SBP revises prudential regulations for microfinance banks

KARACHI: The State Bank of Pakistan (SBP) has issued revised prudential regulations for microfinance banks to streamline the requirement of obtaining credit information report (CIR) and simplifying the documentary requirements from the microfinance borrowers, a statement said.

Earlier, the Credit Bureau Act (CBA) 2015 was promulgated to provide a basis for incorporation and functioning of credit bureaus in Pakistan.

Under the CBA, Licensed Credit Bureaus (LCBs) are offering comprehensive CIR to financial institutions on individuals/borrowers to make informed decisions, borrowers’ credit worthiness and debt carrying capacity.

Considering the development in LCB landscape, following amendments have been made in the MFBs’ regulations.

Earlier, the microfinance banks were required to obtain written declarations from the borrowers about the facilities already obtained by them from other financial institutions. However, as LCBs are able to offer comprehensive CIR on individuals/borrowers; therefore, to avoid duplication, this requirement has been withdrawn. This would bring efficiency and further simplify the loan approval process by reducing documentary requirements from the borrowers.

Similarly, the microfinance banks were earlier required to obtain a mandatory credit report from the State Bank of Pakistan’ eCIB for all credit facilities, exceeding Rs30,000. Since LCBs are able to offer comprehensive CIR to its members, which constitutes almost all the banks/MFBs and non-bank microfinance companies (NB-MFCs); therefore, the mandatory requirement to make inquiry from the SBP’s eCIB has been withdrawn.

This revision will allow the MFBs to independently decide on obtaining CIR of the borrowers, regardless of loan size.

Further, the microfinance banks obligation towards reporting to the SBP’s eCIB has also been simplified, besides aligning relevant terminologies with the Credit Bureaus Act, 2015.

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