SBP amends micro credit guarantee facility

KARACHI: State Bank of Pakistan has once again amended the guidelines for Microfinance Credit Guarantee Facility to make the provisions more flexible for commercial banks/DFIs to provide wholesale funds to eligible Microfinance Banks/Institutions.

After the amendment made to Clause 5 (i), the lending institution shall provide financing after carrying out proper due diligence of the MFB/MFI, keeping in view the risk profile of the borrower and in light of policy developed, duly approved by its Board of Directors, for providing financing under the MCGF.

In case, the microfinance lending policy duly approved from the Board of Director is not in existence, such policy shall be made within two years of the first disbursement under the facility; however, it shall be mandatory if the funding under the facility exceeds 20 percent of the lending bank's equity, prior to disbursement under the facility.

The SBP further clarified that the MCGF guarantee (to the extent of risk coverage issued by SBP) is recognized for capital adequacy purpose as per BSD circular No. 8 issued on 27 June 2006 and will carry 0% risk weight under Credit Risk Mitigation. link....