KARACHI: The government has increased the limit of the loan facility for unemployed youth and small and medium businesses to Rs25 million from Rs5 million, following a revision in the key features of Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme, the central bank said on Friday.
According to a circular issued by State Bank of Pakistan, under the latest revision to the scheme, loans will be disbursed in three tiers. Tier-1 would include loans from Rs100,000 to Rs1 million, Tier-2 loans would be above Rs1 million and up to Rs10 million, while Tier-3 would be above Rs10 million and up to Rs25 million.
The eligibility criteria, as revised by the government, include all men and women holding CNIC, aged between 21 and 45 years with entrepreneurial potential are eligible. However, it said the lower age limit would be 18 years For IT and e-commerce related businesses. At least matriculation or equivalent education would be required for the same businesses.
“Small and medium enterprises (startups and existing businesses) as per definition of the SBP and owned by youth as per above mentioned age brackets are also eligible,” the SBP said.
At least 25 percent of the loans would go to women borrowers.
Types would be long-term loans for machinery and equipment, working capital loan, running finance, and leasing of business on wheels on 2/3/4-wheeled locally manufactured vehicles.
The tenors would be up to 8 years with a maximum grace period of upto one year.
According to the SBP’s circular, under the scheme, security requirements for the Tier-1 loans would be cleared with only personal guarantee of the borrower. However, for Tier-2 and Tier-3 loans, it would be as per the bank's own credit policy, it notified.
For risk mitigation, the government said it would bear the credit losses for the principal portion only on the disbursed portfolio of the banks with up to 50 percent for Tier-1 loans, up to 20 percent for Tier-2 loans, and up to 10 percent for Tier-3 loans. The 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.
As per the pricing of working capital and term loans, the SBP has fixed three percent for the borrowers of Tier-1 loans, four percent for Tier-2, and five percent for Tier-3 loans, while the Karachi Interbank Offered Rates would be plus 400 basis points for each loan.
All commercial, Islamic and SME banks have been asked to come on board.
The SBP advised 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.