Syed Salim Raza, Governor State Bank of Pakistan has said that microfinance
banks/institutions have a key role to play in creating economic opportunities for the poorest
sections of the society by broadening their outreach.
Delivering a keynote address on “Economic Empowerment for the Base of the Pyramid”
at the Acumen Community Gathering held at a local hotel in Karachi today, Mr. Raza said that
the regulatory role develops infrastructure of service delivery, cross fertilizes from researching
and encouraging use of successful global practices, and guides the provision of rules and
oversight that would enable Microfinance Institutions (MFIs) build sources of public funding
and deposits. “In developing economies, the symbiosis between the regulators and the
operators will be a critical underpinning for this vital function to pull its weight as a major
solution to poverty,” he added.
Referring to SBP role in supporting the development of microfinance in the country, he
said the State Bank is facilitating setting up a microfinance‐exclusive credit information bureau
to reduce risks associated with microfinance operations and their clients. SBP has encouraged
mobile‐banking by issuing branchless banking guidelines and funding a pilot to provide access
to remote areas of Pakistan, he said and added that SBP is a pioneer in regulation in branchless
banking in South Asia.
He said several initiatives have been taken by the State Bank to support low income
financial development. These together form a strategy, which includes measures to address
most common causes of banking exclusion; to facilitate and create an enabling environment for
banks to address needs of underserved and un‐banked segments through dedicated prudential
regulations, and through guidelines for Microfinance, SME finance, Agricultural finance and
other areas; and to provide alternative finance models such as Islamic Banking which can
operate in parallel with conventional banking.
Mr. Raza said that MFI Ordinance 2001 has been instrumental in catalyzing growth,
creating investor confidence and protecting depositors. State Bank has recently amended the
Prudential Regulations for Microfinance Bank (MFBs) removing regulatory bottlenecks pointed
out by the industry. He said now MFBs have an increased ceiling on lending limits and relaxed
borrower criteria to allow for client graduation. MFBs can now extend micro loans of up to Rs
150,000/‐ for general purpose and Rs 500,000/‐ for housing‐loan.
Similarly, he pointed out that NGOs are encouraged to restructure into licensed banks,
so that they can operate transparently with an adequate capital base, while providing comfort
to depositors and borrowers. To encourage transformation of NGOs into MFBs, the Federal
Government in June 2007 allowed a five‐year income tax holiday to such institutions and now
some large NGOs are in process of transformation into Banks.
SBP Governor also talked about central bank’s partnership with the UK department for
International Development for a Financial Inclusion Program, which promotes market
development through well considered subsidies. A Microfinance Credit Guarantee Facility
(MFCG), worth GBP 10 million has already been launched, he said and added that facility is
aimed at increasing wholesale funds for MFBs and MFIs. Moreover, SBP has recently allowed
the microfinance banks/institutions to raise foreign currency loans from international financial
institutions and from other social and commercial investors, he added.
Mr. Raza stressed that developing strategic alliances is increasingly important for MFIs
to partner with the wider private sector or public sector entities. As these arrangements
capitalize on the comparative advantages of vastly different institutions, they can take many
different forms, he said and added that in this context SBP encouraged partnership between
the post office (PO) network and MF providers. Post offices already manage over 4 million
savings accounts, mainly small accounts below Rs 10,000, through more than 12,000 branches,
Mr. Raza pointed out that social entrepreneurs act as the agent of change for society,
seizing opportunities others miss and improving systems, inventing new approaches, and
creating solutions to change society for the better. While a business entrepreneur might create
entirely new industries, a social entrepreneur comes up with new solutions to social problems
and then implements them on a large scale, he said and added it is through these new,
innovative solutions that we will be able to achieve economic empowerment for low‐income
populations. He pointed out that one of the biggest obstacles to the growth of micro, small, and
medium enterprises is lack of credit – making this available to the poor has the ability for large