The State bank of Pakistan is targeting 10 million borrowers of micro finance by 2013. This was stated by SBP Director on Microfinance and SMEs Qasim Nawaz while talking to Aaj Markets. He said that by 2010, three million borrowers would be reached and the remaining seven million were targeted during following 2-3 years.
Qasim, while talking on MFB prudential regulations, elaborated that it had been suggested to eliminate MFB from tax regime for at least 5 years, as currently they are being taxed at the rate of commercial banks.
He said that with this incentive more internationally operating NGOs would come to Pakistan, as amendments had been suggested in prudential regulations to enhance the status of NGOs and to acquire licence from SBP to become banks. He added that only licensed banks could raise deposits and re-invest them.
Cash reserve Requirement of these banks, according to MFB regulations, would be decided by the State Bank of Pakistan. He said that by law MFBs would be able to access home remittances directly and could deliver at the doorstep of the customer. He added that the objective was to extend the outreach, and the beneficiaries could benefit at large and borrowers.
SBP is considering enhancing NRSP (National Rural Support Programme) status to National Microfinance Bank. It also plans to provide PPF with credit enhancement tools, where NGOs could borrow from PPF more than 2-3 times for one rupee of a loan. He stressed on improvising governance at Khushhali Bank to make it profitable to the extent where it should become operationally sustainable and its role could be maximised.
The objective is that the top three institutions should facilitate MFBs to raise more and more deposits. He said that with these three top Microfinance institutions and 5 MFBs in private sector, achieving the target of 10 million borrowers was not difficult.
He said that three private sector MFBs are working on national and two on district levels and it is needed to create an environment for MFBs where they can access resources from commercial banks.
Qasim said that at present a microfinance loan ranges between Rs 13-14000 and after three years it is likely to reach up to Rs 20,000. He said that in next few years banking system would need Rs 46 billion additional resources, which are likely to be raised through equity or through commercial bank support.
He said that for maximum outreach it has been proposed to access services of Pakistan Post, where microfinance banks and institutions are not required to open their branches but can access Pakistan Post services. This would help in cost cutting of newly established MFBs.
He said that it is planned to use mobile phone technology to access loan and to repay instalments. A proposed regulatory regime in consultation with Pakistan Microfinance Network (PMN) is placed on SBP website for recommendations.
He said that subsidies should be considered only in areas where acute poverty exists and financing is not possible through cost recovery concept. This is called difficult terrain. In non-difficult terrain financing will be provided on cost recovery concept only.
Talking of the credibility of the system, he said that no leakages had been reported so far. It is estimated that Pakistan is a market of 30 million microfinance borrowers. In 2006, only 0.75 million borrowers were reached, and up to March 2007 the number has crossed 1.13 million borrowers.
He added that the recovery rate of these 1.13 million borrowers was 98 percent. However, efforts were going on to eliminate 2 percent also. He said that misuse was not likely as the size of the loan is small, and added that NGOs were working on community basis and social pressure of the group would eliminate any such incidents.