The government will conduct a special audit to ensure transparency
ISLAMABAD: In order to dispel the objections raised by the International Monetary Fund (IMF) on the limit of guarantees on small loan programs under the Kamyab Pakistan (KPP) program, the government decided to conduct a special audit, where the executing agencies the default rate of credit losses exceeds 10 percent.
As part of the program, the central bank will issue a circular covering all aspects of the program, including government credit loss guarantees to wholesale lenders and EAs for the payment of grant applications over Rs 30 billion for 142 billion rupees distributed by some banks and microfinance institutions.
The 100% loss coverage guarantee will be extended to wholesale lenders on a first come, first served basis. However, this facility is likely to be limited, both in amount and in percentage of coverage.
The SBP, in consultation with the Finance Department and the program steering committee, reserves the right to reduce the guarantee coverage to 50pc for WLs over a period of 18 months. However, this will not apply to existing or ongoing loans.
Wholesale lenders will provide lines of credit under the âpre and post financeâ models to executive agencies, which will provide WLs with details of disbursed loans monthly, and then advise SBP on the actual use of the collateral amount.
The SBP will monitor and ensure the use of the GOP collateral. In addition, the central bank, in consultation with the Finance Division, could notify WLs of the extent of the reduced coverage of the GOP guarantee with 30 days notice.
Any misuse or declaration of the use of the grants will result in punitive actions by the respective regulators. EAs prepare grant and loan loss applications on a quarterly basis.
The WLs will appoint external audit firms to the SBP panel to undertake audits of at least 50% of requests for additional grants and loan losses by EAs on an ongoing basis. Likewise, WL and MFB loan loss and mark-up grant applications under the KPP must also be externally audited and submitted to SBP for payment.