Central Bank Moves to Scale Up Microfinancing

The State Bank of Pakistan amended the Prudential Regulations for Microfinance Banks (MFBs) to facilitate lending to the lower income groups. As announced by the central bank, the new Regulations allow MFBs to lend up to Rs150,000 for general purpose and Rs500,000 for housing purpose. It is widely believed that these changes have been made to scale up microfinance initiatives in the country by enabling greater lending to lower income segments, particularly for meeting low-cost housing needs. Pakistan faces a huge backlog of residential units, with independent estimates placing the number at over 6 million and the National Housing Policy at 4.3 million; microloans for low-cost housing are seen as instruments for bridging this gap and social entreprenurial ventures such as the Acumen Fund and Saaiban have been doing exactly this, with considerable success in Karachi and Lahore.

In another welcome move, the State Bank issued a circular calling on commercial banks to make SME loan application forms and other documentation available in Urdu, in addition to English. Given the low levels of literacy, this is a sensible step to facilitate SMEs and entrepreneurs and one wonders why this wasn't done earlier.