State Bank of Pakistan Governor Yaseen Anwar has said that Microfinance-exclusive Credit Information Bureau will help Microfinance Banks (MFBs) and Microfinance Institutions (MFIs) in developing robust risk management system and practices, which in turn reduce the risk of multiple borrowing and loan defaults.
He said this while addressing at national roll-out of Microfinance-exclusive Credit Information Bureau (MF-CIB) at SBP Learning Resource Centre here on Wednesday. He said the MF-CIB will open access to credit for millions of potential poor borrowers and reduce the credit risk cost of the lenders, besides lowering the loan price for the borrowers.
Anwar pointed out that at present even the credit-worthy borrowers of microfinance institutions face difficulty in accessing larger loans from MFBs or commercial banks due to non-availability of their long history of loans and timely repayments with a microfinance institution. ‘The MF-CIB will facilitate in the ‘graduation’ of such livelihood-based workers into small entrepreneurs,’ he added.
He said that this nation-wide MF-CIB will be a major step for both lenders and borrowers with positive impact. ‘As the CIB expands its operations across the country, the quality and efficiency of the loan appraisal process will improve significantly, he added.
SBP believes that a policy framework for credit bureaus is essential for their smooth and long-term growth, he said., adding that the Government and SBP have already been working on the development of a legal framework, which will strengthen private CIBs by establishing criteria for licensing, issuing regulations, and creating oversight mechanism. ‘All this will result into stakeholders’ satisfaction, and, most importantly, it will boost public confidence,’ he added.Governor SBP urged upon the CEOs/ Presidents of MFBs and MFIs to improve corporate governance, management structures and put in place adequate systems & policies in their respective organizations for ensuring protection of consumer rights.
SBP is already in the process of revising regulations to ensure that MFBs follow best standards in these critical areas, he said and added: ‘We count on your wisdom and commitment to reach out to millions of financially excluded people.’ SBP encourages that credit growth should be fairly distributed across all economic, social, and geographic segments of the target market. ‘The MFBs and MFIs should develop innovative credit methodologies and appropriate risk management policies to maintain growth and quality of loan portfolios,’ he added. It may be pointed out here that the MF-CIB is a joint initiative of the SBP, PMN and PPAF, with funding support from the DFID under its “Financial Inclusion Program” being managed by the SBP.
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