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ISLAMABAD: The Finance Division has estimated budget requirement of over Rs21 billion for providing mark-up subsidy to banks, besides additional subsidy of operational cost of the Micro Finance Providers (MFPs) and expected loan loss for Kamyab Jawan Programme being launched.

Sources said that the Finance Ministry has estimated budget requirement for providing; (a) mark-up subsidy to banks; (b) additional subsidy for meeting operational cost of the MFPs at the rate of eight percent and; (c) expected loan loss claims by MFPs of Rs21,067 million for the year one followed by Rs74.021 million for the second year, and Rs157,763 million for the third year.

The Economic Coordination Committee (ECC) of the Cabinet was submitted a summary by the Finance Division that Kamyab Pakistan Program has been developed for promotion of SME, agri and low-cost housing finance in consultation with the Naya Pakistan Housing and Development Authority (NPHDA), the State Bank of Pakistan (SBP), the Securities and Exchange Commission of Pakistan (SECP), Pakistan Banks Association (PBA), Micro Finance Providers (MFPs),Housing Finance Companies, and other related stakeholders in the consultative meetings of a working group and a steering committee notified for this purpose.

In order to scale up the existing Prime Minister's KamyabJawan Program and government's mark-up subsidy scheme for low-cost housing, it has been proposed to engage Micro Finance Institutions, Rural Support Programs, and Micro Finance Banks, and Housing Finance Companies, the meeting was further told.

Kamyab Pakistan Program proposes provision of cheaper liquidity for large scale distribution of subsidised small business and agri loans to small enterprises, start-ups, and farmers, and to individuals for housing needs.

Under this program, commercial banks and Pakistan Mortgage Refinance Company would extend wholesale loans to microfinance providers for onward extension of small loans under the existing KamyabJawan Program and Naya Pakistan low cost housing program through the NAPHDA.

The Kamyab Pakistan Program will envisage micro loans by microfinance providers, branded as Kamyab Karobar and Kamyab Kissan, for entrepreneur loans, and agri-loans respectively.

Such loans would be priced at zero percent per annum with a loan size of up to Rs0.5 million and Rs0.150 million (for agri loans) and/or Rs0.2 million (farm machinery and equipment) respectively.

Besides, the program also envisages Naya Pakistan low-cost housing program through NAPHDA would be amended to include micro housing loans by the MFPs.

Moreover, Kamyab Pakistan Program is also aimed to integrate with the government's ongoing Skill Development Program for educational and vocational training.

The ECC was further told that it is envisioned that these trained citizens would also have access to finance under the program.

This collaboration shall be re-branded as Kamyab Hunarmand.

It is estimated that more than three million households shall benefit from this program with cumulative disbursement of around Rs1,630 billion over the next three years, thereby creating new jobs in the country.

The program will initially be for seven years, which could be extended further; however, it may not be rolled back before its maturity period. The MFPs are also expected to arrange for Group Life Insurance/Takaful to cover the default risk in the event of death, cost of such insurance Takaful to be borne by the end-user.

Loans under the Kamyab Pakistan Program would be extended to households registered with the National Socio Economic Registry (NSER) of the BISP Ehsaas.

The criteria for selection of borrower/beneficiary under the program shall be: "the borrower/beneficiary of KPP facility shall have cumulative average monthly family income of less than Rs50,000 with priority to be given to 4.5 million beneficiaries of Ehsaas. However, this would not be mandatory for applicants of Tier-I housing loans verified by the NAPHDA through NADRA. Moreover, one loan under each Kamyab Pakistan loan category, ie, Kamyab Karobar, Kamyab Kissan, and Housing, shall be permissible concurrently with the maximum exposure capped at Rs2.85 million put together per family as defined by Ehsaas NSER.

As per Pakistan Banks' Association (PBA) feedback, banks have demanded to extend Direct Debit Authority to the SBP for timely and seamless payment of mark-up subsidy and loss claims to banks and MFPs. Accordingly, secretary finance would facilitate this arrangement.

A precedent already exists in respect of subsidy payment under Government Mark-up Subsidy Scheme (GMSS) for low-cost housing through direct debit authority.

The ECC was requested that exemption of rule 3(2) of Cash Management and Treasury Single Account Rules, 2020, for allowing direct debit authority to the SBP beyond inevitable circumstances may be granted.

Copyright Business Recorder, 2021


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