Islamabad December 12 2022: Government of Pakistan has approved revisions in the key features of PMKJ-YES with a view to make it more purposeful and beneficial for small businesses and agriculture.
The new components of interest free microloans and agriculture loans have been added in the scheme. Moreover, the scheme has been renamed as Prime Minister’s Youth Business & Agriculture Loan Scheme (PMYB&ALS).
Loans up to 5 lacs will be provided at zero percent personal guarantee of the borrower, 5 lac to 15 lac will be charged at a fixed rate of 5 percent while more than 15 lac to 75 lac will be provided at a fixed rate of 7 percent.
Borrowing against vehicles will also be available but limited to one vehicle but owner of food franchise and distribution business may avail financing for more than one vehicle.
25% of the loans will go to women borrowers
Eligibility Criteria
- All citizens of Pakistan 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 and at least matriculation or equivalent education will be required.
Above age limit condition is applicable on individuals and sole proprietors. In case of all other forms of business including partnerships and companies, only one of the owners, partners or directors must be in the age bracket prescribed above. - Small and Medium Enterprises (startups and existing businesses) owned by youth as per above mentioned age brackets are also eligible.
- In case of agriculture, farmers’ classification as per SBP’s “Indicative Credit Limits & Eligible Items for Agriculture Financing 2020” will be applicable.
Loan size
Size of loan is segregated into 3 tiers, as under:
1) Tier 1 (T1): Upto Rs 0.5 million
2) Tier 2 (T2): Above Rs 0.5 million and upto Rs 1.5 million
3) Tier 3 (T3): Above Rs 1.5 million and upto Rs 7.5 million
Loan type
Term loans/ working capital loans including murabaha and leasing/financing of machinery and locally manufactured vehicles for commercial use.
Only one vehicle per borrower is allowed. A borrower in food franchise and distribution business may avail financing for more than one vehicle.
Upto 65% of total financing limit can be availed for Civil Works.
For agriculture, production and development loans are eligible.
Loan Tenor
T1: Upto 3 years and repayment will be in equal monthly installments. However, in case of crop loan, tenor will be upto 1 year and repayment will be lump sum on or before maturity, tied-up with the crop cycle.
T2 & T3: Upto 8 years for long term/development loans with maximum grace period of upto one year.
For working capital/production loans and murabaha under T2 and T3, tenor will be upto 5 years. Banks will have the option to lend working capital/production loans wherein only markup will be payable during first 2 years and thereafter both principal along with the markup will be paid in next 3 years making it total repayment period of upto 5 years.
Debt: Equity ratio
For New Businesses:
T1 & T2 – 90:10
T3 – 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 loan.
For Existing Businesses: Nil for all tiers.
Bank rate
T1: KIBOR+9% which includes wholesale lenders margin of KIBOR+1% and Microfinance Banks (MFBs)/Microfinance Institutions (MFIs) margin of 8%.
T2 & T3: KIBOR+3%
Six months KIBOR offer will be used for calculation of mark-up subsidy.
End user rate
T1: 0%
T2: 5%
T3: 7%
Security Requirements
Security arrangement will be as under:
T1: Clean (secured only by personal guarantee of the borrower).
In addition, rules & regulations of SECP/SBP shall be complied with by MFBs/MFIs.
T2: Clean (secured only by personal guarantee of the borrower).
T3: As per banks policy.
Vehicle(s) financed under T1, T2 & T3 to serve as collateral.
Risk Mitigation
Government will bear credit losses (principal portion only) on the disbursed portfolio of the banks as under:
T1: Upto 50% which includes 40% for wholesale lenders on pari-passu basis and 10% for MFBs/MFIs on first loss basis
T2: Upto 25% on first loss basis
T3: Upto 10% on first loss basis
Number of loans per borrower
A customer may avail maximum two loans (including one long term and one short term loan) within overall maximum financing limit of Rs 7.5 million.
In case of agriculture, a customer may avail one production loan and one development loan within overall maximum financing limit of Rs 7.5 million.
Sectors and Products
All sectors and products. Moreover, in case of agriculture, all crop and non-crop sectors (including crop production, livestock, poultry, fishery, dairy etc.) are also eligible.
Executing Agency (EA)
All commercial and Islamic banks are advised to come on board.
Banks/DFIs are encouraged to participate as wholesale lenders for providing liquidity to MFBs/MFIs for onward lending under T1.
The loan applications processing and disbursement under T1 will only be made through MFBs/MFIs to be selected by the respective wholesale lenders.
Additional Measures
Executing Agencies should ensure following additional measures:
- Criteria for assessing entrepreneurial potential should be developed and implemented.
- In case of loan for existing businesses, a robust independent verification mechanism may be introduced to ensure proper utilization of loans.
- For new businesses, a robust mechanism for ongoing monitoring of the loans’ utilization should be developed and implemented.
- A comprehensive monitoring and evaluation framework may be developed to measure the impact of the scheme, particularly direct jobs created by the beneficiaries.
- The Prime Minister (Youth Affairs) Office may hire a firm for audit, evaluation and monitoring of the scheme.
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.
For effective monitoring, online application form is prescribed through PM Youth Program (PMYP) Portal. The Form would be both in English and Urdu as provided on the portal. The purpose of the portal is to provide a centralized platform through which applicants would be able to apply directly to the relevant banks. The portal will be hosted and controlled by National Information Technology Board, Ministry of IT and Telecommunication.
Only authorized stakeholders for specific purposes will have an access to the portal e.g. individuals for the purpose of applying for loans; banks for the purpose of receiving applications; SMEDA for providing their hand-holding/guidance support wherever necessary and PM Youth Office for retrieving information for monitoring purpose. Moreover, external audit of the portal from expert IT auditors will be conducted on annual basis to ensure that online portal is used by the concerned stakeholders for intended purpose only and unauthorized use of the online portal, if any, is identified in a timely manner.
The processing time will not exceed 45 days and will be stated clearly in the application form. Non-refundable form processing fee will be Rs. 100/- inclusive of NADRA online CNIC verification fee.
