The central bank has formulated guidelines for provision of Islamic microfinance products and services by financial institutions. The central bank, in a circular issued on Monday, said that Pakistan was among the few countries in the world, which had a separate legal and regulatory framework for microfinance banks.
Which allowed microfinance and commercial banks to extend range of microfinance services to poor and low-income people. With the growing popularity of Islamic banking in the country, it was deemed necessary to provide options for provision of Islamic microfinance services by microfinance and commercial banks as well as allowing full-fledged Islamic microfinance banks in the country, the central bank added.
Therefore, the central bank formulated guidelines for provision of Islamic microfinance products and services by financial institutions. These guidelines are aimed at broadening the coverage of microfinance products and services to low income segments of the society in a Shariah compliant manner.
These guidelines stipulate four types of institutional arrangements for offering Islamic microfinance, including establishment of full-fledged Islamic microfinance banks (IMFBs), Islamic microfinance services by full-fledged Islamic banks, Islamic microfinance services by conventional banks and Islamic microfinance services by conventional microfinance banks (MFBs).
It must be taken into account that the criterion mentioned in these guidelines will be in addition to the requirements already issued by the State Bank of Pakistan (SBP) under respective category of financial institutions.
These regulations and guidelines, by any means, will not replace the regulations and guidelines already issued by the SBP from time to time in this area, the central bank added.
Commercial and microfinance banks, interested in building Islamic microfinance portfolio, should review the different institutional/organisational arrangements and select one or the combination of more than one mode, based on their organisation structure, capacity and overall objectives.
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