Loans under KPP: Govt to conduct special audit for ensuring transparency

ISLAMABAD: In a bid to remove objections raised by the International Monetary Fund (IMF) over the limit of guarantees on small loan schemes under the Kamyab Pakistan Programme (KPP), the government has decided to conduct a special audit, where the executing agencies’ credit loss default rate exceeds 10 percent.

Under the programme, the central bank will issue a circular covering all the aspects of the program, including government’s credit loss guarantees to wholesale lenders and EA for the payment of subsidy claims over Rs30 billion for doling out Rs142 billion by selected banks and microfinance institutions.

The 100 percent loss coverage guarantee will be extended to wholesale lenders on the basis of a first-come-first-served. However, this facility is likely to be limited, both in amount and percentage coverage.

The SBP, in consultation with the Finance Division and the steering committee of the program, reserves the right to reduce guarantee coverage to 50pc for WLs over a period of 18 months. However, this will not be applicable to existing or outstanding loans.

The wholesale lenders will provide lines of credit under the “Pre & Post Finance” models to executive agencies, which will provide details of disbursed loans on a monthly basis to WLs, they will then advise SBP on the actual utilisation of the guarantee amount.

The SBP will monitor and ensure utilisation of GOP’s guarantee. Besides, the central bank in consultation with Finance Division could advise WLs about the extent of reduced coverage of the GOP’s guarantee on a 30-day notice.

Any mis-utilization or reporting of subsidy utilization will result in punitive actions from the respective regulators. The EAs shall prepare subsidy and loan loss claims on a quarterly basis.

The WLs shall appoint external audit firms on the panel of SBP to undertake audits of at least 50% of the additional subsidy and loan loss claims by EAs on an ongoing basis. Likewise, mark-up subsidy and loan loss claims of WLs and MFBs under KPP shall also be externally audited and submitted to SBP for payment.