The Pak Banker - - FRONT PAGE -

The State Bank of Pak­istan (SBP) has is­sued re­vised Mi­cro­fi­nance Credit Guar­an­tee Fa­cil­ity (MCGF) Guide­lines of­fer­ing higher risk cov­er­age of up to 60 per cent to Com­mer­cial Banks/ De­vel­op­ment Fi­nance In­sti­tu­tions (DFIs) for lend­ing to smaller Mi­cro­fi­nance Banks (MFBs)/ Mi­cro­fi­nance in­sti­tu­tions (MFIs).

The el­i­gi­bil­ity of MFPs for var­i­ous risk shar­ing op­tions will be as­sessed on the above cri­te­ria. The MFPs fail­ing to meet any of Tier 1 cri­te­ria shall be as­sessed against Tier 2 cri­te­ria.

The in­ter­est rate un­der MCGF shall not ex­ceed 2 (two) per cent over and above the Karachi In­ter­bank Of­fer Rate (KIBOR) of rel­e­vant tenor. The tenor of KIBOR should be the same as of tenor/ re-pric­ing tenor of the loan.

All Banks/DFIs/MFPs are ad­vised to fi­nal­ize their fund­ing deals un­der MCGF and sub­mit their cases to SBP BSC for is­suance of sub­ject Guar­an­tee as per pro­ce­dure en­vis­aged in the guide­lines at­tached here­with. The fa­cil­ity is ex­pected to grad­u­ate smaller MFBs/ MFIs to avail credit lines from com­mer­cial banks/ DFIs for on­ward lend­ing to mi­cro­fi­nance clients.

It may be re­called that the Mi­cro­fi­nance Credit Guar­an­tee Fa­cil­ity is a credit en­hance­ment fa­cil­ity to at­tract mar­ket-based and long-term fi­nance for mi­cro­fi­nance in­sti­tu­tions. MCGF was launched by the State Bank in De­cem­ber 2008 with £15 mil­lion fund­ing support from the UK Depart­ment for In­ter­na­tional De­vel­op­ment (DFID) un­der the Fi­nan­cial In­clu­sion Pro­gram (FIP) which is be­ing im­ple­mented by SBP.

The fa­cil­ity is fo­cused on mar­ket de­vel­op­ment and has been in­stru­men­tal in re­solv­ing the fund­ing con­straints of the mi­cro­fi­nance sec­tor in Pak­istan. So far, 6 large MFBs/MFIs have com­pleted 38 trans­ac­tion with com­mer­cial banks and cap­i­tal mar­kets/re­tail in­vestors mo­bi­liz­ing Rs.12.825 bil­lion for on­ward lend­ing to around 650,000 mi­cro bor­row­ers. This has sig­nif­i­cantly helped in re­duc­ing the risk per­cep­tion of banks to­wards the mi­cro­fi­nance sec­tor, thus in­tro­duc­ing poor bor­row­ers to main­stream fi­nan­cial in­sti­tu­tions.

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