ISLAMABAD: With a master’s degree in agriculture, Awad Shah, 24, has been searching for a job for the last two years.
“During my study at the Arid Agriculture University Rawalpindi, I never expected that I would have to wait for such a long time to get a job,”.
He said after failing to get a job, he tried to start his own business but could not launch it due to lack of resources.
Shah said the initiation of the prime minister’s youth business loan scheme had given him a ray of hope to start his own business.
Since December 2013, only 5,414 youth have obtained the loans across the country
“I was interested in getting a loan to start a fertilizer business but could not meet the terms and conditions of the scheme.”
He said initially he faced difficulty in finding a guarantor but later one of his relatives agreed to stand guarantee for me.
But the bank’s tough conditions forced him to withdraw from the process.According to the requirements, it is the guarantor, not the borrower, who has to enter into an agreement with the bank on a specified format.
“It is illogical to transfer the burden of the loan to the guarantor,” he added.
Zafar Bangash, 27, of Sector G-9 also wanted to start his own business of poultry farm in his native town of Kohat.
“I completed my master’s degree in business administration from Quaid-i-Azam University in 2010 but still remain unemployed.”
He said the agreement should be between the applicant and the bank. It seems the government is going to give loans to the guarantors, not the unemployed youth.
He suggested that the loan should be provided against the applicants’ own or their parents’ property.
The government should review the terms and conditions of the loan if it wants to benefit the youth.
“I have been working in a medical store in Islamabad for seven years and wanted to start my own business but the government announced the business loan with an eight per cent mark-up which is unjustified,” said 35-year-old Raja Murad of Bhara Kahu.
Naeema Iqbal, 26, who lives in Satellite Town in Rawalpindi, said she wanted to open an embroidery and sewing centre in her native district of Gilgit.
“My area is famous for different designs of embroidery on clothes. I wanted to open a centre and engage the local women artisans and provide them better wages.”
She said it was difficult for her to initiate any business without getting an interest-free loan.
“I do not think that I will be able to earn profits from the business after paying the interest on the loan,” she added.
Prime Minister Nawaz Sharif announced the loan scheme on December 7, 2013.
It was decided that citizens aged between 21 and 45 with entrepreneurial potential would be eligible for the scheme with 50 per cent quota reserved for women.
Under the Rs100 billion scheme, 100,000 loans would be given to young entrepreneurs to launch small businesses. The loans will range from Rs100,000 to a maximum of Rs2 million.
The borrower would pay an eight per cent annual interest rate, whereas the lending institutions will charge approximately 15 per cent in annual interest.
The government will subsidise the loans by covering the borrowing cost for the difference between the rates charged by lenders and the eight per cent paid by the borrowers.
Officials in the ministry of finance said around 5,414 youth – 348 from Sindh, 76 from Balochistan, 4,128 from Punjab, 675 from Khyber Pakhtunkhwa, seven from Gilgit-Biltistan, 75 from Azad Kashmir and 105 from the federal capital – had so far obtained loans under the scheme.
The officials said the government was considering excluding the condition of a guarantor but the banks were reluctant to accept it.
Former caretaker finance minister Dr Salman Shah said it was a good initiative of the government but for the applicants it was also not easy to find a guarantor.
But he also said it would be difficult for the banks to provide loans without a guarantor.
He said the government should reduce the rate of interest or provide interest-free loans to the youth.
When contacted, Finance Secretary Dr Waqar Masood Khan acknowledged that the applicants were facing problems in finding guarantors. But it is also difficult for the banks to provide loans without a guarantor, he added.
“Who will return the loans to the banks if the loan seekers did not provide a guarantor,” he asked.
Riphah International University Vice Chancellor Professor Dr Anis Ahmad said the youth were suffering due to the unemployment and extremist groups always tried to get advantage of the situation.
“Under such circumstances, any scheme that engages the youth in productive activities must be welcomed. But there is no concept of Riba or interest in Islam.”
He said the government should introduce interest-free loan schemes for the youth.
When contacted, PPP leader Fawad Chaudhry said the government initiated the loan scheme without proper planning.
“Unsuspecting individuals will end up borrowing huge sums for projects they will not be able to plan or execute while the defaulted amounts will be added to the ever-growing public debt,” he said.
Chairperson of the youth scheme Maryam Nawaz could not be contacted for comments.