Source: Dawn Media Group.

Original article available online.

KARACHI, July 17 – The State Bank of Pakistan has introduced amended microfinance credit guarantee facility guidelines to make the provisions more flexible for commercial banks and development financial institutions to provide whole-sale funds to eligible microfinance banks and institutions.

In a communication to presidents and chief executives of all banks, development financial institutions and micro-finance banks, the banking policy and regulations department of the SBP pointed out out that clause 5(1) of Microfinance Credit Guarantee Facility (MCGF) guidelines has been amended to make provisions more flexible for commercial banks/DFIs, says a press release.

The bank has made it mandatory upon the lending institutions to provide financing after carrying out proper due diligence of microfinance banks and microfinance institutions, keeping in view risk profile of the borrower and in the light of policy developed, duly approved by its board of directors, for providing such a financing under the guarantee facility.

It said: ‘In case, microfinance lending policy, duly approved from the board of director, is not in existence, such a policy shall be made within two years of first disbursement under the facility. However, it shall be mandatory if the funding under the facility exceeds 20 per cent of lending bank’s equity, prior to disbursement under the facility.’

It further clarified that MCGF guarantee (to the extent of risk coverage issued by the SBP) is recognized for capital adequacy purpose as per a circular issued on June 27, 2006, and would carry zero per cent risk weight under credit risk mitigation, a SBP circular said on Thursday.

Meanwhile, the SBP’s SME finance department said that it has received representations from trade bodies and exporters to account for the export performance of goods sold in the international fairs or exhibitions under Part II of the Export Finance Scheme.

The bank said that it has now been decided that export performance of eligible goods sold in the international fairs and exhibitions would be taken into account for performance/entitlement purpose under Part–II of the Export Finance Scheme provided that exporters have not already availed loans under Part-I on post-shipment basis there against as well as fulfilment of the requirements prescribed in the relevant manual.