Pakistan tops microfinance regulatory framework ranking

SBP had earlier increased minimum capital requirements for microfinance banks,

Pakistan has topped the ranking in the microfinance regulatory framework category released by the Economist Intelligence Unit (EIU), the business information arm of the Economist Group – the publisher of the magazine, The Economist.

The EIU report provides annual ranking and in-depth analysis of the microfinance business environment in 54 countries. It evaluated countries on their regulatory framework, the general investment climate for microfinance providers and the level of microfinance institutional development.

Pakistan has been ranked first along with Cambodia and the Philippines with respect to regulatory frameworks, fifth for overall microfinance business environment, 12th for institutional development and 20th for investment climate.

A marked improvement in rankings is the result of the State Bank of Pakistan’s (SBP) proactive approach to microfinance regulations, said the SBP in an announcement. The central bank has revisited a number of microfinance regulations amending rules to support microfinance banks such as lifting regulations that prevented them from accepting foreign currency loans from international investors and changing limits on borrowers’ annual income from Rs150,000 to Rs300,000 for general loans and Rs600,000 for housing loans.

The SBP had earlier adopted a five-year microfinance strategic framework focused on policy, legal and regulatory framework for the microfinance industry and strengthening the necessary infrastructure and supporting mechanisms to promote diversity and sustainability in microfinance business.

The central bank had also raised minimum capital requirements for microfinance banks (MFBs) to ensure that only such sponsors venture to establish MFBs which have adequate financial resources to meet the present and future capital requirements.

Published in The Express Tribune, December 1^st, 2010.