KARACHI, June 27: The State Bank on Tuesday issued guidelines for commercial banks to undertake microfinance business and suggested four different modes to carry out operations.

Under the SBP guidelines the banks can adopt following four modes for offering microfinance services which included (i) establishment of microfinance counters in the existing branches; ii) designating standalone microfinance branches, either through conversion of existing branches or opening new branches; iii) establishing independent microfinance subsidiary with independent and professional board and management under MFIs Ordinance 2001; and iv) developing linkages with microfinance banks (MFBs) licensed by SBP and NGO-MFIs that are not licensed by SBP to extend wholesale funds for onward lending.

The commercial banks interested in building microfinance portfolio should review the different institutional and organisational arrangements and select, one or the combination of more than one mode, based on their organisation structure, capacity and overall objectives, the central bank said in a circular.

The microfinance operations of commercial banks through microfinance counters at conventional branches, standalone microfinance branches and wholesale funds to NGO-MFIs would be subject to Prudential Regulations.

However, microfinance operations through establishment of independent microfinance subsidiary, with independent and professional board and management, would be governed under MFIs Ordinance 2001 and Prudential Regulations applicable on microfinance banks.

The SBP circular said that Pakistan was one of the few countries in the world which had a separate legal and regulatory framework for microfinance banks. The framework allowed the MFBs to extend range of microfinance services including savings and payment transfer facilities to the marginalised people and their micro enterprises.