Tag: Prime Minister’s Youth Business Loans

KARACHI: State Bank of Pakistan (SBP) on Friday issued revised features of Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme.

The SBP said that the government had approved revision in key features of loan program under Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme.

The revised features of the scheme as approved by the government are reproduced below:

S. No	Particulars	Kamyab Jawan Program
1	Eligibility Criteria	All men/women 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. Small and medium enterprises (startups and existing businesses) as per definition of SBP and owned by youth as per above mentioned age brackets are also eligible. For IT/E-Commerce related businesses, at least matriculation or equivalent education will be required.
2	Loan size	Size of the loan is segregated into three tiers, as under: Tier 1 (T1) loans- Rs 100,000 to Rs. 1 million Tier 2 (T2) loans- Above Rs 1 million and upto Rs 10 million Tier 3 (T3) loans-Above Rs 10 million and upto Rs 25 million
3	Loan type	Long Term Loan for Machinery and Equipment / Working Capital Loan/ Running Finance, and Leasing of Business on wheels on 2/3/4 wheel locally manufactured vehicles.
4	Loan Tenor	Upto 8 years with maximum grace period of upto one year.
5	Debt: Equity ratio	For New Businesses: Tier 1 – 90:10 Tier 2 & 3 – 80: 20 For Existing Businesses: Nil for all tiers The Borrower’s contribution of equity would be in the form of cash or immovable property and will be required after approval of loan.
6	Focus on Women	25% of the loans will go to women borrowers.
7	Security Requirements	Security arrangements will be as under: T1 loans: Clean; however only personal guarantee of the borrower T2 & T3 loans: As per bank’s own credit policy
8	Risk Mitigation	Government will bear credit losses (principal portion only) on the disbursed portfolio of the banks as under: T1 loans: Upto 50% T2 loans: Upto 20% T3 Loans: Upto 10%
9	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.
10	Pricing	Pricing for Working Capital & Term Loans: Product Customer Pricing Bank Pricing Tier 1 3% KIBOR+400 BPS Tier 2 4% KIBOR+400 BPS Tier 3 5% KIBOR+400 BPS
11	Executing Agency	All Commercial, Islamic and SME banks are advised to come on board.
12	Sectors and Products	All sectors and products including agriculture.
13	Application Form	The Form would be both in English and Urdu and require minimum essential information with simple format available on Government provided Kamyab Jawan portal. The processing time will not exceed 30 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.
14	Monitoring	SBP will publish consolidated information about the loans extended under this program for information of the public on quarterly basis on its website.
15	Geographical distribution	Whole of Pakistan. In case of Balochistan, at least one branch of NBP will be designated per Division. All non-designated NBP branches will also provide and receive filled application forms and dispatch them to the nearest branches.
16	Additional Measures	Executing Agencies (EAs) under this program 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. Further, for new businesses, a robust mechanism for ongoing monitoring of the loans’ utilization should be developed and implemented. All loans previously disbursed or approved under this scheme will be converted into the new parameters with effect from July 01, 2020.

The SBP directed the banks to gear up their systems for successful implementation of this scheme and to avoid any misuse of the scheme. Eligible borrowers may apply for the loans immediately after formal launch of the scheme by the Prime Minister’s Office.

KARACHI: State Bank of Pakistan (SBP) on Friday issued procedure for disbursement of loan to unemployed youth under Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES).

In a circular issued to all chief executives of banks and development financial institutions, the SBP said that executing agencies (EAs) shall evaluate loan applications of unemployed youth as per parameters of PMKJ-YES approved by the Federal Cabinet and circulated by the State Bank of Pakistan to all banks vide its IH&SMEFD Circular No. 08 of 2019 dated July 11, 2019.

The loan facility for a borrower shall be sanctioned and disbursed by the EA after completion of documentation formalities.

These loans shall be entitled for service charges subsidy and credit losses subsidy. No further evaluation on eligibility of borrowers would be conducted by the SBP.

The government has launched PM Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES) to provide concessional loans to youth for establishing or extending business enterprises thereby promoting entrepreneurship and reducing unemployment and poverty in Pakistan.

The SBP has issued necessary instructions to all banks through IH&SMEFD Circular No. 08 dated July 11, 2019. All loans disbursed under PMKJ-YES shall be reported to SBP under Small Enterprise Financing category.

Under the Scheme, loans are segregated into two tiers i.e. Tier 1 (T1) loans from Rs. 100,000 to Rs. 0.5 million and Tier 2 (T2) loans – above Rs 0.5 million and up to Rs 5 million.

The loans will be provided through the banking system at service charges of 6 percent per annum. for TI loans and 8 percent p.a. for T2 loans, while the rate of return for banks working as EAs for PMKJ-YES would be KIBOR (6- Months offer) + 500 bps for T1 loans and KIBOR (6- Months offer) + 400 bps for T2 loans with KIBOR to be reset bi-annually.

The government shall absorb the difference between the rate of return for EAs and end user rate as service charges subsidy, the SBP said.

Besides, GOP will also bear credit losses (principal portion only) on the disbursed portfolio of the banks up to 50 percent in case of T1 loans and up to 10 percent in case of T2 loans.

As per SBP’s Prudential Regulations for Small Enterprise Financing, loans are classified as loss on objective basis (time based criteria) when default period is 18 months or more or on subjective basis.

Hence, for determination of admissible credit losses against EA’s total PMKJ-YES disbursed portfolio at the end of each quarter, only loan cases classified under loss category as per SBP SME Financing PRs will be considered.

The SBP said that the payment of service charges subsidy to EAs will be made through SBP’s operational arm viz Development Finance Support Department (DFSD), SBP BSC Head Office Karachi.

The EAs shall prepare and submit claims to DFSD for receiving government service charges subsidy on outstanding principal amount of their regular PMKJ-YES portfolio up to expiry of each individual loan.

In case of a loan becoming non-performing, no service charges subsidy will be paid after being classified as ‘Loss’ as per SBP PRs for SME Financing.

The EAs claims shall contain particulars of each individual loan along with calculations of subsidy based on relevant six months KIBOR used. The service charges subsidy claim should be duly vetted by internal audit department of the EA. The audited claim along with a certificate from EA relating to eligibility of borrower for PMKJ-YES and correctness of the subsidy amount shall be submitted to DFSD within 15 working days after the end of respective quarter for payment of service charges subsidy.

DFSD, SBP BSC shall scrutinize subsidy claim of EAs within 15 working days after receipt of complete information from EAs.

DFSD shall ascertain that calculations of EAs subsidy claim are correct and applicable KIBOR rate has been used by the EAs.

Thereafter, DFSD shall submit scrutinized claims to Finance Division for release of funds. After receiving funds from GoP, DFSD will advise SBP BSC Karachi for crediting the subsidy amount in respective EA’s account maintained at SBP BSC Karachi.

Banking Inspection Department of State Bank during regular inspection of the EAs shall conduct inspection of their PMKJ-YES portfolio on sampling basis using its own sampling techniques.

SBP inspectors shall randomly select credit files and review them from the perspective of eligibility of borrowers under the Program, status of loan (regular or NPL) and GOP subsidy claim.

The BID inspection report section on PMKJ-YES shall be used as an important input for reviewing the Scheme and assessing its effectiveness in fulfilling the government objective of promoting youth entrepreneurship in the country.

On behalf of government, payment of credit losses subsidy to EAs will be made up to 50 percent in case of TI loans and up to 10 percent in case of T2 loans on their disbursed portfolio under the Scheme on quarterly basis through Development Finance Support Department (DFSD), SBP BSC Head Office Karachi.

EAs shall prepare claims for submission to DFSD, SBP BSC for receiving payment on account of credit losses subsidy from the government on their disbursed PMKJ-YES portfolio. The list containing details of individual loans classified as loss as per SBP SME PRs and calculation of credit loss subsidy based on total disbursed PMKJ-YES portfolio of EAs at the end of respective quarter shall be submitted to DFSD. EAs claim in this respect should be duly vetted by their internal audit department. The audited claim along with a certificate from EA relating to correctness of the claimed amount shall be submitted to DFSD within 15 working days after the end of respective quarter.

DFSD, SBP BSC shall scrutinize credit loss subsidy claim of EAs within 15 working days after receipt of complete information from EAs and ascertain that calculations of EAs loss claim are correct.

Thereafter, DFSD will forward admissible claims of EAs to Finance Division, GoP, for release of funds. After receiving funds from Finance Division, DFSD will advise SBP BSC Karachi office for crediting the approved subsidy claim in respective EAs account maintained at SBP BSC Karachi Office.

EAs will return excess amount arising, if any, to DFSD, in case movement in their PMKJ-YES portfolio causes amount of credit loss to be less than/falls below 50 percent in case of T1 loans and 10 percent in case of T2 loans of total disbursed portfolio of EA at the end of reporting Quarter.

KARACHI: Banks have disbursed an amount of Rs26.76 billion under Prime Minister’s Youth Business Loans (PMYBL) till June 30, 2019 as against the amount of Rs25.13 billion disbursed till June 30, 2019.

The number of borrowers has been increased to 26,679 by end June 2019 as compared with 25,128 borrowers by end June 2018, State Bank of Pakistan (SBP) said on Friday.

The government, being cognizant of the important role played by youth and small businesses in the economic development, introduced Prime Minister’s Youth Business Loans (PMYBL) Scheme in 2013 with the aim of providing youth the opportunities of financial independence through self-employment.

Under the Scheme, small businesses are provided loans up to Rs 2,000,000/- at a service charge of 6 percent p.a.

Total number of applications received by the Executing Agencies (EAs) under PMYBL Scheme as of June 30, 2019 stood at 101,938. Of the total applications received so far under the scheme, 88 percent were from male applicants.

Moreover, since launch of the scheme, number of sanctioned applications stood at 33,145 as on June 30, 2019, while cumulative disbursements of Rs 26,760 million had been made to 26,679 beneficiaries till June 30, 2019.

The SBP said that small businesses have potential to revitalize economic activity by creating employment opportunities, reducing poverty and providing economic linkages and services to the corporate sector.

The growth of small businesses and their access to formal finance is imperative for the development of economy.

However, despite their strong potential, the small businesses, particularly of young entrepreneurs, have traditionally remained credit constrained due to high risk perception of banks towards them.

The government introduced Prime Minister’s Youth Business Loans (PMYBL) Scheme in 2013 for providing the opportunities of financial independence to youth through self-employment.

Under the scheme, unemployed youth are extended loans upto Rs 2,000,000/- at a service charge of 6 percent p.a. for setting up new business or strengthening existing business.

The rate of return for lending banks is one year KIBOR+500 bps. Difference of banks’ rate and borrowers’ rate is being absorbed by the federal government in the form of subsidy.

As a further incentive to the banks, GOP also shares 5 percent of credit losses of total outstanding loan portfolio of the banks under the scheme.

Currently, eighteen banks are participating in the scheme, of which three are public sector banks (NBP, FWBL and Sindh Bank Limited) while the remaining fifteen are private sector banks.