SECP stresses need for linking microfinance, capital markets

It will support govt’s vision of creating jobs, alleviating poverty

ISLAMABAD: Connecting the microfinance sector with capital markets is vital in order to enable the sector embark on a growth trajectory and support government’s vision of creating jobs, expanding financial inclusion and consequently alleviate poverty, a director of the Securities and Exchange Commission of Pakistan (SECP) said.

Speaking at the Microfinance Conference 2018 on Thursday, SECP Executive Director Aamir Khan pointed out that being a member of the United Nations, Pakistan was committed to achieving the Sustainable Development Goals, including the eradication of poverty.

“Microfinance, financial inclusion and poverty alleviation go hand in hand,” he emphasised. “However, the right to ongoing access to credit must be earned through good credit behaviour and this is where financial prudence and regulatory oversight permeate.”

The conference, titled “Accelerating financial inclusion through microfinance”, was jointly organised by the Pakistan Microfinance Network (PMN) and the UK Department for International Development (DFID).

The SECP has said that it is committed to improving access to finance for the poor people and micro businesses. In that connection, the executive director recalled that the SECP had initiated regulatory oversight of these entities in 2015 after amendments to the NBFC regulatory framework.

Since then, both the PMN and Pakistan Microfinance Investment Company (PMIC) have been dependable partners of the SECP in its endeavours to promote financial inclusion.

Through PMIC’s financial support as well as PMN’s role as a communication conduit between the SECP and its members, 26 entities have now been licensed to carry out microfinance activities.

Today, according to the executive director, the 26 non-banking microfinance companies have over 3.2 million borrowers, representing almost 50% of the market share, being catered to through over 2,500 branches.

“Microfinance has recorded a very solid growth in recent years,” he said. “However, if the sector wishes to achieve ambitious growth levels, then it needs to tap private capital by establishing a deep and wide relationship with the capital market.”

Hence, he stressed, steps to connect microfinance with capital markets needed to be taken at the earliest. He assured the audience that the SECP would fully support the initiatives to build the bridge between microfinance and the debt capital market. Apart from that, he said, the sector should accelerate the pace of digitalisation.

Published in The Express Tribune, December 7^th, 2018.

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