Market players view the Prime Minister’s credit scheme for the youth positively. They feel it can serve as both a means and an end for growth by putting idle resources into the most rewarding economic activity: business.

But they also hope for proper safeguards to ensure efficient dispersal of funds and effective use of precious resources.

“To avoid the repeat of the ‘yellow cab’ scam of 1990s, I expect the government to be more vigilant in curbing corruption and misuse,” Zubair Ahmed Malik, president of the Federation of Pakistan Chamber of Commerce and Industry, said. He appreciates the Nawaz government’s move, as he sees youth unemployment as the ‘mother of many problems’ in the country.

Issues are raised in the media and on the floor of the parliament about access to subsidised credit and loose ends in the scheme that reduce its chances of success.

The downloading of some 3.5 million application forms in the first two weeks since the launch of the scheme on December 6 reflects a warm response from the youth to the initiative. But it is hard to project how many of these farms will be cleared for submission — after being scrutinised by banks — into a computerised draw, to become eligible for a loan.

“The PM’s youth loan-supported businesses will take some time to surface, as the launch of the scheme has already opened up an avenue of business for computer literate people,” a bank manager told Dawn.

“I know people who, taking cue from the reported demand for loans, are self-educating and cultivating links in banks and identifying possible guarantors to sell the complete application package. The charges vary, but from what I have heard, it would be Rs5,000 initially, and an additional Rs10,000 if the applicant succeeds in the draw,” Ahmed Naseem, 21, who is working part-time for a social advertising agency, told this writer.

Detractors fear that the loan scheme may bloat public debt on account of subsidy; weigh heavily on balance sheets of reluctant banks that are forced to handle the exercise; and in the end, benefit anyone but the targeted deserving candidates.

“I am not a huge fan of subsidies. The said scheme can initiate sub-prime lending. The high start-up failure rate, projected to be 85 per cent, would result in toxic public debt. The burden of high default rate will have to be shared by the government and the lending institution. The government has pledged to subsidise seven per cent of the 15 per cent annual interest rate fixed by banks,” a senior executive of a bank commented.

Dr Waqar Masood, federal finance secretary, defended the initiative, which he finds exciting and worthwhile. “Fears are misplaced. There are inbuilt safeguards in the scheme. The loan will be disbursed through banks with zero government interference. They have a stake, so they would prefer to lend only to promising candidates.”

“The government has put in place systems for handholding young aspiring entrepreneurs through guidelines on the website. Some 50 feasibility reports are available on the website for interested youngsters. The government has also directed Smeda to support start-ups,” he said.

“To check the culture of patronage and nepotism, PM Nawaz has claimed the scheme will be totally independent, and even his office will not be able to influence lending decisions. The fact that the scheme has been put under the care of Maryam Nawaz is another matter,” a government opponent mocked.

“I am impressed with the long youthful age Pakistanis enjoy if they are lucky to dodge all kinds of dangers they live in,” he added, referring to the age bracket for the youth scheme, which is 21 to 45 years.

In the opening week of December, PM Nawaz Sharif launched the ‘Youth Business Loan Scheme’ to help young entrepreneurs kick start their private micro enterprises. The Rs100 billion scheme aims to disburse 100,000 loans to budding entrepreneurs at an eight per cent mark-up rate.

Banks will charge about 15 per cent in annual interest — KIBOR +5. Any variation in KIBOR will be reflected in the final lending rate.