KARACHI: The government has relaunched the Prime Minister’s Youth Loan Scheme with revised features including interest-free microloans and agriculture loans. Under the revised scheme titled Prime Minister’s Youth Business & Agriculture Loan Scheme (PMYB&ALS), eligible borrowers can avail financing up to Rs 0.5 million at zero interest rate.

Prime Minister’s Kamyab Jawan Youth Entrepreneur Scheme was initially launched in July 2019 to provide self-employment opportunities to unemployed youth. However, the scheme was suspended in June this year and the State Bank asked the participating banks to put on hold fresh disbursement from July 1, 2022. 

According to the State Bank of Pakistan, now the government of Pakistan has approved revisions in the key features of PMKJ-YES with a view to making 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) and focusing the financing to Women borrowers some 25 percent of the loans will go to women borrowers.

As per key features of PMYB&ALS approved by the Government of Pakistan are reproduced, all citizens of Pakistan holding CNIC, aged between 21 and 45 years with entrepreneurial potential are eligible. However, for IT/E-Commerce related businesses, the lower age limit will be 18 years and at least matriculation or equivalent education will be required.

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 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. 

The size of loan is segregated into 3 tiers. Under the Tier 1 (T1) loan Upto Rs 0.5 million will be provided at end user rate of zero percent. Under the Tier 2 (T2) above Rs 0.5 million and up to Rs 1.5 million financing will be provided at end user rate of 5 percent and above Rs 1.5 million and up to Rs 7.5 million under the Tier 3 (T3) and end user rate will be 7 percent.

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. Upto 65 percent of total financing limit can be availed for Civil Works. For agriculture, production and development loans are eligible. 

Loan tenure under the T1 will be 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.

While, loan tenure under the T2 & T3: Upto 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.

As per revised features, Debt: Equity ratio for New Businesses under T1 & T2 will be 90:10 and 80:20 under the T3.  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 ratio will be nil for all tiers.

Bank rate for T1 will be Kibor+9 percent which includes wholesale lenders margin of Kibor+1 percent and Microfinance Banks (MFBs)/Microfinance Institutions (MFIs) margin of 8 percent.

While for T2 & T3 will be Kibor+3 percent and six months Kibor offer will be used for calculation of mark-up subsidy.

As per scheme government will bear credit losses (principal portion only) on the disbursed portfolio of the banks and under the T1, Upto 50 percent which includes 40 percent for wholesale lenders on pari-passu basis and 10 percent for MFBs/MFIs on first loss basis while up to 25 percent on first loss basis in T2 and up to 10 percent on first loss basis under the T3.

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. Moreover, in the case of agriculture, all crop and non-crop sectors (including crop production, livestock, poultry, fishery, dairy, etc) are also eligible.

All commercial and Islamic banks have been advised to come on board as Executing Agency (EA). The SBP will encourage banks/DFIs 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.

The Finance Division shall allocate funds in each fiscal year’s budget as per estimates provided by SBP and payment will be made on submission of consolidated claims of all banks by the SBP on quarterly basis.

For effective monitoring, online application form is prescribed through the 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 the 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 purposes.

Moreover, external audit of the portal from expert IT auditors will be conducted on an annual basis to ensure that the 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.

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.

The SBP will devise a mechanism in conjunction with the Finance Division and banks on monitoring the subsidy budget and setting triggers.