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Micro Finance

  • Date Submitted: 05/14/2014 07:10 AM
  • Flesch-Kincaid Score: 40.4 
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INTRODUCTION
Pakistan has a separate legal framework to govern the microfinance activities of the Microfinance Banks (MFBs). The MFBs are licensed and regulated by State Bank of Pakistan. Considering the separate needs and dynamics of microfinance, SBP has in place a separate regulatory and supervisory framework for MFBs. Since its creation, the policy framework has seen various improvements on the basis of feedback of key stakeholders and assessment of the evolving needs and conditions of the sector. To promote the mainstreaming of microfinance into overall financial system, SBP encourages creation of new MFBs and transformation of existing operationally sustainable MFIs into MFBs. The presence of a large potential market and availability of an enabling policy environment offer the opportunities for both social and commercial investors to explore this segment of the financial market.

The growth and sustainability continue to be the two guiding objectives for the development of the sector. SBP is fully cognizant of the fact that pursuing these two objectives concurrently is a challenging task. This requires vision of sponsors / management, deep understanding of the target market, viable business model, appropriate organizational structure, and management capabilities to adopt innovation in products & delivery channels. All the prospective investors need to gain deep understanding of the local microfinance banking industry vis-à-vis its performance & potential, and challenges & incentives. Moreover, the promoters of prospective MFBs should also dedicate adequate time and energies to explore the learning and innovations that are occurring rapidly across the globe.
1.1 Definition of Microfinance  
A type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services.
Services for poor and low-income clients offered by different types of service providers....

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