KARACHI: The State Bank on Wednesday launched a microfinance-exclusive credit information bureau (MF-CIB) to give a boost to the microfinance sector.

Highlighting the importance of the sector and its role in Pakistan’s economy, Governor, State Bank, Yaseen Anwar, on this occasion, stated that the bureau would help microfinance banks and microfinance institutions in developing a robust risk management system and practices, which in turn reduce the risk of multiple borrowing and loan defaults.

Qazi Azmat Isa, CEO, Pakistan Poverty Alleviation Fund (PPAF), Syed Mohsin Ahmed, CEO, Pakistan Microfinance Network (PMN) and speakers from UK Department for International Development (DFID) and International Finance Corporation (IFC) highlighted the significance of this initiative and congratulated the SBP, PMN and PPAF for achieving an important milestone in developing a robust microfinance sector in Pakistan.

The SBP governor further stated that the MF-CIB would 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 borrowers.

He said Pakistan has one of the lowest financial penetration levels in the world with 56 per cent adult population totally excluded, and another 32 per cent informally served.

The SBP chief said that at present even the credit-worthy borrowers of microfinance institutions face difficulty in accessing larger loans from microfinance banks or commercial banks due to non-availability of their long history of loans and timely repayments with a microfinance institution.

The MF-CIB would facilitate in the ‘graduation’ of such livelihood-based workers into small entrepreneurs, he said.

He said that this nation-wide MF-CIB would 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 would improve significantly, he added.

He said the SBP believes that a policy framework for credit bureaus is essential for their smooth and long-term growth.

The government and the SBP have already been working on the development of a legal framework, which would strengthen private CIBs by establishing criteria for licencing, issuing regulations, and creating oversight mechanism.

All this would result into stakeholders’ satisfaction, and, most importantly, it will boost public confidence, he added.

He said that the SBP had played a sterling role in the development of microfinance sector as an alternative to conventional banking to serve the lower end of the market.

However, there is a global shift from microfinance to inclusive finance, that is, from supporting microfinance initiatives in isolation to building inclusive financial sector, he added.

Financial inclusion, which is a core component of SBP’s financial sector development strategy, would also stimulate economic growth for the country, he said, adding that it envisages transforming the financial market into an equitable system with efficient market-based financial services to the otherwise excluded poor and marginalised population, including women and young people.