ISLAMABAD: The government will push forward in the upcoming budget about Rs20 billion credit guarantee scheme for financial inclusion of the poor farmers and small enterprises through a subsidised loan scheme through the State Bank of Pakistan (SBP) and National Savings.

The scheme is part of the National Financial Inclusion Strategy (NFIS) supported by the World Bank to contribute to financial inclusion and development of market infrastructure. The scheme aims at creating an ecosystem that could increase access and usage of digital payments and financial services by low-income households and SMEs.

The Budget 2019-20 will envisage about Rs5.2bn needed for financial inclusion and infrastructure project (FIIP) based on feedback from both executing agencies for the project — SBP and Central Directorate of National Savings (CDNS). The scheme should have been in place last fiscal year but was delayed due to requirements of the procurement rules and some activities planned for 2018-19.

For example, consultant for payment gateway will be selected and hired in 2019-20 before bidding and procurement of hardware and software for payment gateway in 2020-21. Likewise, the activity of upgraded IT platform for CDNS will now be materialised in 2020-21 after IT consultant is hired in 2019-20.

The FIIP is a fully foreign funded project with zero local components. The World Bank has warned the Ministry of Finance that it will release only funds which are allocated in the public sector development programme (PSDP) budget.

A similar scheme is also being finalised to support small farmers in at least 100 districts across the country. Officials said the scheme to be launched through the central bank would entail training to the beneficiaries including farmers, SMEs, disabled persons and the poor who would be extended credit on fixed 5pc mark up for five years and the borrowers/beneficiaries would have six years grace period to repay their loans.

Under the scheme, the central bank would extend credit to all the banks and financial institutions loans on zero interest for providing Rs500,000 to Rs1.5m loan to the lower income groups – farmers, small businessmen, women and special persons. The state bank of Pakistan will be taking 100pc refinancing risk of the scheme.

The project is aimed to further strengthen SBP’s payment systems through its national payment gateway that have evolved over the years through microfinance banks, telecommunication companies and retail software networks. The key objective is to increase in number of digital transaction accounts to at least 60 million by 2022 with disbursements targeted to 125,000 loans to unique borrowers, micro enterprises and SMEs of which at least 60pc loans should be to female borrowers.

The scheme would also enhance the capacity of the CDNS to offer additional access points for digital transactions through upgrading its core systems and increase electronic payments per capita to at least 2.0 by 2022.

The ministry of finance and the World Bank had signed the loan agreement in January 2018 and the project had already been declared effective by the bank on March 20, 2018.

Published in Dawn, May 9th, 2019