & lapsing of winning Bonds to Govt. Account.
 Sale of SSC/DSC & Payment of Profit / Encashment of SSC/DSC.
ISSUE & TREASURY (CASH) DIVISION
It is responsible to Bank for various balances and valuables in the custody of the Cash
Department. The Assistant Chief Manager (Cash) is assisted in the discharge of his duties by
Treasury Officers.
Following counters operate in Cash Department:-
 Govt. Payment Counters
 Govt. Receipt Counters
 Bank Payment Counters
 Notes & Coins Exchange Counters
 Defective/Claim Notes Counters
 Prize Bond Sale & Encashment Counter
 Prize Money payment Counter

Currency Management Unit

Receipt and Payment of Claim Notes.
 Destruction of Rejected Notes.
 Receipt and Dispatch of Remittances.
 On-site monitoring / Examination of Commercial Banks Branches and National Bank of
Pakistan Chests
 Record of Forged / Fake Currency Notes received from various quarters VAULTS Various
vaults operate under Currency Officer e.g. Guarantee/ Bonded Notes Vault, Coins Vault
and Notes Vault. However in the face of paucity of space at this offices currency operations
are being conducted in common vault. This vault is operated under the joint custody of
Asstt Chief Manager (Vault) and Treasury Officer of Cash Side. The balances received
from Commercial Banks are put under double lock, with a third lock of the bank,
subsequently the balance examined in detail in examination halls in the presence of
representative of the concerned bank. Similarly the coins received from mint are kept in
Vault for issuance to exchange counters, and commercial banks.
Administration Block
Admin is consists of many subunits that deal with administrative matters.
These units are:
 JSU (Journal services unit): This unit deals with the procurement of all items for bank.
 CRD (Central receipt and dispatch unit): This unit deals with all Receipts and dispatch
matters of field office.
 Medical unit: This unit deals with providing medical facilities to all employees of State
Bank.
 SMU (Staff Matters Unit): This unit works for the management of Human Resource at
State Bank. They maintain records; give appraisals on the basis of performance
management system and performance evaluation system, transfer, promotion, warnings,
retirement, training, and employee’s children educational issues. These are all matters are
handled by this department by concern of head office.
 IMU (Internal monitoring unit): Internal monitoring unit performs the monitoring/auditing
functions of the unit.
 Advanced salaries unit Advanced salaries unit provides the salaries benefit to the staff.
Whether someone wants to take loan, personal loan and the staff loan are provided to them
without charging the interest rate.

Development finance support department

This department works for the financial inclusion of general public, that every individual must
adapt the financial institutes for their financial activities. For this purpose, SBP has launched
various schemes like women entrepreneur scheme, in which women entrepreneurs get finances to
start their business at 5% from the commercial banks, and state bank refinances the commercial
banks at 0%. Furthermore, this department is working for the development of micro financing,
Islamic banking, agricultural financing, and housing schemes.
DFSD is further divided into two unites i.e AFU (Access to finance unit) and RFU (Refinancing
scheme unit).
AFU
This department works spreading awareness among people about financial facilities and schemes
that SBP and commercial banks are providing to them. The purpose is to shift people from informal
banking sector to formal banking sector.
Survey was conducted to find out that how proper utilization of resources can be brought among
our public because in our country, saving and financing from banks are very low. In short people
are aware about facilities that day by day those banks are providing to them. After survey, SBP
launched National Financial Literacy Program (NFLP), to literate people about financial system
so that they can properly utilize resources.
Classroom sessions are arranged in which field trainers give lectures to the participants. Participant
must be between the ages of 18 to 60. After every program, 80% account opening is very important.
For every responded, banks get 230 rupees and 30 separately for account opening. SPB also
operate this program through SAP (Student ambassador plan), in which students are trained to
provide lectures to people of rural areas. For which student get 2500 as traveling allowance, 2000
rupees for conducting session, and 25 for account opening.
RSU (Refinancing scheme unit)
There are three schemes run by RFU.
1. Credit guarantee scheme for women entrepreneur.
2. Refinancing facility for modernization of SME markup subsidy and guarantee facility for rice
husking miles in Sindh.
3. Export refinancing scheme.

 Credit grantee scheme for women entrepreneurs

This scheme is for the women entrepreneurs. The SBP provide the refinance to the women who
want to start their business the markup rate charged by the commercial banks is 5% but the SBP
refinance that on the 0% markup.

 Refinancing facility for modernization of SME markup subsidy and guarantee facility
for rice husking miles in Sindh
This scheme is for the rice millers. The fund is being provided to them for increasing the quality
of their rice in order to increase the demand for that and increase their report.
Part-3

Export Refinance Scheme

History of export Re-financing scheme:

o EFS part-1 was introduced in 1973.
o Introduction part-II in scheme in 1977.
o Modification in the year 1998 to include indirect Exporters-IE under both parts.
o Financing to indirect exporters under part II has been suspended since 1999 due to
some procedural and monitoring issues.
o Simplification of procedure and elimination of excessive documentation of part -1
in 2001.
o On site verification of cases in both parts was started in 2003.

Introduction
Export finance scheme (EFS) is in operation since 1973 with an aim to boost of exports of
country. Under the scheme short term financing facilities are provided to exporters through
commercial banks for eligible commodities. This scheme is divided into two parts, part1
(translation based) and part II (Performance based).
Under part1, finance is given to the exporters on case to case basis at pre-shipment and post-
shipment stage on eligible commodities. Under part-II, an exporter may avail the export finance
limit based on last year’s performance in respect of eligible commodities.

Markup Rate
Under the scheme loan is granted to exporters at low interest rate (3%). Commercial banks act
as an intermediary between exporters and SBP. When intermediary grants loan to the SME than
SBP charges only (1%) markup as it’s commission and the rest of the (2%) will go to commercial
banks, but when banks grants loan to the corporations than SBP charges 2% and remaining 1%
goes to the commercial banks.

Objectives of the EFS

o To boost exports of the country.
o To ensure that small, medium and emerging direct exporter (Exporting the
goods and services directly or export the finished goods) and indirect
exporters (Not directly exporting but are contributing in export by supplying
the input (Raw material) to the exporters or any other facility that help to
produce goods to credit facility)
o To change the composition of export from raw to value added.
o To increase the inflow of foreign exchange.
Facility for Indirect Exporter
EPS Facility is also available to the input suppliers/manufactures of the Direct Exporter,
termed as Indirect Exporter (IDE) based on Standardized Purchase Order (SPO) or the Inland
Letter of credit (ILC) to be established by the Direct Exporter agent the Export
order/contract/Letter of Credit. IDE will be eligible to avail finance from banks against ILC or
SPO, to the extent of amount mentioned therein. The period of financing by bank to the Indirect
Exporter shall be determined as per terms of the relevant ILC/SPO, but subject to a maximum of
120 days.

Eligibility
Under EFS all major value-added commodities exported from Pakistan are eligible financing
except those mentioned under negative list under the scheme. Therefore, any Exporter who meets
the lending criteria of a bank can avail financing for eligible commodities.

Negative list
Funds under scheme are available against all such commodities that are not placed in the
Negative list. It is mainly to achieve the objective of EFS i.e promoting exports of value added

List of commodities not eligible for export refinance scheme

items.
Raw cotton All types of Yarn
Crude vegetable materials Crude Animal materials
Hides and skins Leather wet blue
All metals/ores Fertilizer crude
Jewelry exported under Entrustment Scheme Mutton and Beef other than frozen and
preserved
Works of Arts and Antique Fur skins
Wood in rough and squared Bleach and un-bleach cloths
Wool and Animal hair Live Animals
Stone, Sand and gravels Waste and scrape of all kinds
Petroleum products Crude vegetable materials
All Grains including grain floor Crude Materials
  Reasons for negative list:
o Value added items fetch better price.
o To discourage the export of necessary raw material which might strengthen
the competitors and raise cost of value added items.
o This scheme’s purpose is to boost the foreign exchange of the country which
is somewhere resisted through the exports of the finished goods.
o Employment opportunities are also resisted through this.
o Economic activities are also discouraged through the exports of the negative
listed commodities.

Exporter’s eligibility for availing EFS:

One of the major criteria for availing facility under EPS is Linkage of Overdue Export Proceeds
with Export Finance Scheme
a) An Exporter shall be eligible to avail financing under EFS Part-I and/or Part-II, if the total
amount of overdue export bills at the time of availing the facility is not more than 5% of the
previous year’s export performance shown in EE-1 statements, duty verified/finalized by
concerned SBP BSC office(s). Henceforth, exporters availing only the EFS Part-1 facility are also
required to submit the prescribed EE-1 statements.
b) In case the overdue export position of an exporter is greater than 5% of the previous year’s
exports, the exporter will not be entitled to avail the EFS facility till such time that the overdue
position is reduced to the 5% benchmark level.

Export Finance Scheme (EF-Part-1)

With the sole objective of promoting exports of the country, SBP has been consistently
making policies and reviewing them time to time to encourage the exporters to enhance their
exports of eligible commodities by ensuring that their genuine credit requirement are met through
the banking system,
For this purpose SBP has introduced Export Refinance Scheme over the years. Any Exporter can
avail the export finance facility through any of the commercial bank after fulfilling the
requirements of the banks. Financing under Part-1 of the scheme is a transaction based financing.
The finance is granted by bank to the exporter on the basis of Export order for a maximum period
of 180 days.
The financing facility can be availed at pre-shipment stage for procuring inputs and manufacturing
goods to be exported .Financing at post shipment is also granted against goods already shipped to
the importer abroad, for the period up to realization of export proceeds or 180 days. The Loan is
usually granted for 180 days after 180 days the State bank of Pakistan debits the account of that
commercial bank and notifies it about that (regardless the payment made or not). If the exporter
pays before 180 days then that bank is liable to State bank of Pakistan within 48 hours.
Under this scheme loan is granted to exporter in 1973 at high interest rate (12%) but now SBP has
reduced the interest rate only 3%. Now the question is that why the State bank of Pakistan has
reduced the interest rate? Because State Bank of Pakistan focuses on to increase the exports and
promote the exports. And in the large number of dollars are coming in our country to boost up our
economy. State bank of Pakistan charges low interest rate and it is good chance of SEM and
corporate level to grow up their business. Commercial banks acts as intermediary between
exporters and SBP and charges 2% when is the business is small and medium enterprise and
remaining 1% charges by State bank of Pakistan. And when the business is corporate level then
commercial bank charges 1% and SBP charges 2%. Why the SBP charges 2% from corporate
level business and charges SEM business? Simply the answer is that corporate level business is
already more established in the comparison of SEM business.

Documents required for the Part-I:

1. Application form (form D)
2. Small and medium enterprise (SME certificate)
3. Export overdue certificate
4. Dollar sheet or treasury sheet
5. Copy of export order/contract/letter of credit
6. Demand promissory notes (D.P) or negotiable instrument

1. Application form (form D): This form or document is very important and necessary for the
case. Because in this form write down all the information of exporters. In other words, we can say
the summary of the all cases and this application form at least of two pages.

2. Small and medium enterprise (SME certificate): If any business sells turnover is 50 million
that business lie in the small business enterprise category. And if sales turnover is between the 150
to 800 million that business lie in the medium enterprise category. And according to that position
bank provide certificate to the business either that business is small or medium enterprise.

3. Export overdue certificate: An Exporter shall be eligible to avail financing under EFS Part-I
and/or Part-II, if the total amount of overdue export bills at the time of availing the facility is not
more than 5% of the previous year’s export performance shown in EE-1 statements, duty
verified/finalized by concerned SBP BSC office(s). Henceforth, exporters availing only the EFS
Part-1 facility are also required to submit the prescribed EE-1 statements.
In case the overdue export position of an exporter is greater than 5% of the previous year’s exports,
the exporter will not be entitled to avail the EFS facility till such time that the overdue position is
reduced to the 5% benchmark level.

4. Dollar sheet or treasury sheet: This sheet is very necessary and must attach to the case, because
when an exporter receives a loan from a commercial bank and told the bank that for suppose 14000
dollars are came from the foreign then bank multiply the dollar rate with number of dollars and
provide loan to the exporter in Pakistani rupees.

5. Copy of contract or copy of agreement: Simply in this form both parties mean importer and
exporters are agreed with such a condition. And in this form, write down the both parties name,
date of shipment, repayment date etc.

6. Demand promissory note (D.P) or negotiable instrument: Demand promissory note requires
to be endorsed by the branch concerned in favor of its head office, principal office through which
refinance is being claimed and further endorsed them in favor of the SBP office concerned.
Types Of Payments For Export Financing
1. Pre-shipment payment
2. post-shipment

Pre-shipment payment:
It is the financing to the exporter before the shipment occurs.
These are the following documents required for pre-shipment payments.
a) Letter of credits (L.C) or purchase order
b) Agreement
c) Demand promissory note (D.P NOTE)
In this after 180 days are given to exporter to submit their shipment documents to commercial
bank. Bank is given 7 days after those 30 days to prepare annexure D from documents for onward
submission to SBP. If not, then the bank is charged with fine of 37 paisa per thousand per day.

2, Post-shipment financing:
This is the financing after shipment had occurred.
These are the following documents required for post-shipment payments.
a) Purchase order
b) Agreement
c) Demand promissory note (D.P)
d) Shipment document
Financing at post-shipment stage is also granted against goods already shipped to the importer
abroad for the period up to the realization of export proceeds or 180 days.

Export Financing Scheme Part-II

 Brief
o A revolving finance limit equivalent to 50% of export proceeds realized during the
previous year is fixed on annual basis.
o Maximum period of loan is 180 days
o Export performance is matched annually against total loan availed during the year
on daily product basis
Explanation
o EFS-II is a performance based financing facility for the exporters. There was a need
for EFS-II after EFS-I because in part-I exporter must refund the money in 180 days
or within 3 days after he realizes his proceeds whichever is earlier, but the exporter
has to keep his company/business running for the whole year so to meet this need
of exporters, State Bank of Pakistan started to facilitate the exporters by the EFS-
II, in which an exporter’s revolving export finance limit is equivalent to 50% of
exports proceeds realized through export of eligible commodities in the preceding
financial year (July to June basis) is fixed on annual basis. The exporter can utilize
the facility within entitlement of limit for the whole year. Maturity period for such
facility is 180 days with the rollover facility subject to meeting at least 70%
shipment requirement of already availed loan. To set the fresh limits based on the
last year’s export performance for exporters who have outstanding finance under
the scheme after 30thJune, total borrowing availed under the scheme will be
required to adjust on 31st August each year.
Documents required for the part-II

1. Scrutiny Sheet
2. Form “EB”
3. Schedule to Form “EB”
4. Eligible Commodity Certificate
5. Prior ERF Availment Certificate
6. SME Certificate
7. Export Overdue Certificate
8. Form DE3 (Direct Export)
9. Demand Promissory Note
10. Agreement
11. EE-1 Statement

1. Scrutiny Sheet
This sheet summarizes the whole case and entails details about importer as well as exporter,
exporter’s prior case availment, limit detail, and whether overdue ratio is eligible or not.

2. Form EB
It depicts the limit assigned to exporter, its availment till the date, balance remaining to avail, and
the claim for refinancing amount.

3. Schedule to Form “EB”

This document shows that how much money has been financed, and to whom by the commercial
bank in a tabular format. It refers to the agreement and shows the finance.

4. Eligible Commodities Certificate

Through this document, Commercial Bank informs State Bank that commodity of the export
is not listed in Negative List.

5. Prior ERF Availment Certificate

This certificate shows that whether exporter has availed any finance from the assigned limit as per
the EE-1 Statement.

6. SME Certificate
This certificate is a proof the exporter is operating under SME, and is liable to pay 3% mark up to
commercial Bank, and the bank in turn pays 1% to State Bank of Pakistan.

7. Export Overdue Certificate

This certificate presents the export overdue of last year as a percentage of total turnovers of last
year. If the export overdue of last year is more than 5% then the exporter is not eligible to avail
facility under Export Financing Scheme.

8. Form DE3 (Direct Export Form 3)

It entails the details which includes name of the company, commodities, Name of indirect exporter,
EE-1 Limit, how much availed from the assigned limit how much remaining, and how much is
needed now.
 9. DP Note (Demand Promissory Note)
It is Rs.100 promissory note in which Exporter promises to pay the said amount as per terms and
conditions.

10. Agreement
Through this agreement, exporter agrees with the bank that he has taken finance from the bank and
he will fulfill all the conditions. The affidavit is of Rs.100.

11. EE-1 Statement This statement presents the financial value of previous year’s transactions,
on the basis of which Bank assigns limit to any exporter. This limit is normally 50% of the
previous year’s financial value of all transactions.

Limit Allocation under Part-II

Exporter shall apply to his banker in triplicate of EE-1 Statement. The banker shall verify
the entries in the application and authenticate the correctness of the entries on all the copies. The
bank shall submit Form EE-1 to Foreign Exchange Operation Department (FEOD) of SBP BSC
for verification of realization of proceeds. Then a revolving finance limit equivalent to 50% of
export proceeds realized during the previous year is fixed on annual basis. Allocated limits may
be transferred to any bank with the consent of both the banks. Exporter can not avail the finance
more than allocated limit. Any excess availment of limit by the exporter would be subject to fine
Export performance of an exporter is matched annually against total loan availed during the
financial year on daily product basis.

Procedure of Entitlement
o The bank shall allow a limit to the exporter on the above basis and send all copies
of Form EE‐1 in respect of each case to Foreign Exchange Operations Department
(FEOD) of the respective office of SBP BSC for verification of realization of
proceeds.
o After verifying EE-1, the concerned FEOD shall return the original and duplicate
copies to the concerned bank and retain the third.
o Exporter may obtain finance limit from more than one bank to the extent of 50% of
exports realized through each bank.

Monitoring of Export Performance

o Performance of the exporter shall be watched by the bank concerned by obtaining
Form EF‐1 from concerned exporter.
o Form EF‐1 is submitted in triplicate to FEOD for verification after close of financial
year.
o After verification of these Forms by FEOD, the original and duplicate copies shall
be returned to the bank concerned, the third copy retained by FEOD.
o The duplicate copy shall be submitted by the bank to the respective office of SBP
BSC by 31st August.
o Some of the entries reported in EF‐1 statement are marked for post facto
verification pending submission of report of realization of export proceeds.
o These entries are based on exports against confirmed & irrevocable L.C without
reserve made up to 30th June but export proceeds are not realized up to said date.
Opportunity To Explore New Markets For Export Financing Scheme Part-II

EFS-II is a performance based financing facility for the exporters. There was a need for
EFS-II after EFS-I because in part-I exporter must refund the money in 180 days or within 3 days
after he realizes his proceeds whichever is earlier, but the exporter has to keep his
company/business running for the whole year so to meet this need of exporters, State Bank of
Pakistan started to facilitate the exporters by the EFS-II, in which an exporter’s revolving export
finance limit is equivalent to 50% of exports proceeds realized through export of eligible
commodities in the preceding financial year (July to June basis) is fixed on annual basis. The
exporter can utilize the facility within entitlement of limit for the whole year. Maturity period for
such facility is 180 days with the rollover facility subject to meeting at least 70% shipment
requirement of already availed loan. To set the fresh limits based on the last year’s export
performance for exporters who have outstanding finance under the scheme after 30 thJune, total
borrowing availed under the scheme will be required to adjust on 31st August each year.

Pre-Requisites And Procedure Of Entitlement Of Limit In Case Indirect Exporter(IDE) Is Also

Financed Through Direct Exporter (DE)

The initial process of financing the indirect export would be similar to the way direct
exporter is financed alone. However, if direct exporter want to finance his indirect finance ,he shall
be entitled to avail finance by furnishing an‐undertaking to the bank as per Form UT‐DE‐II The
DE may also authorize their banker to open ILC(s) in favour of IDE(s) for making supplies of
inputs to him as per procedure laid down under Part‐I of the Scheme, within the prescribed limit
as per Form DE‐3.
The amount of the limit availed of by the DE as also the amount of ILC(s) opened in favour of
IDE(s) for supply of inputs, when taken together shall not exceed his entitlement of limit at any
point of time. It may however be ensured that in individual instance the loan shall not remain
outstanding beyond a maximum period of 180 days.
The Direct Exporter shall be under obligation to match export performance annually
against total loan availed during the financial year on daily product basis including finance availed
by his Indirect Exporter(s) under ILC(s) opened issued by the DE. The export performance shall
be provided by realization of 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.
On receipt of an application from the Direct Exporter, on Form "DE‐3" requesting for grant of
finance to the specific Indirect Exporter(s), for supply of domestic inputs, the financing bank shall
open ILC(s)/issue SPO(s) in favour of the said IDE(s) by reducing the entitlement of the DE under
Part‐Il of the Scheme.
The bank shall also provide financing facilities, to the extent of his balance entitlement of limit
tothe DE as per his manufacturing requirement after adjusting amount(s) of ILC(s) issued
in favour of the Indirect Exporter.
Upon submission of application on Form "IDE‐2" by the IDE, the banker of the DE or IDE, as the
case may be shall provide finance to the extent of the amount of the ILC (s) to
the IDE concerned upon roductionof the requisite documents on the basis of which financing faci
lity under Part I is available to theIDE.The refinancing to extent of the amount released by the
financing bank of the direct exporter(s) to the indirect exporter(s), against ILC(s) shall be
provided by the concerned office of the SBP to the banker of the indirect /direct exporter, upon
submission of the following documents
 1. Refinance application on the prescribed Form DE‐3 –
2. Certified copy the relevant ILC/SPO along with amendments thereto, if any.
3. DP Note of the Indirect Exporter covering the amount of the ILC(s)/SPO(s), dully endorsed
in favour of SBP.
4. Undertaking of the Indirect Exporter on the prescribed Form UT‐IDE‐II –Schedule
of deliveries.

IDE(s) would be under obligation to supply the required inputs on a case by case basis
in accordance with the terms of ILC/SPO, failing which he shall be liable for non‐shipment
fine as prescribed under Part‐I. Payment of such fines shall, however, not absolve IDE(s) from
his/their liabilities to the DE. The loan granted to the indirect exporter(s) along with mark up
thereon, shall be adjusted upon submission of the documents evidencing delivery of the inputs
and negotiation of ILC(s)/SPO(s)involved. The Indirect Exporter(s) shall be under obligation
to produce the following documents to the banker of the direct exporter, evidencing
delivery/acceptance of the inputs by him to the direct exporter.

a) Invoice in favour of Direct Exporter.

b) Goods Receipt Notes/Delivery Challan

duly signed by the Direct Exporter, showing date and quantity delivered to the direct
exporter as per terms of the delivery.

On production of documents mentioned in Para above, evidencing deliveries of the inputs, the
amount(s) of the loan(s) earlier granted in favour of Indirect Exporter(s) shall be transferred in
the name of the Direct Exporter and all mark up charges from the date of said transfer shall be
borne by
DirectExporter. The refinance earlier availed by the bank of the Direct Exporter(s), against di
sbursement(s)released to Indirect Exporter(s) shall continue to remain outstanding till
the monitoring period or up to maturity of loan whichever is earlier

 Exporter's Responsibilities under Part-II

Exporter after availing the finance has to:
o Ensure shipment of eligible commodity within monitoring period
o Ensure Proceed Realization Within Monitoring period
o Exporter should avoid excess availment.
o EE-I & EF-I statement should be submitted within stipulated time period
o Total Performance product should be matched with Total Borrowing product
o E-form used under Part-I should not be mentioned in EF-I.

 Bankers’ Responsibilities
o Ensure loan is granted against an eligible item.
o Bank shall authenticate the correctness of entries of EE-I submitted by exporter
o No bank shall authenticate more than 3 copies of Form EE-I in respect of any
exporter for any period
o The borrowing of bank under part-II shall not excess at any time the total amount
lent to the exporter
o in case part or full payment made by borrower before its due date, the bank shall
submit the amount to SBP BSC within same day
  Incentives for Banks
o Banks spread in EFS markup rate:
o Bank’s Spread 1.0% (For Corporations)
o Bank’s Spread 2.0% (For SMEs)

 Incentives for Exporters

o Concessional Rate
o Fulfill the Financial Needs
o Easy to Access
o Performance based Mark-Up rebate

Role of SBP in Financial Development

State Bank of Pakistan (SBP) has been encouraging exports since 1973 through its various
schemes, withthe objective to make funds available to meet the short and long term financing needs
of the exportoriented industries. The schemes, other than the EFS, which are currently functional
include:

• Islamic Export Refinance Scheme (IERS)

The IERS is a refinance scheme that SBP has developed to cater to the requirements of the banks
andexporters who wish to avail finances under Shariah compliant modes. Exporters can avail the
schemefrom participating Islamic Banks or Islamic Banking branches of Commercial banks, if the
exporter fulfillsthe criteria stated in the scheme for Musharika Pool.

• Long Term Financing Facility (LTFF)

Exporters can avail long-term financing facilities through banks for the export of eligible
plants,machinery and engineering goods under this facility. The financing facilities shall be
available both atpre-shipment and post-shipment stages for a maximum period of five years.

•Schemes for Modernization of Cotton Ginning Factories & Rice Husking Mills
SBP has introduced refinancing schemes for modernization of Cotton Ginning and Rice Husking
Factorieswith a view to enhancing quality of their outputs and value added chain. Financing under
the schemes isavailable at concessional rates for import/local purchase of new plant and machinery
for BMR purpose.

• Agri-loans Refinancing & Guarantee Scheme for KPK and FATA

To facilitate farmers of war affected areas of KPK and FATA for obtaining fresh loans from banks
to resume agricultural activities, the banks have been allowed to obtain refinance facility from SBP
BSC offices against the production/ working capital loans provided to the farmers of war affected
districts of KPK and FATA.

• Financing Scheme for Power Plants using Renewable Energy

SBP has started a scheme for financing power plants using renewable energy with a capacity of 10
MW.The scheme is not only aimed to overcome the shortage of electricity but also to promote
economic growth in less developed areas which are naturally endowed with channels & river flows
.
• Financing Facility for Storage of Agricultural Produce
The purpose of this scheme is to encourage private sector to develop the agricultural produce
marketing and enhance storage capacity by establishing Silos, Warehouses and Cold Storages. The
facility is available through banks/ DFI’s on long term basis for establishment, expansion and
balancing, modernization & replacement (BMR) of storage and allied facilities.
CONCLUSION

Through our Internship Program of six weeks, we have learned a lot about State Bank of Pakistan.
We have learned the main difference between the state Bank and Commercial Banks and their
operations (how they differ from each other.)
All the departments are working with coordination and The SBP (BSC) has various checks at every
step to ensure that all the departments are working properly.
We have learned and understood so many things in practical, apart from our bookish knowledge.
Our information has been increased through these six weeks as we had given very informative
project related to Export Re-Finance Scheme, which enhance our knowledge about how the SBP
supports trade for the country’s development. And how SBP have strategies to increase the foreign
reserves of the country. The whole staff was cooperated and we had get a lot from here. This is
the best experience we had at State Bank of Pakistan (BSC).