SBP, UKAID to implement Financial Inclusion Programme

ZAHEER ABBASI

ISLAMABAD: The State Bank of Pakistan (SBP) has partnered with the UKAID to implement a comprehensive “Financial Inclusion Program” in the country to promote inclusive economic growth through promoting market-based financial services for the poor and marginalized, especially small and micro-enterprises.

Sources said the sub-committee of National Assembly on Finance was informed by the Finance Ministry that the program involves Microfinance Credit Guarantee Facility (MCGF) (£15m), which is a credit enhancement facility to attract long-term, market-based funding for microfinance institutions. MCGF offers 25 percent first loss or 40 percent partial guarantee to banks. So far, 34 guarantees have been issued under MCGF which has mobilized Rs11.225 billion from commercial banks and capital markets/retail investors for onward lending to around 600,000 micro-borrowers. The facility has helped develop the market and introduced poor borrowers to mainstream financial institutions.

The Credit Guarantee Scheme (CGS) for small and rural enterprise Guarantee Fund (€13m) aims to enhance credit to small and rural enterprises through commercial banks. The participating banks have sanctioned loans of Rs 6.328 billion under CGS and SBP issued guarantees for risk coverage of Rs 2.554 billion for onward lending to around 10,000 borrowers against the approved limits of Rs2.634 billion by the end of December 2013, representing a highly encouraging utilization of 97 percent of the Risk Coverage Limits.

The financial measures also include Institutional Strengthening Fund (ISF) (£4.37m), which is a capacity-building grant facility for microfinance banks and institutions. The ISF grants are provided to enhance institutional and human resource capacity, develop and implement strategies for mobilization of savings, strengthen governance and internal controls functions, and launch branchless banking initiatives.

The Fund Committee has approved grants of Rs 712.732 million for 26 projects from 15 microfinance institutions (MFIs) and banks (MFBs) representing more than 60 percent of the microfinance sector. The ISF support has been transformational; supporting graduation of NGO MFIs to Microfinance Banks (MFBs) and has put the industry on a more sound footing.

In addition, ISF has helped a number of institutions to be sustainable and efficient in financial service delivery such as the Tameer Bank in launching Easy Paisa Branchless Banking product.