Govt advised caution in launch of Rs1.6tr initiative


The government is set to launch the largest ever Rs1.6 trillion worth Kamyab Pakistan Programme (KPP) – an initiative to give interest-free and subsidised loans to lowest income groups – amid bureaucracy’s advice to exercise caution and make the programme more transparent.

The government is expected to launch the programme on Monday that appears surprising as neither the Ministry of Finance nor the partner banks have got access to the “backbone” of the programme – the data.

The data is being collected under the National Socio Economic Registry (NSER), sources told The Express Tribune. In fact, the NSER data compilation and validation by Nadra will be done by end September, sources in the Poverty Alleviation and Social Safety Division, which is the custodian of the data, revealed.

If executed successfully and transparently, the programme can help 30 million families to improve their living standards by increasing their earnings.

The finance ministry and other government departments have advised the political leadership to exercise caution and conduct due diligence on the cost, service charges being paid to partner banks and microfinance institutions that will disburse these loans and the beneficiaries, sources said.

The finance ministry has conveyed its observations to the political leadership and urged it to follow them to avoid trouble in the hands of the National Accountability Bureau, sources added.

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The bureaucracy, being afraid of the anti-corruption watchdog, wanted that the initiative should be launched only after thoroughly reviewing its all aspects, as it also involves about Rs260 billion subsidies over a period of three years, sources further said.

Finance Minister Shaukat Tarin has taken multiple meetings after assuming office on Monday, including the one held on Thursday with all the stakeholders.

Even on Thursday, Special Assistant to the Prime Minister on Poverty Alleviation Dr Sania Nishtar stated in the meeting that the finance ministry did not contact her about getting access to NSER database, sources maintained. Dr Sania was not available for comments.

According to sources, the finance minister had inquired from the finance secretary when the ministry contacted the Social Safety Division to get access to the data.

“The Finance Division has been engaged with BISP/Ehsaas to understand the nature and structure of the Ehsaas NSER data for the past couple of weeks or so,” Finance Secretary Yousaf Khan said while responding to queries sent by The Express Tribune.

He stated that since the work on the Kamyab Pakistan Programme began, there had been numerous meetings and discussions in this respect.

“In fact, right from the outset, it was an understanding that NSER data would be the backbone of KPP,” said Khan, adding that the engagement on Thursday was merely on the finer details and arrangements of sharing the data in a safe and secure manner, electronically, with the executing agencies of the KPP.

The NSER survey remained incomplete and Nadra has not yet validated the data of the beneficiaries, sources noted. The NSER will be ready for use by September, they added.

The programme is designed to give loans to 30 million beneficiaries who would be selected on the basis of NSER scores – called Proxy Means Test (PMT).

The targeted PMT score is from 29 (4.5 million beneficiaries) to 40 (30 million beneficiaries) for disbursing Rs1.6 trillion loans in three years.

Sources said that the Poverty Alleviation Division has data of only up to 29 PMT score and the rest of the data will be available by September. However, the political leadership was desperate to launch the programme and was not willing to wait till September.

There were also issues about bringing transparency in selection of partner microfinance banks, commercial banks, guarantees being extended to these partner institutions and the cost being paid to them, according to the sources.

As per the design, the central bank would provide money to the commercial banks and banks then would give it to the microfinance banks.

According to the proposal, the central bank would provide money to the banks at Karachi Interbank Offered Rate (Kibor) plus 0.5% rate and would extend 100% guarantees against the losses. However, the finance ministry objected to giving 100% guarantees.

Sources maintained that the microfinance banks would be paid 8% service charges and would be given guarantees to pick 10% of the losses.

Initially, the idea was to pay 3% service charges since the money was interest-free, as Akhuwat was already taking 5% charges. But surprisingly the rate went up to 8%.

It was said that there was also a proposal to give 10% service charges but the finance secretary put his feet down. The government has also been advised to pick the partner institutes through competitive bidding.

In the first year, the government plans to disburse Rs315 billion that will involve Rs21 billion subsidies.

In the second year, the target is around Rs500 billion loans involving Rs75 billion subsidies and in the third year, which will be the first year of a new government, Rs785 billion will be disbursed involving Rs161 billion subsidies, sources observed.

Prime Minister Imran Khan wants to give micro-loans to entrepreneurs, businessmen and farmers at 0% markup without collateral. The key focus is to provide loans to 4.5 million households at the lowest strata, registered with the NSER.

The programme is part of the PM’s vision of bottom-up approach under which people at the lowest end would be given access to money.

Under Kamyab Kissan component, agricultural loans will be given to farmers with landholding up to 12.5 acres and loan size of Rs150,000 (per crop) for procurement of agricultural inputs. In addition, loans upto Rs200,000 would be given for machinery and equipment.

Under second component of Kamyab Karobar, Rs500,000 loans will be given for small business and start-ups in both rural and urban areas for three years.

Under the third component of Naya Pakistan low-cost Housing loans, up to Rs2 million loans will be given for non Naya-Pakistan Housing and Development Authority and Rs2.7 million for NAPHDA projects for 20 years on up to 5% interest rates.

The loans will be given to families with cumulative average monthly income of less than Rs50,000.