Wholesale lenders, executing agents: SBP unveils mechanism for KPP markup and credit loss subsidies

KARACHI: The State Bank of Pakistan (SBP) Monday announced the mechanism for payment of markup subsidy and credit loss subsidy to commercial banks working as Wholesale Lenders (WLs) and Microfinance Providers/Housing Finance Companies working as Executing Agents (EAs) under the Kamyab Pakistan Program (KPP). The government of Pakistan (GOP) has launched Kamyab Pakistan Program (KPP) to provide subsidized micro loans to small businesses, agriculture sector and housing sector. The KPP has three components related to financing, ie, Kamyab Karobar, Kamyab Kissan and Naya Pakistan Low Cost Housing (NPLCH).

As per financing procedure, commercial banks/DFIs (WLs) will provide liquidity to Executing Agents (EAs), ie, Microfinance Providers (MFPs) and Housing Finance Companies (HFCs) for onward lending to borrowers. Microfinance providers include Microfinance Banks (MFBs), Microfinance Institutions (MFIs) and Rural Support Programs (RSPs).

The SBP Monday asked the WLs to submit their own claims and also the claims of their respective EAs to the Program Management Unit (PMU) of the Finance Division, Government of Pakistan within 15 working days after the end of the respective quarter. PMU will recommend the claims of WLs/EAs for payment to Development Finance Support Department, SBP BSC, Karachi.

As per procedure for availing GOP subsidy, EAs will evaluate loan applications of borrowers as per parameters of KPP approved by the Federal Cabinet and circulated by SBP to all banks/MFBs/DFIs. The loan facility for a borrower will be sanctioned and disbursed by the EAs after completion of documentation formalities. These loans will be entitled for mark-up subsidy and credit loss subsidy.

Kamyab Pakistan Programme: Bids invited from banks to act as wholesale lenders

The Finance Division, Government of Pakistan will provide Direct Debit Authority to SBP to the extent of budgetary allocation to ensure timely and seamless payment of mark-up subsidy and credit loss subsidy claims to WLs and EAs.

Payment of mark-up subsidy to WLs will be made on quarterly basis through SBP. Government will pay the difference of “customer rate” and “bank rate” as mark-up Subsidy. Bank rate will be determined through a competitive bidding process by ensuring transparency and compliance of Public Procurement Regulatory Authority (PPRA) Framework in letter and spirit.

The EAs will be required to prepare and submit their subsidy claims (as the difference of EAs operational cost rate agreed with WLs and customer rate) to WLs, which will also prepare their own mark-up subsidy claims.

The audited claims of EAs/WLs along with a certificate from external auditor relating to accuracy of markup subsidy calculations will be submitted through WLs to PMU within 15 working days after the end of the respective quarter for payment of mark-up subsidy claims. The SBP BSC Karachi Office will make disbursement of subsidy within two working days from the date of receipt of advice for the same. WLs shall retain their own mark-up subsidy amount and shall credit the remaining amount of subsidy in the accounts of claimant EAs on the same day.

According to mechanism for payment of credit loss subsidy, the EAs/WLs will submit their credit loss claims on the standard formats and Prudential Regulations (PR) of SBP pertaining to Microfinance Banks to determine the default, ie, Regulations related to classification of loans in the “Loss” category would be the benchmark for this purpose and presently it is 180 days.

The EAs will prepare and submit their credit loss claims to WLs. WLs will also prepare their own credit loss claims, if any and will arrange audits of the External Audit Firms for onward submission of both claims (EAs & WLs) to PMU for receiving credit loss subsidy on outstanding principal amount.

Copyright Business Recorder, 2022