The Federal Cabinet has decided to revise the guarantee for Kamyab Pakistan Program (KPP) loans from 100 percent to 50 percent, reported a local newspaper.
The decision to revise the guarantee downwards was taken on the proposal by the State Bank of Pakistan (SBP) Governor, Dr. Reza Baqir.
The guarantee in concern is provided to banks, DFIs, and Pakistan Mortgage Refinance Companies (PMRCs). The Finance Division requested the ECC to approve Kamyab Pakistan Program on July 16, 2021.
During the ensuing discussion, Finance Minister Shaukat Tarin, who is also Chairman ECC, clarified that the program would uplift the low-income groups by providing them small loans through microfinance institutions, primarily in the agriculture sector and for housing.
He also clarified that the target market for these loans would be those identified under the “Ehsaas Program.” The overall debt servicing burden for these loans would be limited up to 33 percent of the borrowers’ total income for the housing loans and up to 50 percent for non-housing loans.
For the agriculture sector, it was suggested to keep the loan limit of Rs. 150,000 per crop.
Governor SBP, Dr. Reza Baqir, suggested that government guarantees for loans may be kept at 50 percent so that sustainability of the credit market can be ensured.
It was also suggested that approval of the SECP be required for allowing direct debit. The ECC agreed to both suggestions.
As a result, an increase of 0.50 percent will be observed in applicable interest for banks.
After a detailed discussion, the ECC approved the summary of the Kamyab Pakistan Program. The Federal Cabinet also ratified the decision of the ECC on July 27, 2021.