KARACHI, Feb 23: The State Bank of Pakistan has decided to administer microfinance credit guarantee facility to encourage banks join hands with the financially sound micro-finance banks and micro-finance institutions.

An SBP circular said on Monday that the development finance support department of SBP-BSC Head Office, Karachi, would administer the facility and receive all requests, applications for issuance of NOCs to micro-finance banks and institutions, vetting of draft loan agreements between commercial banks and micro-finance banks and institutions, issuance of guarantees to lending banks or development finance institutions under the facility.

The SBP would also process lending banks’ claims against guarantees issued under the facility.

“The facility is aimed at encouraging banks or development finance institutions join hands with financially and socially sound micro-finance banks and micro-finance institutions for extending financial services to poor and marginalised segments of society,” said the SBP circular.

According to the directions of the SBP, the micro-finance banks and micro-finance institutions interested in obtaining bank loans under the facility would apply to banks or development finance institutions of their choice directly.

The micro-finance banks expecting positive response of their loan applications would apply to Director, DFSD, SBP-BSC for issuance of NOC for creating charge on their assets for securing bank loans under the facility.

The lending bank or DFI and the borrowing micro-finance banks and micro-finance institutions would then directly negotiate and finalise the structure and terms and conditions of the loan in the light of the facility guidelines and other legal and regulatory requirements.

The bank or DFI will submit the draft agreement between the bank and development finance institutions and micro-finance banks and micro-finance institutions to Director, DFSD, SBP-BSC for vetting along with the request for issuance of the Guarantee under facility.