MICROCAPITAL BRIEF: State Bank of Pakistan (SBP) Reduces Provision Requirements for Microfinance Loans

The State Bank of Pakistan (SBP) has withdrawn general provision requirements for loans extended by microfinance banks (MFB) that are secured against collateral. In the words of a circular issued by SBP, “It has been decided to withdraw the general provision requirements wherein loans have been secured against gold or other cash collateral with appropriate margin.” The dispatch also establishes that for collateral-free loans the general provision requirement has been reduced to 1 percent of net outstanding loans, a 50 basis point decrease from the existing requirement of 1.5 percent. [1]
By Kristha Abores, Research Associate
About State Bank of Pakistan (SBP):
Established in 1956, the State Bank of Pakistan (SBP) is the nation’s central banking authority. SBP is responsible for the following primary functions: to regulate and supervise the nation’s financial system, to carry out monetary policy and to manage public debt. In addition, SBP performs the following non-traditional functions: developing the financial framework of the country, providing credit to priority sectors and furthering the Islamization of the banking system.
Sources and Additional Resources:
[1] State Bank of Pakistan, AC&MFD Circular Letter No. 01 of 2011, http://www.sbp.org.pk/acd/2011/Cl1.htm
MicroCapital.org article, August 22, 2011, “MICROCAPITAL BRIEF: State Bank of Pakistan (SBP) Reports 13% Quarterly Decline in Microfinance Bank Deposits, Slow Recovery After 2010 Floods”, http://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-reports-13-quarterly-decline-in-microfinance-bank-deposits-slow-recovery-after-2010-floods/
MicroCapital.org article, August 2, 2011, “MICROCAPITAL BRIEF: CGAP Reports State Bank of Pakistan (SBP) Removing Regulatory Barriers to Branchless Banking”, http://www.microcapital.org/microcapital-brief-cgap-reports-state-bank-of-pakistan-sbp-removing-regulatory-barriers-to-branchless-banking/
MicroCapital.org article, May 19, 2011, “MICROCAPITAL BRIEF: State Bank of Pakistan Launches GBP 10m Financial Innovation Challenge Fund (FICF) to Support Innovation Contests, Government-to-Person (G2P) Payments”, http://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-launches-gbp-10m-financial-innovation-challenge-fund-ficf-to-support-innovation-contests-government-to-person-g2p-payments/
MicroCapital.org article, March 21, 2011, “MICROCAPITAL BRIEF: State Bank of Pakistan (SBP) Announces Launch of $16m Financial Innovation Fund, Support for Mainstreaming Microfinance into Formal Banking System”, http://www.microcapital.org/microcapital-brief-state-bank-of-pakistan-sbp-announces-launch-of-16m-financial-innovation-fund-support-for-mainstreaming-microfinance-into-formal-banking-system/
MicroCapital Universe Profile: State Bank of Pakistan, http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=State+Bank+of+Pakistan+%28SBP%29
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