PM Youth Loan Scheme reintroduce with updated features, interest-free.
The Prime Minister’s Youth Loan, Business & Agriculture Scheme (PMYLB&AS), a redesigned program, allows qualified borrowers to obtain loans up to Rs 0.5 million at no interest. The Kamyab Jawan Youngsters Entrepreneur Scheme of the Prime Minister was first introduced in July 2019 to give jobless youth possibilities for self-employment.
The plan was, however, placed on hold in June of this year, and the State Bank urged the participating institutions to stop making new payments as of July 1, 2022. The State Bank of Pakistan reports that the Pakistani government has now authorized changes to the essential components of PMKJ-YES in order to make it more useful and advantageous for farmers and small companies.
The program now includes the addition of interest-free microloans and loans for agriculture. Prime Minister’s Youth Business & Agriculture Loan Scheme (PMYB&ALS) is the new name for the program, and it focuses on lending to women borrowers, with around 25% of loans going to them.
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All Pakistani residents with valid CNICs who have the capacity to start their own business and who are between the ages of 21 and 45 are eligible, according to the reproduction of the major elements of PMYB&ALS approved by the government of Pakistan.
However, the minimum age requirement for IT/E-Commerce-related firms will be 18 years old, and matriculation or an equivalent degree will be needed. Individuals and single owners are subject to the age restriction condition.
Only one owner, partner, or director must fall within the aforementioned age range for all other company structures, including partnerships and corporations. Young people who own small and medium-sized enterprises (both new and established companies) are also eligible.
Farmers will be classified according to SBP’s “Indicative Credit Limits & Eligible Items for Agriculture Financing 2020” in the case of agriculture. Three tiers of loan sizes are established. Up to Rs 0.5 million would be made available under the Tier 1 (T1) loan at a zero percent end-user rate.
Financing will be offered at an end-user rate of 5% under Tier 2 (T2) for amounts over Rs 0.5 million and up to Rs 1.5 million and at a rate of 7% under Tier 3 (T3) for amounts over Rs 1.5 million and up to Rs 7.5 million.
Term loans, working capital loans, including Murabaha, as well as leasing and financing options for machinery and locally produced cars used for business purposes. Per the borrower, just one car is permitted. A borrower in the food distribution and franchising company is eligible to receive finance for more than one vehicle.
For civil works, up to 65% of the overall finance ceiling may be used. Loans for production and growth in agriculture are available. The maximum loan term under the T1 is three years, with repayment divided into equal monthly payments.
However, the term of a crop loan may be up to one year, and repayment will be made in one lump amount on or before maturity, in accordance with the growing season. Loan terms under T2 and T3, however: Long-term loans for development can have terms of up to 8 years with a maximum grace period of one year.
Tenor will be up to 5 years for working capital/production loans and Murabaha under T2 and T3. Banks will be able to offer working capital/production loans with a maximum payback duration of five years. During the first two years, only the markup will be due; in the next three years, both the principal and the markup will be due.
According to updated features, the debt-to-equity ratio for new businesses under T1 and T2 will be 90:10, and under T3, it will be 80:20. The bank rate for T1 will be Kibor+9%, which includes a margin of 1% for wholesale lenders and 8% for Microfinance Banks (MFBs)/Microfinance Institutions (MFIs).
While the markup subsidy for T2 and T3 will be calculated using a six-month Kibor offer and Kibor +3%. According to the plan, the government will be responsible for credit losses (just the principal amount) on the banks’ disbursed portfolio and under the T1.
Up to 50%, of which up to 25% on first loss basis in T2 and up to 10% on first loss basis in T3 (40 percent for wholesale lenders on a pari-passu basis and up to 10% for MFBs/MFIs on first loss basis).
Within a total maximum financing limit of Rs 7.5 million, a client may only obtain a maximum of two loans (including one long-term loan and one short-term loan). In the case of agriculture, a client may obtain one production loan and one development credit up to a total of Rs 7.5 million in finance.
All crop and non-crop industries (such as crop production, livestock, poultry, fishing, dairy, etc.) are also eligible in the case of agriculture. It has been suggested that all commercial and Islamic banks join as an Executing Agency (EA).
The SBP will encourage banks and DFIs to join as wholesale lenders in order to supply MFBs and MFIs with money for further T1 lending. Only the MFBs/MFIs chosen by will process and distribute loan applications submitted under T1.
Only MFBs/MFIs chosen by the respective wholesale lenders shall handle loan applications and release funds under T1. According to the estimates supplied by SBP, the Finance Division shall allocate money in each fiscal year’s budget, and payment shall be made upon quarterly submission by SBP of the consolidated claims of all banks.
Through the PM Youth Program (PMYP) site, an online application form is required for efficient monitoring. The form will be available on the web in both English and Urdu. The portal’s function is to offer a consolidated platform via which candidates may submit applications directly to the appropriate institutions.
The National Information Technology Board, Ministry of IT and Telecommunication, will host and manage the portal. Only parties that have been given permission to use the site for a specific purpose—such as individuals applying for loans, banks accepting applications, SMEDA offering assistance and advice when needed, and the PM Youth Office accessing data for monitoring—will be able to use it.
Additionally, a yearly external audit of the portal by qualified IT auditors will be carried out to make sure that it is only used by the relevant stakeholders for the intended purposes and that any instances of unauthorized usage are promptly discovered.
