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Economic Revitalization of Khyber Pakhtunkhwa and FATA (ERKF)

The Multi Donor Trust Fund (MDTF) project ‘Economic Revitalization of Khyber Pakhtunkhwa and Federally Administered Tribal Areas (FATA)’ is a joint initiative for both Khyber Pakhtunkhwa and FATA to provide support to the Small and Medium Enterprises (SMEs), attract Diaspora investment, and strengthen institutional capacities to foster investment and implement regulatory reforms.  The project is a response to the priority interventions identified under the donor-supported Post Crisis Needs Assessment (PCNA) Report. The MDTF for Khyber Pakhtunkhwa, FATA and Balochistan was established to support the recommendations made in the PCNA report, and is being administered by the World Bank on behalf of 10 donors.

The Project is divided in three components:

  • Component 1: SME Development
  • Component 2: Investment Mobilization
  • Component 3: Capacity Building to Foster Investment and Implement Reforms

 SME DEVELOPMENT COMPONENT

Of the total project funds of USD 20 million under the MDTF, USD 14 million has been earmarked for SME Development Component:

Khyber Pakhtunkhwa: $ 9.1 million

FATA:                         $ 4.9 million

Total Allocation:        $14.0 million

There are three subcomponents of this grants program:

Subcomponent-1 Rehabilitation Support: This subcomponent will provide direct support to the affected SMEs. ERKF will provide assistance in the form of matching grants to eligible enterprises. These grants may be used as working capital, for reconstruction of basic infrastructure, and acquiring/repairing machinery and equipment, etc.

Subcomponent-2 Up-gradation Support: The second sub-component will support the up-gradation of SMEs for improving business productivity and efficiency. Matching grants to eligible individual SMEs for projects, as well as to a group of SMEs for cluster development programs will be provided. These grants could be used for technological innovation, product development, adopting new packaging/labeling requirements, establishing common facility centers (CFCs), etc. Funds may be used for both capital investment and working capital.

Subcomponent-3 Capacity Building and Business Development Support: This sub-component will support capacity building of SMEs in partnership with the Business Edge Program of International Finance Corporation (IFC) and through procurement of business development services (BDS) required by the SMEs.

 

Comparison of Grants

 

Criteria

Rehabilitation Grant

Up gradation Grant (Individual)

Up gradation Grant (Cluster)

BDS & Capacity Building Support

Maximum amount

Rs. 2,500,000

Rs. 1,000,000

Rs. 5,000,000

Rs. 300,000

Cost Sharing by SMEs of total cost

40%

50%

50%

50%



SME ELIGIBILITY CRITERIA

  • SME is citizen of Pakistan doing business in Khyber Pakhtunkhwa or FATA
  • SMEs affected by crisis
  • SME employs at least 3 persons and maximum of 100
  • Proof of doing business before August 2010
  • SME can be categorized in the target sectors, clusters, or locations to be notified by the Grants Review and Monitoring Committee
  • SME justifies utilizing the Rehabilitation Support in rehabilitating business through a Business Revitalization Plan/Work Plan. In case of Up-gradation Support, a business plan will be required for justifying the proposed up-gradation by the SME or Cluster association
  • SME was not a bank defaulter when it was operational with exception to SMEs with sound justification that default was due to crisis 
  • SME does not belong to the ineligible sectors or clusters


Project started on December 29, 2011.

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