Interest-free credit flow remains slow
The Ministry of Finance and banks reviewed the possibility of relaxing certain conditions aimed at giving the sluggish programme a push. photo: file
Loan disbursements under the Kamyab Pakistan Programme remained quite low at Rs466 million, or 2.3% of the revised two-month target, affirming apprehensions about slim chances of success due to various reasons.
During November-December 2021, out of three, two commercial banks through two partner microfinance institutions disbursed Rs466 million to less than 3,000 clients, according to sources in the Ministry of Finance.
Finance Minister Shaukat Tarin on Thursday reviewed the disbursement of loans in a meeting with partner banks and microfinance institutions.
The maximum amount, of Rs388 million, was disbursed by Habib Bank Limited through Akhuwat – a microfinance institution – to over 2,500 people.
Disbursements by the Bank of Punjab through the National Rural Support Programme (NRSP) stood at Rs78 million, which was given to about 434 clients, according to the sources.
Tarin met with the stakeholders to remove the bottlenecks and it was decided to make some changes in the programme design subject to the approval of federal cabinet, a participant of the meeting told The Express Tribune.
In October last year, Prime Minister Imran Khan launched the Kamyab Pakistan Programme to disburse interest-free loans to help people start their business, buy agricultural inputs and build homes.
Although Tarin has been repeatedly saying that Rs1.4 trillion worth of loans will be disbursed to millions of beneficiaries in three years, the government’s internal documents show that the actual programme size is Rs228 billion and it plans to disburse this amount to 738,000 people.
The programme is the brainchild of Tarin and is aimed at lifting people out of poverty and low-income cycles by providing them interest-free loans of up to Rs500,000 for doing business and procuring inputs and machinery.
Under an agreement with the International Monetary Fund (IMF), the government has fixed the maximum loan disbursement at Rs10 billion a month, far lower than the Rs43 billion initially considered.
Against the revised target of Rs20 billion for the first two months, the government disbursed Rs466 million, according to the sources.
Tarin said on Wednesday that a total of Rs1 billion was disbursed by banks under the Kamyab Pakistan Programme by the end of last month, expecting the pace to pick up in coming months.
HBL, through Akhuwat, reached out to 2,524 clients. It disbursed 2,247 loans amounting to Rs324 million to help people start their business. Another Rs16 million was given to 162 farmers while disbursements under the housing component by HBL stood at Rs48 million with 115 beneficiaries.
The Bank of Punjab through its partner NRSP disbursed Rs78 million to 434 beneficiaries. Out of this, Rs58 million was given to 206 beneficiaries for starting a business. Moreover, nearly 228 farmers received Rs20 million through NRSP.
The Kamyab Pakistan Programme is a new product that requires the re-strategising of microfinance portfolio, said a senior executive of a partner institute. He hoped that the disbursement would pick up soon once it was open for all districts of the country.
Read Govt disburses interest-free loans under Kamyab Pakistan Programme
The senior executive said that the agricultural portfolio was confined to six-month maturity while a majority of farmers were involved in cultivation of sugarcane in south Punjab.
He said that housing was now a product that required a policy review that had been done. “That too will take off now.”
The Ministry of Finance and banks reviewed the possibility of relaxing certain conditions aimed at giving the sluggish programme a push.
The partner institutions sought relaxation in the grace period to disburse money. In order to stop the misuse of funds, the government has placed a condition that loan should be disbursed on the same day the money is given.
However, the banks have demanded at least seven-day grace period without any financial cost. If the government accepts this condition, it will allow the partner institutions to keep funds in banks and earn interest on them, said an official of the Ministry of Finance.
The microfinance institutions have also demanded upfront release of funds by the banks.
They have requested that at least 50% should be released within seven days of the submission of quarterly claim by them to the banks and the remaining 50% can be released within 30 days for the smooth running of operations.
In case of delay, the microfinance institutions cannot continue operations, resulting in the risk of default, according to the two firms.
They also demanded that instead of limiting the programme to a few districts, it should be launched all across Pakistan. Also, the microfinance institutions should be allowed to collect 2% from the borrowers under the Kamyab Pakistan Programme housing scheme.
According to the plan approved by the cabinet, a major chunk – Rs152 billion, or 67% of total loans – will go to 152,100 people to enable them to buy low-cost housing units during fiscal years 2021-22 and 2022-23 – the last two years of the Pakistan Tehreek-e-Insaf (PTI) government.
Under the scheme, the government will disburse Rs52.3 billion, or 23% of the loans, among 348,480 beneficiaries in the remaining two years. Loans of up to Rs500,000 will be given.
Published in The Express Tribune, January 28th, 2022.
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