Credit scheme: Microfinance banks can extend loans

MFBs given 40% risk coverage on loans. Earlier, only commercial banks provided loans under Credit Guarantee Scheme.

KARACHI:

The State Bank of Pakistan (SBP) has extended the scope of Credit Guarantee Scheme by including microfinance banks (MFBs) as eligible financial institutions in order to enable micro enterprises to benefit from the scheme.

“Now MFBs will be able to extend loans from Rs150,000 to Rs500,000 to micro enterprises for a tenure not exceeding five years,” said SBP in a circular issued on Tuesday.

SBP said the MFBs that have already obtained the central bank’s approval for undertaking microenterprise lending could apply for allocation of credit exposure limits under the Credit Guarantee Scheme.

Earlier, only the commercial banks provided loans under the Credit Guarantee Scheme. MFBs will find great comfort in taking credit risks as they now enjoy risk coverage of 40% on their loans to micro enterprises.

Published in The Express Tribune, December 5^th, 2012.