Wholesale Lenders, Administrators: SBP Unveils KPP Markup and Loss of Credit Subsidy Mechanism
KARACHI: The State Bank of Pakistan (SBP) on Monday announced the payment mechanism of the add-on grant and credit loss grant to commercial banks working as wholesale lenders (WLs) and microfinance providers/ housing finance companies working as Implementing Agents (EAs) under the Pakistani Kamyab Program (KPP). The Government of Pakistan (GOP) has launched the Kamyab Pakistan (KPP) program to provide subsidized micro-loans to small businesses, agricultural sector and housing sector. The KPP has three funding-related components, namely Kamyab Karobar, Kamyab Kissan and Naya Pakistan Low Cost Housing (NPLCH).
As per the funding procedure, Commercial Banks/DFIs (WLs) will provide liquidity to Executing Agents (EAs), i.e. Microfinance Providers (MFPs) and Housing Finance Companies (HFCs). ) for subsequent lending to borrowers. Microfinance providers include Microfinance Banks (MFBs), Microfinance Institutions (MFIs), and Rural Support Programs (RSPs).
The SBP on Monday instructed the WLs to submit their own claims as well as the claims of their respective AEs to the Program Management Unit (PMU) of the Finance Division of the Government of Pakistan within 15 working days of the end of the quarter. respective. The PMU will recommend WL/EA claims for payment to the Development Finance Support Department, SBP BSC, Karachi.
In accordance with the GOP Grant Utilization Procedure, EAs will assess borrowers’ loan applications against KPP parameters approved by the Federal Cabinet and disseminated by SBP to all Banks/MFBs/DFIs. The loan facility for a borrower will be sanctioned and disbursed by the AEs after completion of the documentation formalities. These loans will qualify for an uplift grant and a credit loss grant.
Kamyab Pakistan Scheme: Bank Tenders to Act as Wholesale Lenders
The Finance Division of the Government of Pakistan will provide Direct Debit Authorization to SBP to the extent of budget allocation to ensure prompt and transparent payment of Markup Grant and Credit Loss Grant applications to WLs and Credit Loss Grants. EA.
Payment of the incremental grant to WLs will be made on a quarterly basis through the SBP. The government will pay the difference between the “customer rate” and the “bank rate” as a premium subsidy. The discount rate will be determined through a competitive bidding process ensuring transparency and compliance with the Public Procurement Regulatory Authority (PPRA) framework in letter and spirit.
EAs will be required to prepare and submit their grant applications (such as the difference between the EA operating cost rate agreed with the WLs and the client rate) to the WLs, who will also prepare their own mark-up grant applications.
Audited claims from EAs/WLs together with a certificate from the external auditor on the accuracy of the incremental grant calculations will be submitted via WLs to the PMU within 15 working days of the end of the respective quarter for payment of supplemental grant applications. The SBP BSC office in Karachi will effect the disbursement of the grant within two working days from the date of receipt of the relevant notification. WLs will retain their own increased grant amount and credit the remaining grant amount to applicant EAs’ accounts on the same day.
According to the Credit Loss Grant Payment Mechanism, EAs/WLs will submit their credit loss claims on the standard formats and Prudential Regulations (PR) of SBPs relating to Microfinance Banks to determine default, that is ie the regulations relating to the classification of loans in the category “Loss” would be the reference for this purpose and currently it is 180 days.
EAs will prepare and submit their credit loss claims to WLs. WLs will also prepare their own credit loss claims, if applicable, and arrange for audits of external auditing firms for subsequent submission of both claims (EA and WL) to the PMU to receive a credit loss grant on the outstanding principal amount.
Copyright Business Recorder, 2022