Govt Launches Markup Subsidy and Risk-Sharing Financing Scheme for Farmers

In order to enhance agriculture productivity and food security in the country, the Government of Pakistan (GoP) has introduced a markup subsidy and risk-sharing scheme for farm mechanization under the PM’s Kissan Package- 2022. Under this scheme, the cost of markup subsidy and risk sharing will be borne by the government of Pakistan. Ministry of National Food Security & Research (MNFSR) in collaboration with other stakeholders and banks to develop an online portal for farmers to apply for financing under this scheme. All banks will be given access to the aforementioned portal for picking up clients from the available pool. The loans will be provided on a first come first serve basis. Banks promote the scheme through print and digital media. The validity of Scheme Scheme will be valid for 1 Year i.e. from the date of issuance of the Maximum Loan Size of Rs. 30 million. Loan Tenor Up to 7 years inclusive of a 01-year grace period, however, the bank may decide the actual tenor based on the useful life of machinery/equipment. The scheme will apply to all farmers, processors, and corporates engaged in agriculture crop production. They can purchase new/used farm machinery including: The end-user markup rate stands at 7 percent per annum. Bank pricing includes KIBOR (6-month offer) + 3 percent p.a. The government will pay the difference of the cost i.e. (KIBOR+3 percent) – 7 percent p.a. The government will bear a 25 percent first loss on the disbursed portfolio (principal portion only) for eligible borrowers as per Prudential Regulations for Agriculture Financing. Participatory banks including all commercial banks including Islamic banks mode of loan and disbursement. The payment against the purchase of farm machinery/equipment will be directly made in the name of the supplier/vendor/owner. Banks are advised to ensure successful implementation of the Scheme through the dissemination of necessary instructions to branches and capacity building of field staff, development/alignment of financing products and marketing campaigns, etc.