The government on Friday announced plans to hire banks for rolling out the Kamyab Pakistan Programme (KPP) through competitive process, as it is set to reduce program size by three-fourth to just Rs10 billion a month and also placed an upper limit for sovereign guarantees.
“After extensive discussion, it was decided that a robust bidding process will be undertaken for selection of wholesale lenders (banks) who in turn will exclusively engage with executing agencies - microfinance providers,” according to a statement issued by the Ministry of Finance.
It said that Finance Minister Shaukat Tarin presided over the joint meeting of the Steering Committee and Advisory Board of Kamyab Pakistan Programme and took these decisions.
During the meeting, the program design was reviewed and contours of KPP were finalised in consultation with all relevant stakeholders.
The ministry also announced to cut the size of sovereign guarantees against the losses being faced by the banks to 50% from its earlier plan of 100%, confirming The Express Tribune report on September 2.
“The government will extend guarantees to wholesale banks up to 50% on a risk sharing basis,” said the finance ministry.
There will be a quarterly performance review of wholesale lenders with reference to disbursement of funds, it added. “This will ensure transparency and due diligence in evaluating performance of wholesale lenders with reference to disbursement of funds,” said the ministry.
A brainchild of Finance Minister Shaukat Tarin to financially empower the lowest income groups, the government had initially planned to give interest-free-to-subsidised loans to entrepreneurs, businessmen and farmers at 0% mark-up without collateral.
Initially, the finance minister wanted to disburse Rs1.6 trillion or Rs45 billion a month among 30 million beneficiaries over a period of three years. Now, monthly and quarterly ceilings are placed to ensure fiscal discipline and cut possible losses to the exchequer.
Although the finance ministry did not disclose the size of the loan in its handout, sources said that amount could be Rs10 billion a month and maximum Rs30 billion a quarter. They said that the monthly sovereign guarantees limit is capped at Rs5 billion.
The moment the maximum ceiling of loan size and the guarantees is exhausted, the implementation of the programme will be stopped, they added.
“The KPP size is reduced to Rs10 billion a month for initial six months,” said Finance Secretary Yusuf Khan. He said these ceilings will change after six months.
Both the International Monetary Fund (IMF) and the State Bank of Pakistan were against giving 100% guarantees cover to the commercial banks. Sources said that the IMF was not impressed by the explanation given by Zafar Masood - President Bank of Punjab, on the financial viability of the programme. The IMF staff had instead desired that such briefings should be given by the ministry officials.
Masood is convener of the steering committee.
Also read KPP downsizing
The federal cabinet had approved to pick 100% losses and now a fresh summary will be sent for the cabinet approval.
The finance ministry said that a KPP Portal, called Kamyab Pakistan Information System (KPIS), will also be launched. There will be a toll-free number which will integrate KPIS through Telecos via NTC, it added. The portal will be integrated with Ehsaas Data and Nadra for verification of beneficiaries eligibility to facilitate the executing agencies (microfinance providers) for finalising the financing modalities in a most efficient and seamless manner.
In his remarks, the finance minister stated that KPP is a flagship initiative of the government which is designed to transform the lives of the marginalised segments of the society and ensure their financial empowerment.
This is the first programme of its kind in Pakistan’s history wherein the banks are being connected to the lowest income segment through microfinance institutions. Therefore utmost care is being taken before the launch of KPP, the finance minister said.
Published in The Express Tribune, September 18th, 2021.
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