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KARACHI: Following the directives of the federal government, the State Bank of Pakistan has announced reduction in the markup rate of Prime Minister's Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES) by 3 percent. According to the SBP, the federal government has approved revision in key features of Prime Minister's Kamyab Jawan Youth Entrepreneurship Scheme and as per revised features of the scheme, loan limit has also been enhanced from Rs 5 million to Rs 25 million.

Initially, the loan was segregated into two tiers, which now has been converted into three tiers. First tier of loan limit has been fixed from Rs 100,000 to Rs. 1 million. Previously, it was Rs 100,000 to Rs 0.5 million. Under the second tier, now entrepreneurs can get loans above Rs 1 million and up to Rs 10 million.

Under the third tier, loans from Rs 10 million up to Rs 25 million will be provided. Previously, the maximum limit of loan was Rs 5 million.

In addition, end user markup rate (consumer pricing) will be 3, 4 and 5 percent for Tire 1, Tier 2 and Tier 3, respectively. Banking rate will be KIBOR+400 for all tiers. Previously, end user rate was 6 percent and 8 percent for tier one and tier two, respectively.

According to the SBP, all men/women 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.

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. For IT/E-Commerce related businesses, at least matriculation or equivalent education will be required.

It will be long-term loan for machinery and equipment/working capital loan/running finance, and leasing of business on wheels on 2/3/4 wheels locally manufactured vehicles for up to 8 years with maximum grace period of up to one year.

The scheme will focus on women entrepreneurs and some 25 percent of the loans will go to women borrowers.

Under the security arrangements for Tier one loans only personal guarantee of the borrower will be required, while for Tier two & Tier three loans will be disbursed as per the bank's own credit policy.

The government will bear credit losses (principal portion only) on the disbursed portfolio of banks. Some 50 percent credit losses will be borne by federal government under Tier one loans, 20 percent for Tier two and up to 10 percent for Tier three loans.

The Finance Division shall allocate funds in each fiscal year's budget as per the estimates provided by the SBP. Payment will be made on submission of consolidated claims of all banks by the SBP on quarterly basis.

The form would be both in English and Urdu and requires minimum essential information with simple format available on government provided KamyabJawan portal.

As per the procedure, the processing time will not exceed 30 days and will be stated clearly in the application form. Non-refundable form processing fee will be Rs100 inclusive of Nadra online CNIC verification fee.

The SBP will publish consolidated information about the loans extended under this program for information of the public on quarterly basis on its website.

In case of Balochistan, at least one branch of NBP will be designated per division. All non-designated NBP branches will also provide and receive filled application forms and dispatch them to the nearest branches.

Executing Agencies (EAs) under this program should ensure that 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.

Further, for new businesses, a robust mechanism for ongoing monitoring of the loans' utilization should be developed and implemented. All loans previously disbursed or approved under this scheme will be converted into the new parameters with effect from July 01, 2020

The SBP has advised the banks to gear up their systems for successful implementation of this scheme and to avoid any misuse of the scheme.

Copyright Business Recorder, 2020