Youth Loan Scheme for Business and Agriculture – The Ideal Prime Minister’s Youth Program

youth loan scheme

Youth loan scheme under the Prime Minister’s Youth Program Initiative is an excellent initiative by the Federal Govt of Pakistan to provide financing facilities to youth with entrepreneurial potential.  Entrepreneurial potential means the youth should have the skill, courage, and broad prospects to undertake successful business initiatives. The scheme provides the loan in 3 tiers with no markup in tier 1 and nominal markup in tier 2 and 3. The facility is provided through 15 Islamic, Commercial, and Small and Medium Enterprises (SME) Banks. Renowned commercial banks like NBP, HBL, MCB, UBL, ABL, and Meezan Bank are the major stakeholders of the scheme in collaboration with Govt of Pakistan.

The scheme is also renowned as a prime minister youth loan scheme, prime minister youth program, or simply PMYP in the general public. The scheme is the best, easiest, and cheapest youth loan in Pakistan.

Here is a detailed article, specifying the step-by-step process for submitting the PMYP Loan Application.

Prime Minister’s Youth Program – Business and Agriculture Loan Scheme

  • It’s for youth aged 21-45, for IT and e-commerce the lower age limit is 18 years
  • It’s for both New and Existing businesses
  • The loan under this scheme is categorized into 3 Tiers with Tier 1 having Zero Markup/Interest
  • The tenure of the loan is 3 to 8 years with grace periods available in some categories

Before you apply for the Youth Loan Scheme at the official portal of the Prime Minister Youth Loan, you must go through the following terms and conditions of the PM Youth Loan Scheme.

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Terms & Conditions of the Youth Loan Scheme as per SBP Criteria

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Identity

  • All citizens holding Computerized National Identity Card (CNIC) are eligible under the scheme

Age Limit

  • The Age limit is 21 to 45 Years while for Information Technology and Electronic Commerce, the lower age limit is 18 years
  • The age limit is defined for Individuals and Sole Proprietors. For companies and associations one of the directors/partners or owner should lie in the said age bracket
  • Startups and existing businesses falling under the SME (Small and Medium Enterprises) category owned by youth should also match the age bracket criteria

Agriculture Finance

  • For Agriculture financing under the scheme, the Eligible Items and Indicative Limits as defined by the State of Pakistan under Agriculture Financing 2020 must be complied

Types of Loans

  • The scheme provides financing facilities schemes for Working Capital Requirements and Long Term Financing facilities. The borrower can avail the Islamic Murabaha, and Long Term Financing like Leasing facility for vehicles for commercial use that are locally assembled
  • A borrower can avail only one vehicle under this facility. Though a borrower engaged in Food Franchise or Distribution business may avail more than one vehicle
  • The scheme provides loan for Agriculture, Development, and Production Loans where not more the 65% of the loan limit can be availed for civil works of the project.

Loan Tiers and Limits

The loan scheme is distributed in 3 tiers as follows:

Loan TiersLoan Limits
Tier – 1 0.5 Million
Tier – 2Above 0.5 to 1.5 Million
Tier – 3Above 1.5 to 7.5 Million

Markup/Interest/Profit on the Loan

The mark/interest/profit of the loan tiers as mentioned as follows:

Loan TiersMarkup/Interest/Profit
Tier – 1 Markup Free (Zero Markup)
Tier – 25% Per Annum
Tier – 37% Per Annum

Loan Tenure

The Tenure of the Loan Tiers is as follows:

Loan TiersMaximum TenureRepayments
Tier – 1 For 3 years, for Agriculture Finance for Crops, It’s 1 YearEqual Monthly Installments For Crops, a lump sum amount to be paid on or before crop harvesting.
Tier – 28 Years (With a Grace Period of Up to 1 Year)Repayments of the loan after the grace period
Tier – 38 Years (With a Grace Period of Up to 1 Year)Repayments of the loan after the grace period
Tier – 2 & Tier – 3 Murabaha, Working Capital & Production Loans5 YearsBank may opt for recovery of markup/interest/profit in first 2 years, and principal and profit in next 3 years with total term to loan be completed in 5 years.

Debt Equity Ratio for the Borrowers

The Debt Equity Ratio of the loan under the scheme is as follows:

Loan TiersBusiness TypeDebt Equity Ratio
Tier – 1 New Businesses90:10
Tier – 2New Businesses80:20
Tier – 3New Businesses80:20

Loan TiersBusiness TypeDebt Equity Ratio
Tier – 1 Existing BusinessesNil
Tier – 2Existing BusinessesNil
Tier – 3Existing BusinessesNil

The equity contribution of the borrower will be required after the approval of the facility and will be in the shape of Cash or Immovable Property.

Security & Collateral of the Loan

The Security & Collateral of the loan tiers under the scheme are as mentioned as follows:

Loan TiersSecurity & Collateral
Tier – 1 Clean loan, no security or collateral is required, just the Personal Guarantee of the borrower is required
Tier – 2Clean loan, no security or collateral is required, just the Personal Guarantee of the borrower is required
Tier – 3Banks are required to take security as per their credit policy

The vehicle(s) financed under any of the tiers will serve as the security of the loan.

Other Rules & Regulations

The banks are required to follow the rules and regulations as prescribed by the State Bank of Pakistan (SBP) and the Securities & Exchange Commission of Pakistan (SECP).

Future Updates – Youth Loan Scheme

Once the scheme is re-launched, you may find the complete details here at online portal to apply online.

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FAQs

It’s the Prime Minister’s Youth Program for Business and Agriculture Loan, where the youth having entrepreneurial potential aged 21-45 can avail a tier-based interest-free and low-interest loan limits to conduct the business of their choice.

The youth in the age bracket of 21-45 with entrepreneurial potential can apply for the loan. For IT and e-commerce businesses, the lower age limit is 18 years.

Tier 1 of the Prime Minister’s Youth Loan Scheme is interest-free and its limit is Rs.500,000 or simply 5 Lakh. For Tier 2 loan limit is 15 Lakh and Tier 3 has a limit of 75 Lakh.

The youth can avail the tier 1 loan under the Prime Minister’s Youth Program for Business and Agriculture Loan Scheme. An amount of Rs. 500,000 (Rupees Five Hundred Thousand) is free of any interest/markup/profit.

In terms of easy repayment, no or least interest payments the Prime Minister’s Youth Program for Business and Agriculture Loan Scheme is the best one. It offers Rs.500,000 as an interest-free loan with repayments in up to 3 years. The tier 2 and tier 3 loans have interest rates of 5% and 7% with repayments up to 8 years.

Conclusion

The Prime Minister’s Youth Program for Business and Agriculture Loan is an excellent initiative by the Federal Govt of Pakistan. The Youth with passionate ambition and entrepreneurial mindset must grab this opportunity to prove themselves as a successful business enterprise. The purpose of the youth loan scheme is to empower the youth to take part in the country’s economic growth and to improve their income level by choosing the right business segment to make a successful story.

The youth must not miss the opportunity, need to plan the right business activity, and opt for concessional youth loan facility to make them a success story.

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