Youth loan ceiling raised to Rs25m

A new tier-4 has been introduced that offers loans of over Rs7.5 million and up to Rs25 million at 8% markup for a maximum of eight years. Until now, subsidised loans were capped at Rs7.5 million, leaving successful young businesses with no room to grow.

Tier-4 will support agro-processing, cold chains, mechanised farming, solar energy, manufacturing and exports. "Tier-4 turns today's small business into tomorrow's employer of hundreds," the PMYP chairman remarked. The scheme is open to youth and adults aged 21 to 45 years and to young people aged 18 and above for IT and e-commerce.

New ventures and existing businesses, including farmers, can avail themselves of the scheme and Islamic financing is also available. The PMYP chairman mentioned that the cost had been reduced for the government while same rates would be applied to borrowers.

Banks' margin on tier-3 and tier-4 loans has been cut from Kibor + 3% to Kibor + 2.4%, with no change in the 7-8% rates paid by borrowers. "This saves about Rs0.6 billion on every Rs100 billion disbursed, so more young people can be financed with the same budget," he said.

The government has set a disbursement target of Rs292.5 billion for financial year 2026-27. It plans to extend financing to about 266,700 young Pakistanis, leading to creation of about 835,000 jobs. Funds will be split equally between agriculture and small businesses, and about three in four beneficiaries will receive interest-free tier-1 loans.

Khan revealed that young entrepreneurs had repaid more than 99% of loans, with non-performing loans standing at just 0.74%. "Our young people have repaid more than 99% of what they borrowed. That is not charity; that is credibility," he said.

Since the scheme was reconfigured in January 2023, 581,341 young entrepreneurs have been provided financing of Rs313.9 billion, creating an estimated 1.82 million jobs. "This is 10 times the borrowers in the previous decade, achieved in less than four years," he said.

Annual lending has risen from below 17,000 to about 170,000 young people. The scheme has reached 638,081 borrowers by providing Rs392.4 billion and creating nearly 2 million jobs. Since 2023, 62% of the borrowers have been in agriculture and more than 121,000 are young women, one in every five, who have received Rs36.6 billion.