KARACHI, Oct 19: The State Bank has advised those interested in setting up microfinance banks/institutions to obtain application forms from the director of its Banking Supervision Department or download from its website.

A press statement issued by the central bank says that those interested in setting up microfinance banks (MFBs)/institutions (MFIs) may apply as per this criteria:

1. The MFB/MFI shall be a public limited company incorporated in Pakistan under Companies Ordinance 1984.

2. The Memorandum and Articles of Association and the proposed name shall be cleared by the SBP before incorporation with the Securities & Exchange Commission of Pakistan.

3. MFBs/MFIs shall have a minimum paidup capital of Rs 500 million; Rs 250 million and Rs 100 million for countrywide, province-wide and specific district-wide operations respectively.

4. At least 51 per cent of the total paidup capital shall be subscribed by the promoters or sponsor members and the shares subscribed to by the sponsors shall remain in the custody of the SBP and shall not be transferable.

5. The number of sponsor directors shall not be less than seven. The amount proposed to be subscribed by each sponsor director is required to be indicated separately.

6. Sponsor directors should have declared personal net worth which should not have been less than the amount to be subscribed by them personally.

7. The institutional sponsors shall submit a resolution of their respective boards/governing bodies for (i) sponsoring the MFB/MFI either individually or in collaboration with other persons (ii) the amount to be subscribed and (iii) the nomination of directors representing the institution on the MFB/MFI board.

8. The sponsor directors and chief executive shall submit commitment letters to serve in their respective positions.

9. Foreign investment shall be allowed in accordance with the government foreign investment policy. While dividends may be repatriated with SBP approval the repatriation of capital will be allowed at inter-bank exchange rate in case of sale of shareholding to sponsors acceptable to SBP.

10. Applications shall stand disqualified if any of the sponsor directors or their spouses: (i) has been convicted (ii) has been associated with any illegal activity (iii) has failed to meet his/her obligations to banks/financial institutions (iv) has defaulted in tax payment (v) holds or has held the position of director/chief executive of a corporate whose corporate and tax record has been unsatisfactory; and (vi) maintains adverse reputation.

11. No person shall be on he board of more than one MFB/MFI.

12. No more than 25 per cent of the sponsor directors should be from the same family.

13. The chief executive shall be a professional with sufficient experience as microfinance specialist or senior banker.

14. The MFI must commence operations within six months of the grant of licence by the SBP.