State Bank cuts markup rate on youth loans to six percent

KARACHI: The State Bank of Pakistan (SBP) on Thursday announced to reduce the markup rate for the borrowers of Prime Minister’s Youth Business Loans (PMYBL) Scheme from eight percent to six percent, a circular issued by the bank said.
The cut in markup rate will come into effect from July 2015.
"The government will continue to pay the difference of the cost at KIBOR+500 basis points (bps) to all executing agencies," the SBP said.
Federal Finance Minister Ishaq Dar during his Budget speech had announced that the markup rate for the borrowers would be slashed by 200bps to six percent from July 1.
However, the formal intimation of this rate cut from the Ministry of Finance was awaited for implementation.
Analysts said that despite the finance minister’s announcement, the central bank has reduced the pricing cost in the wake of low interest rates.
The central bank cuts the policy rate by 50bps to six percent in its monetary policy review meeting held last week.
Small business loans will be provided in the shape of term-loan focused on (but will not restricted to) unemployed youth, especially educated youth looking for establishing or extending business enterprise.
The government and the State Bank of Pakistan launched PMYBL in 2013 to create multiple job opportunities by encouraging the entrepreneurial abilities among the youth.
Under this scheme, loans of up to Rs2,000,000 are being provided through the banking system.
At present, the National Bank of Pakistan (NBP), First Women Bank Limited and Meezan Bank are disbursing loans under this scheme.
With having major exposure in this scheme, the NBP has extended over Rs5.2 billion worth of loans to 6,100 successful applicants so far.