KARACHI: State Bank Governor Yaseen Anwar has said that an authenticated information sharing mechanism like Microfinance-exclusive Credit Information Bureau (MF-CIB) will shrink the nonperforming loan portfolios of microfinance institutions.
Delivering his keynote address at the national roll-out of MF-CIB at SBP Learning Resource Centre Auditorium on Wednesday, he said the MF-CIB will open access to credit for millions of potential poor borrowers and reduce the credit risk cost of the lenders, besides lowering the loan price for the borrowers.
Anwar pointed out that at present even credit-worthy borrowers of microfinance institutions (MFIs) face difficulty in accessing larger loans from microfinance banks (MFBs) or commercial banks due to non-availability of their long history of loans and timely repayments with a microfinance institution. “The MF-CIB will facilitate in the ‘graduation’ of such livelihood-based workers into small entrepreneurs,” he added.
He said that this nation-wide MF-CIB will be a big step forward for both lenders and borrowers. ‘As the CIB expands its operations across the country, the quality and efficiency of the loan appraisal process will improve significantly,’ he added.
SBP believes that a policy framework for credit bureaus is essential for their smooth and long-term growth, he said, adding that the government and SBP have already been working on the development of a legal framework which will strengthen private CIBs by establishing criteria for licensing, issuing regulations, and creating an oversight mechanism. ‘All this will result in stakeholdersÕ satisfaction, and, most importantly, it will boost public confidence,’ he added.
He said that SBP has played a sterling role in the development of the microfinance sector as an alternative to conventional banking to serve the lower end of the market. ‘However, there is a global shift from microfinance to inclusive finance, that is, from supporting microfinance initiatives in isolation to building an inclusive financial sector,’ he added.
Anwar urged the CEOs of MFBs and MFIs to improve corporate governance, management structures and put in place adequate systems and policies in their respective organizations for ensuring the protection of consumer rights. SBP is already in the process of revising regulations to ensure that MFBs follow the best standards in these critical areas, he said, and added: ‘We count on your wisdom and commitment to reach out to millions of financially excluded people.’
SBP governor pointed out that Pakistan has one of the lowest financial penetration levels in the world with 56 percent of the adult population totally excluded, and another 32 percent informally served. ‘Therefore, it is imperative that we all endeavor to bring the unbanked people into the formal banking channels to achieve our collective vision of access to all,’ he added.
Highlighting some of the recent developments in the microfinance sector, he said that many of the MFBs have undergone recapitalization and restructuring in the last two years. Resultantly, strong and strategic investors have entered and are entering the microfinance sector, he said, adding that secondly, adoption of new technologies and alternative delivery channels such as mobile phones and agent-based banking have radically transformed the distribution channels and retail capacity of the sector. ‘Finally, SBP continues to invest in various large-scale initiatives in areas of funding, financial literacy, capacity building, institutional strengthening, and innovations,’ he added.
He said that SBP has already issued necessary regulations to allow MFBs to extend loans up to Rs 500,000 to microenterprises.
Tariq Jan, MD, DataCheck, while speaking on the occasion, said that MF-CIB will serve as a centralized database to store all past and present credit transactions of an individual who has been declared a defaulter by any reporting microfinance providers across Pakistan. The MF-CIB is run by DataCheck Private Limited.
President Tameer Microfinance Bank Nadeem Hussain said that funding and lack of resources are major challenges for the microfinance industry in Pakistan. CEO Pakistan Poverty Alleviation Fund (PPAF) Qazi Azmat Isa, CEO Pakistan Microfinance Network (PMN) Syed Mohsin Ahmed, and speakers from the UK Department for International Development (DFID) and International Finance Corporation (IFC) discussed the significance of this initiative.