Business & Banking

Prime Minister’s Kamyab Jawan SME Lending Program 2019

State Bank Issues Eligibility Criteria for PM’s SME Lending Program

The State Bank of Pakistan issued details on Thursday on eligibility criteria, loan size and the debt / equity ratio of the Kamyab Jawan SME Loan Program launched by the government of Prime Minister Imran Khan.

In order to provide self-employment opportunities to unemployed youth, the government would grant a profit margin and a credit loss subsidy for small business loans in the range of Rs100,000 to Rs5,000,000 disbursed by the banks under the program, the State Bank of Pakistan. (SBP) said in a circular

“The banks are also informed that with the launch of the Prime Minister’s Kamyab SME Loan Program, the Prime Minister’s Young Entrepreneurship Loan (PMYBL) plan would cease to exist.”

The eligibility criteria, as approved by the prime minister, include all men and women, aged between 21 and 45 years old, who have a national computerized identity card. However, he said that the lower age limit would be 18 years for companies related to IT and e-commerce. “Small businesses (new businesses and existing businesses) as defined by SBP and owned by youth according to the age groups mentioned above are also eligible.”

At least 25 percent of the loans would go to the borrowers.

He also stated that the minimum educational requirement for companies related to IT / e-commerce was tuition and / or experience of at least six months.

Small businesses stimulate economic growth by providing employment opportunities, fostering innovation and reducing income inequalities. The lack of adequate financial resources from formal sources was one of the key challenges facing small businesses and young entrepreneurs, the SBP said. Therefore, he said that the size of the loan has been segregated into two levels. Tier1 would include loans of Rs100,000 to Rs0.5 million, while Tier2 loans would be above Rs0.5 million and up to Rs5 million, he said.

The rates would be working capital loans and term loans, with terms of up to eight years with a maximum grace period of up to one year.

According to the SBP circular, under the program, the borrower’s capital contribution would be in cash or real estate, and would be required after loan approval. It would be 90:10 for Tier1 loans and 80:20 for Tier2 loans.

The security requirements for Level 1 loans would be clean, with only a personal guarantee from the borrower, while for Level 2 loans would be in accordance with the bank’s credit policy, SBP circular said.

To mitigate the risk, the prime minister approved that the government would pay the credit losses of the part of the capital only in the disbursed portfolio of the banks with up to 50 percent for the loans of Level 1 and up to 10 percent for the loans of Level 2.

The Finance Division must allocate funds in the budget of each fiscal year according to the estimates provided by the SBP, and the payment will be made when presenting the consolidated claims of all the banks by the SBP.

Also Read  Eid-ul-Fitr 2019: Complete list of e-Branches for fresh currency notes in Pakistan

According to the price for working capital and term loans, the SBP notified a rate of six percent per annum for borrowers of Tier1 loans, while the government would pay the difference in cost to interbank interest rates in Karachi (KIBOR). ) plus 500 basis points (BP).

For Level 2, it would be set at 8 percent per year for the borrower, while the government would pay the difference in cost at KIBOR plus 400 basis points (BP).

“In the first instance, the National Bank of Pakistan (NBP), the Bank of Punjab (BoP) and the Bank of Khyber will execute the program under the direction and supervision of the State Bank of Pakistan. Subsequently, SBP will also advise other commercial banks to participate in the program. “NBP will continue to play the leading role, with a participation of up to 50 percent in total loans disbursed, said the SBP on the executing agency.

The SBP said that all standardized schemes / projects / commitments designed by SMEDA, or projects designed by private sector service providers or by the same individuals would also be eligible.

“The form would be in both English and Urdu and would require minimal essential information in a simple format. The processing time will not exceed 15 days and will be clearly indicated on the application form. The forms will be easily available in branches and dedicated websites of banks. The non-refundable form processing fee will be Rs100, “the circular said.

SBP will publish consolidated information on the loans granted under this program for public information quarterly on its website.

The scheme would be available throughout Pakistan. In the case of Balochistan, at least one branch of NBP would be designated by division. All non-designated NBP branches would also provide and receive full application forms and send them to the nearest branches.

The Executing Agencies (EA) under this program must guarantee additional measures, such as the development and implementation of the criteria to evaluate the business potential.

“In the case of loans for existing companies, an independent and robust verification mechanism can be introduced to guarantee the correct use of the loans. In addition, for the new companies, a solid mechanism for the continuous monitoring of the use of the loans must be developed and implemented. ”

A mechanism should be introduced to ensure that the prescribed debt capital ratio has been maintained. Before the disbursement of the loans, it must be guaranteed that the capital was deposited in the bank from the sources of the borrower, where the capital mechanism was in the form of cash, said the SBP.

SBP advised banks to prepare their systems to successfully implement the program and avoid any misuse. Loan application forms will be available both at branches and through dedicated websites of NBP, BoP and Bank of Khyber.

Also Read  Eid-ul-Fitr 2019: Complete list of e-Branches for fresh currency notes in Pakistan

You can Read the SBP Circular here

Dear Mr / Mrs,

    • Small businesses stimulate economic growth by providing employment opportunities, fostering innovation and reducing income inequalities. The lack of adequate financial resources from formal sources is one of the key challenges faced by small businesses and young entrepreneurs. The Government of Pakistan is aware of this situation and is fully committed to allowing young people to obtain affordable financing from banks to establish new businesses or strengthen their existing businesses.
  • In order to provide self-employment opportunities to unemployed young people, the Government of Pakistan is launching the Prime Minister Kamyab Jawan SME Loan Program throughout the country. The government of Pakistan will grant a subsidy for loss of credit and surcharge in loans for small businesses in the range of Rs. 100,000 to Rs. 5,000,000 disbursed by the banks under the program. The key characteristics of the Program are reproduced below, as approved by the Prime Minister:

 

S. No Particulars Key Features
1 Eligibility Criteria
I. 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.
II. Small enterprises (startups and existing businesses) as per definition of SBP and owned by youth as per above mentioned age brackets are also eligible.
III. For IT/E-Commerce related businesses, at least matriculation and/or experience of at least six months.
2 Loan size
Size of the loan is segregated into two tiers, as under:
Tier 1 (T1) loans- Rs 100,000 to Rs. 0.5 million
Tier 2 (T2) loans- Above Rs 0.5 million and upto Rs 5 million
3 Loan type
Working capital loans and term loans
4 Loan Tenor
Upto 8 years with maximum grace period of upto one year.
5 Debt to Equity ratio
T1 loans- 90:10
T2 loans- 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 the 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 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 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 the banks by the SBP.
10 Pricing
Pricing for Working Capital & Term Loans:
T1 loans: 6% p.a. fixed for borrower. Government will pay the difference of the cost at KIBOR+500bps
T2 loans: 8% p.a. fixed for borrower. Government will pay the difference of the cost at KIBOR+400bps
11 Executing Agency
In the first instance, National Bank of Pakistan (NBP), Bank of Punjab and Bank of Khyber will execute the program under the guidance and supervision of State Bank of Pakistan. Subsequently, SBP will also advise other commercial banks for participation in the program.
NBP will continue to play the lead role. NBP’s share in total disbursed loans will be upto 50%.
12 Sectors and Products
All sectors. Standardized schemes/ projects/ undertakings designed by SMEDA, or projects designed by private sector service providers or by individuals, themselves will also be admissible.
13 Application Form
The Form would be both in English and Urdu and require minimum essential information with simple format.
The processing time will not exceed 15 days and will be stated clearly in the application form.
The forms would be readily available both in branches and through dedicated websites of the banks. Non-refundable form processing fee will be Rs. 100 (Rupee One Hundred Only).
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 loans for existing businesses, a robust independent verification mechanism may be introduced to ensure proper utilization of the loans. Further, for new businesses, a robust mechanism for ongoing monitoring of the loans’ utilization should be developed and implemented
A mechanism must be introduced to ensure that the prescribed debt equity ratio has been maintained. Before disbursement of the loans, it should be ensured that the equity is deposited in the bank from the borrower’s own sources where the equity mechanism is in the form of cash.
Also Read  Eid-ul-Fitr 2019: Complete list of e-Branches for fresh currency notes in Pakistan

 

  • Banks are advised to prepare their systems for the successful implementation of this program and to avoid any misuse of the program.
  • Loan application forms will be available at branches and dedicated websites of the National Bank of Pakistan, the Bank of Punjab and the Bank of Khyber. The standard loan application form can be found in Annex-1. Banks are recommended to mention their free telephone number in the loan application form for the facilitation of young entrepreneurs. Eligible borrowers can apply for loans immediately after the formal launch of the program by the Prime Minister.
  • Banks are also informed that with the launch of the Prime Minister’s Kamyab SME Loan Program, the Prime Minister’s Young Entrepreneurship Loan (PMYBL) plan would cease to exist.

In CL:

Annex -1: Loan application form

Tags

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close