Many of us still remember how a yellow cab scheme was launched by the federal government in 1990s and vehicles were distributed among applicants like peanuts. Under the scheme, the applicants were given locally assembled and imported cars by banks on payment of partial costs and personal guarantees. The beneficiaries of the scheme were supposed to pay back the financed amounts in easy installments. But what happened was that a huge number of beneficiaries defaulted.
When the financing banks tried to launch recovery drives they found out that many of the applicants had submitted fake information and guarantees and there was no way to trace them. There were complaints that the banks had been put under immense political pressure to process applications without delay. In the process, they failed to verify the antecedents of the applicants.
The situation was the same in the cases of small loan schemes launched by the PPP for youth and the Khud Rozgar Scheme introduced during the Musharraf era. The purpose of these schemes was to gain political mileage.
Many beneficiaries of the Musharraf’s Khud Rozgar scheme, who were given rickshaws without any guarantees and collateral, returned these rickshaws to the financing banks after using them for a year or two. The banks are finding it hard to sell off these rickshaws in the market as they are substandard and over-priced. Many believe the scheme was announced to oblige cronies and sell their low-quality products in the market.
Against this backdrop, there are a lot of apprehensions about the Prime Minister’s Youth Business Loan Programme (PMYBL). The banks that were approached to provide the required funds were also reluctant and in the end only the state-owned banks -- The National Bank of Pakistan (NBP) and the First Women Bank Limited (FWBL) -- agreed to come on board.
The government has announced to disburse Rs100 billion per year to the successful applicants whose applications are approved by the financing banks purely on merit.
For those who had been waiting endlessly to see the scheme kick off, the money has started moving from banks to the applicants. To date, two batches of applicants have been given cheques through a computer balloting process carried out by the prime minister himself. In a balloting ceremony, held earlier this month, 5169 candidates were declared successful. Of these applicants, 4504 were male and 665 females.
The supporters of the PML-N government say need for balloting arose because the number of applications received was far higher than the number which could be accommodated at one time. On the other hand, there are people who believe the conditions of these loans are too strict for the applicants to fulfill.
There are potential applicants who say they cannot find a guarantor as the banks require the guarantors to submit post-dated cheques worth 1.5 times the amount of the loan required to be disbursed in the applicants’ names. Besides, there is a concern that though women were given 50 per cent quota of loans under the scheme they were applying in very small numbers. May be, there is a need to create awareness among them and to help them overcome social inhibitions, which keep them away from becoming entrepreneurs.
Muhammad Tahir, a merchandiser in Hide Market Lahore, feels the loans under the PMYBL scheme are meant for businesses which are already functional and need additional running finance to expand. Or, he says, these loans suit those government employees who want to do some side business. What they can do is that they can apply in the name of their family members and give their guarantee. "Will anybody be willing to submit post-dated cheques for a beginner, especially when bouncing of a cheque can lead to registration of a criminal case against the issuer?" he questions.
Makhdoom Waseem Qureshi, a central level office-bearer of the PML-N Lawyers’ Wing, does not buy the argument. He says people criticise loan schemes where loans are disbursed without due diligence, and when the banks try to secure the whole process these people have complaints of a different type. Qureshi tells TNS that the conditions of these loans have already been relaxed to help out applicants from all backgrounds.
For example, he says, earlier blood relations were not allowed to be guarantors but now this condition has been lifted. Waseem says loan beneficiaries are being charged 8 per cent annual interest while the banks are charging 15 per cent. The remaining 7 per cent will be paid by the government.
However, the NBP President and CEO, Syed Ahmed Iqbal Ashraf, claims people from all walks of life are availing loans under the scheme. In a statement issued to the press, he says over 21,000 applications were received for the second balloting of PMYBL, out of which 5169 were successful. He informs that an overwhelming majority of applicants was seeking funds for agriculture related projects. This, he says, is a proof of the fact that the message has reached the masses even in rural areas.
An NBP official, who does not want to be identified, says these loans will benefit applicants as well as lead to job creation and business opportunities for suppliers, vendors, etc. He says this time it will be ensured that it goes into the business projects mentioned in the scheme. "That is why the approved amounts are released in two tranches."
He says an applicant is required to have his basic business set-up ready before he becomes eligible to receive the second tranche, which will be spent on procurement of core assets. The first tranche will cover the cost of putting the basic business set-up. Besides, he says, there are third party surveyors who have been employed by the bank to ensure that the loan amount is being spent on setting up of business only.
He tells TNS there is a division at the NBP head office in Karachi, comprising over 100 people which evaluates each case before clearing it for balloting. If the amount applied for seems higher than the actual amount required to start a particular business, the cell reduces the approved amount accordingly.
The successful applicants, he says, are given one-year grace period so that they are not burdened to pay loan installments right after the approval of their loans. Besides, the bank has waived the condition of providing post-dated cheques at the time of submission of application. "Now, only the applicants who are declared successful in balloting are asked to provide these cheques," he concludes.
The question remains as to how women stand to benefit from this scheme? Ume Laila Azhar, Executive Director, HomeNet Pakistan, tells TNS that a lot of effort is required to make women aware of such schemes and help them come over socio-cultural taboos. "They should be given trainings on how to make best use of loans." She says there are many women workers in the informal sector who can be brought into the mainstream if they establish their formal linkages with the formal sector." This way they will be able to set up businesses with loans offered by the government," she concludes.