KARACHI: State Bank of Pakistan (SBP) Monday issued revision in loan program under Prime Minister (PM) Kamyab Jawan Youth Entrepreneur Scheme (PMKJ-YES).
The SBP said that the government had approved revisions in the key features of PMKJ-YES with a view to make it more purposeful and beneficial for small businesses and agriculture.
The new components of interest free microloans and agriculture loans have been added in the scheme. Moreover, the scheme has been renamed as Prime Minister’s Youth Business & Agriculture Loan Scheme (PMYB&ALS). The key features of PMYB&ALS approved by the Government of Pakistan are reproduced below:
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01. Eligibility Criteria: All citizens of Pakistan holding CNIC, aged between 21 and 45 years with entrepreneurial potential are eligible. For IT/E-Commerce related businesses, the lower age limit will be 18 years and at least matriculation or equivalent education will be required. Above age limit condition is applicable on individuals and sole proprietors. In case of all other forms of business including partnerships and companies, only one of the owners, partners or directors must be in the age bracket prescribed above.
Small and Medium Enterprises (startups and existing businesses) owned by youth as per above mentioned age brackets are also eligible. In case of agriculture, farmers’ classification as per SBP’s “Indicative Credit Limits & Eligible Items for Agriculture Financing 2020” will be applicable.
02. Loan size: Size of loan is segregated into 3 tiers, as under:
Tier 1 (T1): Up to Rs 0.5 million
Tier 2 (T2): Above Rs 0.5 million and up to Rs 1.5 million
Tier 3 (T3): Above Rs 1.5 million and up to Rs 7.5 million
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03. Loan type: Term loans/ working capital loans including murabaha and leasing/financing of machinery and locally manufactured vehicles for commercial use. Only one vehicle per borrower is allowed. A borrower in food franchise and distribution business may avail financing for more than one vehicle. Up to 65 per cent of total financing limit can be availed for Civil Works. For agriculture, production and development loans are eligible.
04. Loan Tenor:
T1: Up to 3 years and repayment will be in equal monthly installments. However, in case of crop loan, tenor will be up to 1 year and repayment will be lump sum on or before maturity, tied-up with the crop cycle.
T2 and T3: Up to 8 years for long term/development loans with maximum grace period of up to one year.
For working capital/production loans and murabaha under T2 and T3, tenor will be up to 5 years. Banks will have the option to lend working capital/production loans wherein only markup will be payable during first 2 years and thereafter both principal along with the markup will be paid in next 3 years making it total repayment period of up to 5 years.
05. Debt: Equity ratio:
For New Businesses: T1 & T2 – 90:10; T3 – 80:20
The Borrower’s contribution of equity would be in the form of cash or immovable property and will be required after approval of loan.
For Existing Businesses: Nil for all tiers.
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06. Bank rate:
T1: KIBOR+9 per cent which includes wholesale lenders margin of KIBOR+1 per cent and Microfinance Banks (MFBs)/Microfinance Institutions (MFIs) margin of 8 per cent.
T2 & T3: KIBOR+3 per cent
Six months KIBOR offer will be used for calculation of mark-up subsidy.
07. End user rate: T1: 0 per cent; T2: 5 per cent; T3: 7 per cent
08. Security Requirements: Security arrangement will be as under:
T1: Clean (secured only by personal guarantee of the borrower).
In addition, rules & regulations of SECP/SBP shall be complied with by MFBs/MFIs.
T2: Clean (secured only by personal guarantee of the borrower).
T3: As per banks policy.
Vehicle(s) financed under T1, T2 & T3 to serve as collateral.
09. Risk Mitigation:
Government will bear credit losses (principal portion only) on the disbursed portfolio of the banks as under:
T1: Up to 50 per cent which includes 40 per cent for wholesale lenders on pari-passu basis and 10 per cent for MFBs/MFIs on first loss basis
T2: Up to 25 per cent on first loss basis
T3: Up to 10 per cent on first loss basis
10. Number of loans per borrower: A customer may avail maximum two loans (including one long term and one short term loan) within overall maximum financing limit of Rs 7.5 million. In case of agriculture, a customer may avail one production loan and one development loan within overall maximum financing limit of Rs 7.5 million.
11. Sectors and Products: All sectors and products. Moreover, in case of agriculture, all crop and non-crop sectors (including crop production, livestock, poultry, fishery, dairy etc.) are also eligible.
12. Executing Agency (EA): All commercial and Islamic banks are advised to come on board.
Banks/DFIs are encouraged to participate as wholesale lenders for providing liquidity to MFBs/MFIs for onward lending under T1.
The loan applications processing and disbursement under T1 will only be made through MFBs/MFIs to be selected by the respective wholesale lenders.
13. Focus on Women: 25 per cent of the loans will go to women borrowers.
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14. Allocation in Budget: Finance Division shall allocate funds in each fiscal year’s budget as per estimates provided by SBP. Payment will be made on submission of consolidated claims of all banks by the SBP on quarterly basis.
15. Online Application Form on PM Youth Portal: For effective monitoring, online application form is prescribed through PM Youth Program (PMYP) Portal. The Form would be both in English and Urdu as provided on the portal.
The purpose of the portal is to provide a centralized platform through which applicants would be able to apply directly to the relevant banks. The portal will be hosted and controlled by National Information Technology Board, Ministry of IT and Telecommunication.
Only authorized stakeholders for specific purposes will have an access to the portal e.g. individuals for the purpose of applying for loans; banks for the purpose of receiving applications; SMEDA for providing their hand-holding/guidance support wherever necessary and PM Youth Office for retrieving information for monitoring purpose.
Moreover, external audit of the portal from expert IT auditors will be conducted on annual basis to ensure that online portal is used by the concerned stakeholders for intended purpose only and unauthorized use of the online portal, if any, is identified in a timely manner.
16. Turn Around Time:
The processing time will not exceed 45 days and will be stated clearly in the application form. Non-refundable form processing fee will be Rs. 100/- inclusive of NADRA online CNIC verification fee.
17. Monitoring: SBP will devise a mechanism in conjunction with Finance Division and banks on monitoring the subsidy budget and setting triggers. SBP will also publish consolidated information about the loans extended under the scheme for information of the public on quarterly basis on its website.
18. Geographical distribution: Whole of Pakistan. In case of Balochistan, at least one branch of NBP will be designated per Division.
19. Additional Measures: Executing Agencies should ensure following additional measures: Criteria for assessing entrepreneurial potential should be developed and implemented.
In case of loan for existing businesses, a robust independent verification mechanism may be introduced to ensure proper utilization of loans.
For new businesses, a robust mechanism for ongoing monitoring of the loans’ utilization should be developed and implemented.
A comprehensive monitoring and evaluation framework may be developed to measure the impact of the scheme, particularly direct jobs created by the beneficiaries.
The Prime Minister (Youth Affairs) Office may hire a firm for audit, evaluation and monitoring of the scheme.
The SBP advised the banks, development financial institutions (DFIs) and microfinance banks (MFBs) to gear up their systems for successful implementation of this scheme and to avoid any misuse of the scheme. Eligible borrowers may apply for loans on PM Youth Portal immediately after formal launch of the scheme by the Prime Minister’s Office.
