The federal government has announced a 10 percent first-loss credit guarantee for financing banks under the Prime Minister’s Fan Replacement Program (PM FRP), a nationwide initiative aimed at accelerating energy conservation and improving power efficiency. The move is designed to encourage commercial banks to extend consumer financing under the scheme by mitigating initial credit risk exposure.
According to the State Bank of Pakistan, the Ministry of Energy (Power Division), through a notification dated February 6, 2026, has formally outlined the program’s framework and term sheet. Under this arrangement, the government will absorb the first 10 percent of losses incurred on financing extended by participating banks. The credit guarantee mechanism is intended to enhance risk-sharing and incentivize broader participation from financial institutions.
The PM FRP financing structure sets a minimum financing limit of Rs10,000 and a maximum ceiling of Rs300,000 per applicant. The repayment tenor ranges between six and eighteen months, offering short-term, structured financing tailored to household-level upgrades. Pricing for the facility will be linked to the one-year Karachi Interbank Offered Rate (KIBOR) plus 2 percent per annum. In addition, a Musawama profit of Rs500 will be included in the first installment. The applicable KIBOR rate will remain fixed throughout the financing period, determined in line with each bank’s standard pricing practices.
The detailed mechanism for settlement of credit guarantee claims will be issued separately. The State Bank has advised commercial banks to complete all necessary operational preparations, including system integration with the National Energy Efficiency and Conservation Authority’s online portal. This integration is considered central to ensuring seamless verification, approval, and monitoring processes under the program.
The National Energy Efficiency and Conservation Authority (NEECA) will spearhead the nationwide rollout, overseeing governance, operational coordination, and stakeholder management. The implementation will be executed through tripartite agreements involving power distribution companies (DISCOs), participating banks, and fan manufacturers. This coordinated structure is intended to align financing, distribution, and manufacturing workflows under a unified digital framework.
The program will operate through a web portal hosted by the Punjab Information Technology Board. The platform will be integrated with participating banks, the Power Information Technology Company (PITC), DISCOs including K-Electric, and registered manufacturers. The digital infrastructure is expected to streamline consumer onboarding, eligibility verification, and transaction processing. Public awareness campaigns are also planned to drive participation and increase uptake of financing for energy-efficient appliances.
Under the operational framework, DISCOs will provide API-based data access to NEECA’s portal in line with the approved term sheet. This data-sharing mechanism will facilitate consumer eligibility assessments and enable banks to solicit customers based on verified electricity usage records, subject to applicable policies and defined responsibilities under the tripartite agreements.
The State Bank of Pakistan will circulate the program’s features to all commercial banks and facilitate onboarding of participating institutions. It will also devise a payment mechanism for processing credit guarantee claims, including claims related to financing extended during the soft launch phase. This mechanism will be developed in coordination with NEECA, the Power Division, and the Ministry of Finance.
The Ministry of Finance will ensure budgetary allocations for the scheme and support timely settlement of guarantee claims. Relevant stakeholders have been directed to take immediate steps to operationalize the initiative and submit progress updates to the Power Division in accordance with the Rules of Business, 1973.
The Prime Minister’s Fan Replacement Program aims to replace inefficient household fans with energy-efficient models, reducing electricity consumption, easing pressure on the national grid, and lowering consumer energy costs. By combining fiscal support, banking sector participation, and digital system integration, the initiative represents a coordinated effort to address energy efficiency through structured financing and technology-enabled governance.
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