Rs10b diverted from small loans to business, agriculture loans

Finance Division presented request to ECC seeking TSG surrendered by MoIP

ISLAMABAD:

In a significant move, the Ministry of Industries and Production (MoIP) has declined to execute the Prime Minister’s Youth Programme for Small Loans (PMYPSL), opting instead to channel a massive budget of Rs10 billion towards the Prime Minister’s Youth Business & Agriculture Loan Scheme (PMYB&ALS).

The decision was reached during a recent meeting of the Economic Coordination Committee (ECC) where approval was granted. The Finance Division presented the proposal for the new initiative, the Prime Minister’s Youth Programme for Small Loans, designed to provide small loans to priority sectors, including cutlery/crockery, agro-processing, agri-implements, cold chain development, gemstones, seafood, meat processing, information technology, and mining.

Initially, the implementation of this initiative was assigned to the Ministry of Industries and Production with a budget allocation of Rs10 billion for the current financial year to cover mark-up subsidy and risk coverage. The MoIP, along with SMEDA (Small and Medium Enterprises Development Authority), developed a PC-I for the initiative, which was subsequently taken to Central Development Working Party (CDWP)/ Executive Committee of National Economic Council (ECNEC) for review.

However, during the CDWP meeting held on June 26, 2023, it was evident that the Ministry of Industries and Production was not prepared to defend the project. Discussions with the Finance Division and the Prime Minister’s Office (PMO) led to a decision to shift the financing mode from development to recurring, ultimately leading to the project’s execution by the Finance Division.

This stance was further endorsed in a review meeting of PMYPSL chaired by the adviser to the prime minister on establishment. Consequently, the Ministry of Industries and Production relinquished the allocated funds of Rs10 billion meant for the unapproved project PMYPSL in favour of PMYB&ALS.

The Planning Division supported this change in financing mode and requested the Finance Division to obtain the Technical Supplementary Grant (TSG) of the surrendered amount from PMYPSL in favour of PMYB&ALS under the non-development budget.

In response, the Finance Division presented a request to the ECC seeking approval for the provision of the Technical Supplementary Grant amounting to Rs10 billion surrendered by the MoIP. The ECC, after thorough consideration, approved the proposal to utilise the funds under the already operational Prime Minister’s Youth Scheme.

Earlier in June 2023, Special Assistant to the Prime Minister (SAPM) on Youth Affairs Shaza Fatima Khawaja said that loans worth Rs22 billion had been availed in the six months since the rollout of Prime Minister Youth Business & Agriculture Loan scheme.

According to the SAPM, as part of the revived initiative, inaugurated in January, youth, transgender and special persons aged between 21-45 years will be able to apply for loans of up to Rs7.5 million from 15 designated commercial, Islamic and SME banks to set up their own businesses.

A quarter of the amount, or 25%, has been set aside as quota for women applicants, stated Khawaja.

According to the website of one of the banks, the loans are divided into three tiers. It identifies tier 2 to be loans between Rs500,000 and Rs1.5 million. The mark up for this loan is 5%.

Tier 3 loans are from Rs1.5 million to Rs7.5 million, and will be charged 7% interest. Pakistan’s key interest rate currently stands at a record 22%.

The debt-to-equity ratio for tier 2 is 90:10 while for tier 3 it is 80:20. The website adds that people older than the designated limited can also avail the loan if one of the partners, who has to be the applicant, falls within the designated age.

“Through youth and agriculture loan program, the government aims to reduce unemployment by providing financial assistance and guidance to talented Pakistanis,” she said. She said the agriculture-based loan would help youth benefit from innovation and the latest technology used in the sector to bring it at par with international standards.

Published in The Express Tribune, August 3^rd, 2023.

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