Need to con­nect mi­cro fi­nance sec­tor with cap­i­tal mar­kets urged

The Financial Daily - - NATIONAL -

ISLAMABAD: It is vi­tal to con­nect the mi­cro­fi­nance sec­tor with cap­i­tal the mar­kets to en­able the sec­tor to meet it growth tra­jec­tory and to sup­port gov­ern­ment's vi­sion of cre­at­ing jobs and ex­pand­ing fi­nan­cial in­clu­sion and by con­se­quence al­le­vi­ate poverty, Aamir Khan, Ex­ec­u­tive Di­rec­tor, SECP, said while ad­dress­ing the Mi­cro­fi­nance Con­fer­ence 2018, here Thurs­day, says a Press re­lease.

The con­fer­ence, with the theme of "Ac­cel­er­at­ing Fi­nan­cial In­clu­sion through Mi­cro­fi­nance", was jointly or­ga­nized by the Pak­istan Mi­cro­fi­nance Net­work and UK's De­part­ment of In­ter­na­tional Devel­op­ment (DFID). Pub­lic sec­tor rep­re­sen­ta­tives, mi­cro­fi­nance en­trepreneurs and pro­fes­sion­als were there to com­pare notes on key is­sues and fu­ture pol­icy ini­tia­tives.

Be­ing a UN mem­ber, Pak­istan has com­mit­ted to achiev­ing the sus­tain­able devel­op­ment goals, in­clud­ing the goal of poverty erad­i­ca­tion, said Khan. The mi­cro­fi­nance, fi­nan­cial in­clu­sion and poverty al­le­vi­a­tion go hand in hand, but the right to on­go­ing ac­cess to credit must be earned through good credit be­hav­ior and this is where fi­nan­cial pru­dence and reg­u­la­tory over­sight per­me­ate, he added.

The SECP is com­mit­ted to im­prov­ing ac­cess to fi­nance for the poor peo­ple and mi­cro busi­nesses. In this con­nec­tion, Aamir said, the SECP ini­ti­ated reg­u­la­tory over­sight of th­ese en­ti­ties in 2015 af­ter amend­ments to the NBFC reg­u­la­tory frame­work. Since then, both PMN and PMIC have been the SECP's de­pend­able part- ners in its en­deav­ors to fo­cus on fi­nan­cial in­clu­sion.

Through PMIC's fi­nan­cial sup­port as a re­spon­si­ble whole­sale lender as well as PMN's role as a com­mu­ni­ca­tion con­duit be­tween the SECP and its mem­bers, 26 en­ti­ties have now been li­censed to carry out mi­cro­fi­nance ac­tiv­i­ties. To­day, he in­formed par­tic­i­pants, th­ese 26 NBMFCs have over 3.2 mil­lion bor­row­ers rep­re­sent­ing al­most 50% mar­ket share, be­ing ser­viced through over 2,500 branches.

He said that the mi­cro­fi­nance has recorded a very solid growth in re­cent years, but if the sec­tor wishes to achieve the am­bi­tious growth lev­els it has set for it­self, then it needs to tap into pri­vate cap­i­tal by es­tab­lish­ing a deep and wide re­la­tion­ship with the cap­i­tal mar­ket. Hence, the steps to con­nect mi­cro­fi­nance with cap­i­tal mar­kets would need to be taken at the ear­li­est. He as­sured that au­di­ence that the SECP would fully sup­port the ini­tia­tives to help build the bridge be­tween mi­cro­fi­nance and debt cap­i­tal mar­ket

Sec­ondly, he said, the sec­tor needs to ac­cel­er­ate the pace of dig­i­ti­za­tion. Dis­burse­ments, col­lec­tions, distri­bu­tion of cross­selling prod­ucts, ac­count­ing sys­tems, records, risk man­age­ment and re­port­ing, all need to be dig­i­tized on an end-to-end ba­sis. This trans­for­ma­tion is vi­tal for the longevity of the sec­tor, as it will ex­pand out­reach, re­duce costs and im­prove ef­fi­ciency. The SECP for its part is al­ready work­ing on cre­at­ing fa­vor­able regime for fin­tech and tech­nol­ogy based distri­bu­tion channels.

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