In the last six years (July 2013–June 2018), the federal government financially empowered 26,679 young people by offering each of them a subsidised loan of around Rs1 million.
The nation has come to know this through a periodical update on the Prime Minister’s Youth Bank Loans Scheme (PMYBL) launched in 2013 by then premier Nawaz Sharif.
The update, released recently by the State Bank of Pakistan (SBP), reveals that 13 banks participating in the scheme disbursed Rs26.76 billion in six years. When the scheme was launched, Mr Sharif had promised the nation that Rs100bn-200bn loans would be offered to enterprising youth.
How many of the 26,679 young people who received subsidised loans were women? We don’t know. What we know, thanks to the SBP update, is that 101,938 people applied for youth loans in the past six years — and only 12 per cent of them were women. When the PMYBL was launched, the nation was told that banks would offer 50pc of total loans to female borrowers.
Imparting professional education to young women and then financially empowering them via subsidised loans will promote skill development and entrepreneurship
According to 2017-18 data, which is the latest and is considered grossly under-reported by the way, the number of unemployed Pakistanis comes to 3.79m — around 5.79pc of the total workforce of 65.5m. Seen in this backdrop, the disbursement of subsidised loans to only 26,679 people in six long years means the PMYBL has miserably failed to reduce joblessness. There could be numerous reasons for it, but one of them is a low number of loan applicants — 101,938 in six years.
If the PMYBL was meant to help jobless youth become self-employed, why did the scheme attract such a low number of applicants? Policymakers ought to do some honest soul-searching and find out the deficiencies in the scheme that made it difficult for jobless people to benefit from it. A more important question is why banks (or executing agencies of the PMYBL) failed to ensure that 50pc of the subsidised loans went to women borrowers as envisaged in the original scheme.
The interest rate subsidy under the scheme was pretty good: when the scheme was launched in 2013, banks were allowed to charge one-year Kibor plus 5pc on such loans, but borrowers were to pay just 6pc annual interest. The government was supposed to pay the difference between the actual cost of loans and 6pc subsidised markup charged from borrowers.
At that time, one-year Kibor was over 9pc and, as such, banks executing the scheme were earning a substantial return of 14pc (9pc plus 5pc) on loans offered under the PMYBL. The borrowers were paying 6pc and the remaining 8pc was being paid by the government. If a subsidised loan scheme offers loans at an interest rate half the actual, it should ideally become a hit among jobless people. Why this did not happen has to be probed so that policymakers can learn some practical lessons.
How Kamyab Jawan lending enhances SME growth will be a measure of its success
Perhaps it was the realisation of the shortcomings in the PMYBL that compelled the PTI to launch a new version of it in July under the title of the Prime Minister’s Kamayab Jawan SME Lending Programme. Most features of this scheme are similar to those of the PMYBL. But some changes have been introduced to make the scheme more practical. One noteworthy change is that this scheme aims at distributing 25pc of the total loans to female borrowers — instead of 50pc as envisioned in the original scheme.
In principle, setting a lower target for the loan disbursement for female entrepreneurs is not good. But setting a higher target and missing it by a very wide margin again and again is worse. So if the intention is to ensure meeting a lower target before increasing it gradually, this is quite a pragmatic approach.
Under the Kamyab Jawan scheme, the size of the loan has been bifurcated into tier-1 and tier-2. Under tier-1, applicants can avail subsidised loans of Rs100,000 to Rs500,000 at a fixed markup of 6pc. Under tier-2, they can avail loans of Rs0.5m to Rs5m at 8pc. One hopes that this and other changes made in the original PMYBL will make the Kamyab Jawan scheme a launching pad for the financial empowerment of jobless men and women endowed with entrepreneurial spirit. The new scheme has been launched keeping in view the requirements of our SME sector. How Kamyab Jawan lending enhances SME growth will be a measure of its success.
The federal government’s decision to award 50,000 scholarships to undergraduate students every year for the next four years is a welcome move. If implemented honestly, it can also raise a better breed of youth loan seekers well-equipped with professional education. But the government will have to ensure that 50pc of the scholarships really go to girl students as announced by Imran Khan.
Imparting professional education to young women and then financially empowering them via youth loans can ideally help us in broadening the base of professional education, skill development and entrepreneurship, particularly in poverty-stricken rural areas. But to make that happen, the government needs to focus on their core purpose and ensure that they don’t become just a vehicle for gaining political mileage.
Published in Dawn, The Business and Finance Weekly, November 12th, 2019