SBP amends rules for microfinance banks

The State Bank of Pakistan (SBP) has issued revised prudential regulations for microfinance banks (MFBs) in a bid to streamline the requirement of Credit Information Report (CIR) and simplify the documentary requirements from microfinance borrowers. Earlier, the Credit Bureau Act (CBA) 2015 was promulgated to provide basis for the incorporation and functioning of credit bureaus in Pakistan, the central bank said in a statement on Saturday.

Under the CBA, licensed credit bureaus (LCBs) are offering comprehensive CIR to financial institutions on individuals/ borrowers to help make informed decisions on borrowers’ creditworthiness and debt carrying capacity. Considering the developments in the LCB landscape, a few amendments have been made in the regulations for MFBs. Elaborating the amendments, the SBP stated that earlier MFBs were required to obtain a written declaration from borrowers about the facilities already obtained by them from other financial institutions.

“As LCBs are able to offer comprehensive CIR on individuals/ borrowers, in order to avoid duplication, this requirement has been withdrawn,” the SBP stated. “This would bring efficiency and further simplify the loan approval process by reducing documentary requirements from borrowers.” MFBs were also required to obtain a mandatory credit report from the SBP’s eCIB for all credit facilities exceeding Rs30,000. Since LCBs are able to offer comprehensive CIR to its members which comprise almost all banks/ MFBs and non-bank microfinance companies, the mandatory requirement to make inquiry from the SBP’s eCIB has been withdrawn as well, it said.

According to the SBP, this revision will allow MFBs to independently decide on obtaining the CIR of borrowers, regardless of the loan size. “Furthermore, MFBs obligation towards reporting to SBP’s eCIB has also been simplified besides aligning relevant terminologies with the Credit Bureau Act 2015,” the central bank said.