SBP Governor rolls out Microfinance Credit Information Bureau

Institution will help the sector develop robust risk management practices.

KARACHI:

State Bank of Pakistan (SBP) Governor Yaseen Anwar has said that Microfinance-exclusive Credit Information Bureau (MF-CIB) will help microfinance banks (MFBs) and microfinance institutions (MFIs) in developing robust risk management systems and practices, which in turn will reduce the risk of multiple borrowing and loan defaults.

MF-CIB will open access to credit for millions of potential low-income borrowers and reduce the credit risk cost of the lenders, besides lowering the loan price for the creditors, he said while speaking at the launch of MF-CIB at SBP here on Wednesday.

The MF-CIB will facilitate in the ‘graduation’ of such livelihood-based workers into small entrepreneurs, he said. “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 loans and timely repayments,” he said.

He stated that SBP has played a sterling role in the development of the microfinance sector as an alternative to conventional banking to serve the lower income bracket 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.

Anwar urged upon the CEOs and presidents of MFBs, many of whom were sitting in the audience, and MFIs to improve corporate governance, management structures and put in place adequate systems and policies in their respective organisations for ensuring protection of consumer rights.

The 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 endeavour to bring the unbanked people into the formal banking channels to achieve our collective vision of access to all, he added.

Highlighting some of the recent developments in the microfinance sector, he said that first and foremost, many of Pakistan’s MFBs have undergone recapitalisation and restructuring in the last two years. Resultantly, strong and strategic investors have either entered or are entering the microfinance sector, he said.

Secondly, adaptation of new technologies and alternative delivery channels such as mobile phones and agent-based banking have radically transformed the distribution channels and retail capacity of the sector.

He congratulated the Pakistan Microfinance Network (PMN), Pakistan Poverty Alleviation Fund (PPAF), UK Department for International Development (DFID), DataCheck, MFBs, MFIs, and other stakeholders on the national roll-out of MF-CIB.

MF-CIB is a joint initiative of the SBP, PMN and PPAF, with funding support from the DFID under its “Financial Inclusion Programme” being managed by the SBP.

Talking to The Express Tribune, PMN CEO Syed Mohsin Ahmed said that he is confident of greater penetration of microfinance institutions in the coming months owing to the progress on MF-CIB.

He was also upbeat with the new investments in MFIs and said that this signifies the growth potential of this industry in the country.

The officials of DFID and International Finance Corporation (IFC) also stressed the significance of this initiative and congratulated SBP, PMN and PPAF for achieving an important milestone in developing a robust microfinance sector in Pakistan.

DataCheck Managing Director Tariq Jan said that microfinance industry is facing challenges in Pakistan like aggressive cross lending, decentralised processes and control as loans disbursements are still in big cities.

In his concluding remarks, PPAF CEO Qazi Azmat Isa said that Pakistan is continuously strengthening its position as one of the world’s leading country in the microfinance sector. Pakistan’s position will strengthen with the collaboration of leading stakeholders in MF-CIB.

Published In The Express Tribune, June 21^st, 2012.