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Monday, April 15, 2024

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Bank of Punjab offers interest-free financing to SME and agricultural sector

Bank of Punjab has signed agreements with Akhuwat Islamic Microfinance and National Rural Support Programme (NRSP) to provide interest-free financing for small business owners and the agricultural sector.

According to the bank, with the signing of the agreements, it has become the first bank to offer Shariah compliant financing for the sectors under the newly expanded Prime Minister Youth Business & Agriculture Loan Scheme (PMYB&ALS).

“We will use this scheme to reach out to small businesses and farmers for their economic and social upliftment,” Dr Rashid Bajwa, CEO of the NRSP, said in a statement.

According to Dr Karman Shams, CEO of Akhuwat Islamic Microfinance, the PMYB&ALS financing model is ideal for uplifting marginalized segments of society.

The PMYB&ALS is an expansion of the Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES) introduced in 2019 which includes the agricultural sector in addition to SMEs under the existing program. The program was expanded and renamed on the 12th December 2022.

“[The] government of Pakistan has approved revisions in the key features of PMKJ-YES with a view to make it more purposeful and beneficial for small businesses and agriculture. The new components of interest-free microloans and agriculture loans have been added in the scheme,” an official statement from the State Bank of Pakistan read.

The PMYB&ALS avails funding of up to PKR7.5 million (US$27,968.5) to all sectors to Pakistani citizens between the age of 21 and 45, with the funding applicable to all sectors. The scheme also has a mandate for 25% of the loans to be offered to female borrowers.

Under the program, the Pakistani government shall provide markup and credit loss subsidies in the range of PKR100,000 (US$372.91) to PKR5 million (US$18,645.7) disbursed by participating banks under the program.

Akhuwat Islamic Microfinance, established in 2001, offers interest-free microfinance loans to underprivileged communities while the NRSP, established in 1991, is Pakistan’s largest rural support program in terms of outreach and development activities.

According to Dr Rashid, the NRSP has a track record of delivering financial inclusion projects with the Bank of Punjab. Notably, the bank disclosed on the 29th December 2021 that its board has taken an in-principle decision to explore the possibility of acquiring a stake in the NRSP’s subsidiary, NRSP Microfinance Bank, and has entered into an MoU with the NRSP to enter into discussions regarding the potential acquisition.

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