KARACHI, Sept 7: Micro-finance banking for the poor will receive a boost in coming weeks when a new micro-finance bank will be launched here. This is the third licence, the State Bank of Pakistan (SBP) has granted to the private sector.
The SBP, sources said, is mulling over a proposal to allow those banks which are unable to meet the capital requirement of Rs2 billion by 2006, turn into micro-finance institutions (MFIs). The network of the MFIs is being widened as a part of the poverty alleviation strategy.
The Khushhali Bank was the first MFI to be set up in public sector followed by the First Micro-Finance Bank by Aga Khan. Sponsors of the Micro-Finance Bank who received the licence from the State Bank in May this year are awaiting an approval of listing from the Karachi Stock Exchange to begin their operations. The KSE is likely to grant the approval in about 4-5 weeks.
Operating at first from Karachi, the bank would have an initial paid up- capital of Rs100 million, 40 per cent of which would be raised through public subscription, Chief Executive Officer of the Network Leasing Corporation (NLC) (sponsor) Asif Siqdiqui told Dawn. The NLC has paid-up capital of Rs200 million.
Sources further said the Rozgar Micro-Finance Bank, a project of banking and allied professionals, is to receive a licence in the next few days for operations in Karachi.
The sponsors are allowed six months to start business from the date of issue of licence. The sponsor-directors of the Rozgar include Badr-ud-Din Khan, a former head of the Industrial Development Bank of Pakistan and Afzal Munif, a well- known chartered account and a former provincial minister in the Sindh government.
The SBP is also processing an application by the Pak-Oman company for a licence but it would take some time to reach to a decision, the sources added. Under the State Bank policy, the paid-up capital for a micro-finance bank is linked to the size of its operations.
For city operations, the amount is Rs100 million, for provincial banks Rs250 million and for national operations Rs500 million. Asif Sidiqui said that it is prudent to start with one city and then enlarge the operations on the basis of experience and expertise.
Describing prudential rules for the micro-finance institutions as "generally in line with the best practice, the IMF reckons that "the minimum capital requirements seem high (Rs500 million or US $8.8 million for a national licence) and would discourage entry." Lower requirements apply to district level banks, but they are still high, says the Fund.
Being concerned about the financial health of lending institutions, the State Bank is moving more cautiously in unexplored markets so far. By far, the largest operation of micro-finance is that of the Khuhhali Bank.
With a network of 40 branches and 70 service centres across 41 districts, the Khushhali Bank has extended loans amounting to Rs3 billion to nearly 150,000 borrowers, says the Pakistan Economic Survey 2003-2004 recording progress up to nine months the previous fiscal year.