KARACHI – State Bank of Pakistan Deputy Governor Yaseen Anwar, on Saturday, disclosed that the central bank would soon launch a 10 million UK pound Financial Innovation Challenge Fund (FICF) to spur innovations in the financial services products and delivery channels in the country. Speaking at the inaugural ceremony of NRSP Microfinance Bank Limited (NRSP MFB) in Bahawalpur, he said that the SBP had also launched Improving Access to Financial Services Fund (IAFSF), for enhancing financial literacy amongst existing and potential microfinance clientele which will increase their capability to access and make productive use of financial resources. ‘A nationwide Financial Literacy Programme would be launched shortly in various districts on a pilot basis,” he added.
Anwar said that the State Bank would continue to encourage mainstreaming of microfinance into formal banking system to achieve financial inclusion in a sustainable manner. “SBP believes that, in the long-run, institutional development is the most critical factor for sustainable growth of microfinance in the country,” he said. The SBP deputy governor said that setting up of NRSP MFB was a result of successful transformation of National Rural Support Program (NRSP) into microfinance bank. “At SBP, we look forward to the success and positive outcomes of this transformation,” he said.
He, however, emphasised that the ‘transformation’ of any microfinance institution into a microfinance bank was not a one-time move. “It’s a long-term and rigorous process in which the organisational behaviors have to be constantly modified to a new environment characterised by competitiveness and regulatory compliance,” he said, adding that “With this transformation, the NRSP would now be exposed to new set of challenges which will have consequences for the financial, operational, and strategic risks.”
Anwar said that, since NRSP held a market share of almost 22 percent, commencement of business would result in a substantial increase in the market share of regulated microfinance banks within the overall microfinance sector. Besides micro-credit, this transformation would also lead to the provision of other important financial services (such as deposits, remittances etc.) in the rural areas of our country, he added. “We foresee NRSP Microfinance Bank operating successfully in all the districts of Pakistan in near future. I believe that NRSP experience would act as a change agent -facilitating transformation of other larger MFIs into formal banking system.”
He said that the State Bank had taken a number of policy and programme initiatives to promote microfinance in the country. “To facilitate the microfinance industry’s growth on a sustainable basis, SBP maintains fine balance in regulating the sector and allowing space for innovation and experimentation,” he added. The deputy governor said the SBP collaborated with Pakistan Microfinance Network in launching a pilot test of Lahore-based Credit Information Bureau (CIB) for the microfinance sector. He said that Pakistan was the first country in South Asia to have MF-specific CIB and this initiative would improve credit assessment capabilities of microfinance players and also reduce over indebtedness of poor clients.
He said the Microfinance Credit Guarantee Facility, launched with 10 million UK pound, had been able to mobilise private capital from commercial banks to provide Rs 2.0 billion for microfinance, which would improve outreach considerably. The deputy governor said that Institutional Strengthening Fund, worth 10 million UK pound, also set up at SBP since Dec 2008, aims at strengthening institutional and human resource capacity of microfinance banks and institutions. “So far, grants of Rs 400 million have been approved for eight microfinance providers in respect of 10 major projects which are aimed at addressing institutional strengthening needs of key players,” he added.
Anwar said that Pakistan had earned a global recognition for improvements in microfinance in a number of areas as a result of initiatives taken by the central bank and contribution made by the industry and other stakeholders. “The Economist Intelligence Unit (EIU) has ranked Pakistan at the top in microfinance regulations,” he said and added that the EIU report had come at the right time – validating SBP’s approach to microfinance development. He said that the existing branchless banking deployments, with over 12,000 agents, have already surpassed bank branches network of 10,000 in Pakistan. ‘This is indicative of the fact that bricks and mortar approach to promote financial inclusion is not very useful,’ he added.
