KARACHI: State Bank of Pakistan (SBP) on Wednesday issued revised Microfinance Credit Guarantee Facility (MCGF) Guidelines offering higher risk coverage of up to 60% to commercial banks, development finance institutions (DFIs) for lending to smaller microfinance banks (MFBs)/microfinance institutions (MFIs).
The facility is expected to graduate smaller MFBs/MFIs to avail credit lines from commercial banks/DFIs for onward lending to microfinance clients, said a SBP press release.
Microfinance Credit Guarantee Facility (MCGF) is a credit enhancement facility to attract market-based and long-term finance for microfinance institutions.
MCGF was launched by the State Bank in December 2008 with pounds 15 million funding support from United Kingdom’s Department for International Development (DFID) under the Financial Inclusion Programme (FIP) which is being implemented by SBP.
The facility is focused on market development and has been instrumental in resolving the funding constraints of the microfinance sector in Pakistan.
So far, six large MFBs/MFIs have completed 38 transactions with commercial banks and capital markets/retail investors mobilising Rs 12.825 billion for onward lending to around 650,000 micro borrowers.
This has significantly helped in reducing the risk perception of banks towards the microfinance sector; thus introducing poor borrowers to mainstream financial institutions.
The revised Guidelines on MCGF have been issued by SBP on January 28, 2015.
This supersedes all earlier instructions/guidelines issued in this regard.