KARACHI, March 5: The State Bank on Monday introduced changes in prudential regulations to facilitate Micro Finance Banks (MFBs) in the wake of rising demand of small loans and increasing role of microfinancing.

The SBP said the microfinance banking had witnessed a considerable growth in recent years. However, keeping in view the existing large unmet demand in microfinance sector and the need for strengthening institutional capacities of MFBs, certain changes in the existing legal and regulatory framework have been made.

Some amendments have already been made in MFIs Ordinance 2001 through Finance Bill 2006.

The current changes in Prudential Regulations for MFBs mainly relate to increase in maximum loan size, investment of surplus fund, minimum income threshold, submission of audited financial statements, and declaration of Fidelity and Secrecy. The revised regulations will come into force with immediate effect.

According to revised prudential regulations the MFB will not extend loans exceeding Rs150,000 to a single borrower. However at least 80pc of loan portfolio amount of an MFB should be within the loan limit of Rs100,000 or below.

The MFB will ensure that the loan amount commensurate with the business requirements and repaying capacity of the borrower. The MFB will also ensure that the loans equivalent to the maximum limit are extended only to those borrowers who have established track record of satisfactory repayment.

The MFB will ensure that total exposure of its clients from banks, MFIs, MFBs, other financial institutions, NGOs etc., does not exceed Rs150,000 in aggregate. They will obtain a certificate from the clients regarding borrowings from banks and other MFIs, MFBs and NGOs.