President Pervez Musharraf has launched "Rozgar Pakistan Scheme" across the country for unemployed youth and women in less developed areas, to help them earn sustainable income. The scheme aims to target about 2.5 million unemployed individuals through loaning by NBP, the largest banking network of the country.
It has been claimed that the scheme has more application and significance for the Balochistan province where educated youth must get job opportunities and contribute towards economic uplift of the country.
The scheme is really appreciable, particularly in the scenario that a large number of educated young men and women would get self-employment. However the government must learn a lesson from "Prime Minister Self Employment Scheme" launched by the former PM of Pakistan which was largely misused and at present huge outstanding loans of banks are stuck up which have also been classified by SBP. A large number of suits filed by banks for recovery are pending in courts. I have personally gathered information that several delinquent borrowers raised finances against fake property documents and incorrect credentials which do not enable banks to recover these amounts.
I, therefore, suggest that landed property must be taken as collateral security besides personal guarantees of two individuals having sound means, be obtained. A major flaw of the scheme is that at the initial stage, the Government had announced that 10 percent of losses, if any sustained by individual entrepreneurs, will be absorbed by the Government or insurance companies. No doubt, this should have been provided in the scheme but it must not have been disclosed at the initial launching because this would prosper default culture and even persons carrying profit oriented businesses would wrongfully claim or declare "losses" which would ultimately be harmful for the lending bank. It is worth mentioning that this aspect is the main constraint being faced by banks which have launched Islamic Banking in their selected branches. SBP should therefore intervene in the scheme and adopt pre-emptive measures to forestall creation of non-performing loans.