Govt Introduces Markup Subsidy & Risk Sharing Scheme For Farmers

The Government of Pakistan has launched the Markup Subsidy and Risk Sharing Scheme for Farm Mechanization (MSRSSFM) under the Prime Minister Kissan Package 2022.

According to Business Recorder, the State Bank of Pakistan (SBP) has announced mechanisms for the Markup Subsidy and Risk Sharing Scheme for Farm Mechanization (MSRSSFM) to support the agriculture sector.

Under the scheme, the Government of Pakistan will bear the cost of markup subsidy and risk-sharing and all farmers as well as corporates engaged in agriculture crop production are eligible for the Markup Subsidy and Risk Sharing Scheme for Farm Mechanization (MSRSSFM).

The scheme offers the ability to avail finance for purchase of new or used farm machinery, tractor, thresher, harvester, planters, mobile grain dryers and solar tube-wells. Furthermore, the scheme will only remain valid for 1 year from the date of announcement with maximum loan size of Rs. 30 million.

The loan tenor under the Markup Subsidy and Risk Sharing Scheme for Farm Mechanization (MSRSSFM) is up to 7 years inclusive of 1-year grace period. However, the bank has the authority to decide the actual tenor based on useful life of machinery and equipment.

Moreover, the markup rate for end user will be 7 percent per annum, while bank pricing includes Kibor 6-month offer + percent per annum. The Government will be paying the difference of the cost.

The Government will bear 25 percent first loss on disbursed portfolio (principal portion only) for eligible borrowers as per Prudential Regulations for Agriculture Financing.

Furthermore, the banks are required to submit their proposed credit limits to State Bank of Pakistan (SBP) within seven days after issuance of the circular for the allocation of targets. The SBP will then assign credit limit to banks and allocate credit disbursement targets to banks in view of banks’ previous performance, their penetration among farmers, and budgetary allocation made by the GoP and communicate the same to banks.

The target achieved by banks under this scheme will be part of their annual indicative agriculture credit target assigned by the SBP.

Scheme Details

Under Category 1 of the tractor and thresher, all farmers are eligible to finance new or used tractors and threshers, which are not older than 3 years. In case of used tractors and threshers, valuation report from PBA approved evaluator will be required for assessing loan tenor/useful life of machinery.

Under Category 2, all farm processors and corporates engaged in agriculture crop production are eligible to finance harvesters, planters and mobile grain dryers, and solar tubewells.

New and used harvesters, planters, mobile grain dryers and solar tube-well, which are not older than 3 years old, are eligible for financing. However, a valuation report from PBA approved evaluator will be required for assessing loan tenor/useful life of used machinery.

Hypothecation/any collateral is acceptable to bank as per the policy.

Read more: Govt to Offer Farmers Discount on DAP Fertilizers.

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