KARACHI - Yaseen Anwar Governor State Bank of Pakistan (SBP) has said that Microfinance-exclusive Credit Information Bureau (MF-CIB) would help microfinance banks (MFBs) and microfinance institutions (MFIs) in developing robust risk management system and practices, which in turn reduce the risk of multiple borrowing and loan defaults. Delivering his keynote address at the national roll-out of MF-CIB here at SBP Learning Resource Centre (LRC) Auditorium on Wednesday, the SBP governor said the Bureau would open access to credit for millions of potential poor borrowers and reduce the credit risk cost of the lenders, besides lowering the loan price for the borrowers. Anwar pointed out that at present even the credit-worthy borrowers of microfinance institutions face difficulty in accessing larger loans from MFBs or commercial banks due to non-availability of their long history of loans and timely repayments with a microfinance institution.
“The MF-CIB will facilitate in the ‘graduation’ of such livelihood-based workers into small entrepreneurs,” he added. He said this nation-wide MF-CIB will be a major step for both lenders and borrowers with positive impact. “As the CIB expands its operations across the country, the quality and efficiency of the loan appraisal process will improve significantly.”
SBP believes that a policy framework for credit bureaus is essential for their smooth and long-term growth, he said, adding the Government and SBP have already been working on the development of a legal framework, which will strengthen private CIBs by establishing criteria for licensing, issuing regulations, and creating oversight mechanism. “All this will result into stakeholders’ satisfaction, and, most importantly, it will boost public confidence,” he added. He said that SBP has played a sterling role in the development of microfinance sector as an alternative to conventional banking to serve the lower end of the market. ‘However, there is a global shift from microfinance to inclusive finance, that is, from supporting microfinance initiatives in isolation to building inclusive financial sector,’ he added.
Financial inclusion, which is a core component of SBP’s financial sector development strategy, will also stimulate economic growth for the country, he said, adding that it envisages transforming the financial market into an equitable system with efficient market-based financial services to the otherwise excluded poor and marginalized population including women and young people.
Anwar urged upon the CEOs/Presidents of MFBs and MFIs to improve corporate governance, management structures and put in place adequate systems & policies in their respective organizations for ensuring protection of consumer rights. SBP is already in the process of revising regulations to ensure that MFBs follow best standards in these critical areas, he said and added: “We count on your wisdom and commitment to reach out to millions of financially excluded people.” The SBP governor pointed out that Pakistan has one of the lowest financial penetration levels in the world with 56% adult population totally excluded, and another 32% informally served. “Therefore, it is imperative that we all endeavor to bring the unbanked people into the formal banking channels to achieve our collective vision of access to all,” he said.
Highlighting some of the recent developments in the microfinance sector, he said that first and foremost, many of our MFBs have undergone recapitalization and restructuring in the last two years.
Resultantly, strong and strategic investors have now entered and are entering in the microfinance sector, he said, adding that secondly, adoption of new technologies and alternative delivery channels such as mobile phone and agent-based banking have radically transformed the distribution channels and retail capacity of the sector. “Finally, SBP continues to invest in various large-scale initiatives in areas of funding, financial literacy, capacity building, institutional strengthening and innovations,” said he. SBP encourages that credit growth should be fairly distributed across all economic, social, and geographic segments of the target market.