PM to mobilise young entrepreneurs for economic growth

In a way the national bankers described as ‘very unique’, Prime Minister Nawaz Sharif would be rolling tomorrow (Wednesday) the wheels of economic activity in the country through providing the country’s skilled but resource-less youth with growth-oriented small business financing under the Prime Minister’s Youth Business Loan (PMYBL) programme.

Also, the federal government, through the National Bank of Pakistan (NBP), is planning to employ a strategy called “Hand Holding” to avoid possible defaults on the business loans that would be availed in the first phase by some 5,350 successful applicants.

“The overwhelming majority of applicants are seeking funds for agriculture related projects,” said a bank statement issued Monday at a briefing conducted by NBP President and CEO Syed Iqbal Ashraf at the bank’s head office.

The prime minister, he said, would be handing loan cheques the total value of which be around Rs 5.3 billion. The volume of small loans, Ashraf said, would be ranging between Rs 0.1 million to Rs 2 million that would be repaid in a 7-8-year period at the “lowest” and “manageable” mark-up rate of 8 percent. “We feel that this is one of very unique type of initiatives the prime minister has taken to generate economic activity in the country,” said the NBP chief.

An NBP official told Pakistan Today that once disbursed and used properly the first-phase billions would add at least 2 percent growth to the country’s struggling economy. Flanked by other bank executives, Ashraf said the scheme would be regarded as a routine business bank lending with the borrowers to be expected to practically show that he or she was establishing a business and creating jobs.

The NBP so far has received over 60,000 applications to be processed in the second balloting slated for June 4. The NBP president said the bank had approached the microfinance banks asking the latter to pinpoint their clients having reached the required “maturity level” and need further financing to advance their businesses.

“We plan to access such matured borrowers of the microfinance banks after the success of this programme,” he told reporters. The gist of PMYBL was to provide those skilled youth with the capital they need to start their own businesses, added the CEO.

About risks of loan defaults involved, Ashraf said “in-built hurdles” were being kept in mind in the preparation of the scheme. “We are in a risk business. But we believe these borrowers would be the torch bearers for others,” he said. Ashraf said the borrowers would be taught how to make their businesses a success through NBP’s “Hand Holding” plan. Overall, the country’s banks’ non-performing loans (NPLs) or bad debts have grown above Rs 600 billion.

Nosherwan Adil, manager operations, said the PMYBL was a “structured programme” in which bad debts of 5-6 percent may always be acceptable.

“We would be verifying that whether or not the borrower is acquiring the desired business assets. Would seek guarantees and so on,” the banker said adding debt repayment rescheduling also would be an option.

According to NBP statement, the growing labour force in Pakistan, where the 2.2 percent average annual population growth rate stands highest among developing nations, is a challenge in terms of employment opportunities. With participation rates also rising, the labour force is expected to swell by 3.5 percent in coming years.

“High unemployment among the youth is particularly widespread, and only 25 percent of employment is in the formal sector,” the bank said.

With official rate standing at 6.7 percent, the unemployment rate in FY13 stands at 9.1 percent and 4.8 percent, respectively, in rural and urban areas of the country.