Pakistan: Prudential Regulations for Microfinance Banks/Institutions

This is a set of regulations applicable to all microfinance banks (MFBs)/ microfinance institutions (MFIs) licensed by the State Bank of Pakistan. The Directive details the provisions concerning:

• Minimum capital requirement;
• Exposure against contingent liabilities;
• Percentage of maintenance of cash reserve and liquidity;
• Statutory reserve and depositors' protection fund.

Further, the Law lists provisions relevant for MFBs/MFIs for the following:

• Classification of assets and provisioning requirements;
• Rescheduling/ restructuring of loans;
• Writing-off non-performing loans;
• Pricing policies of microfinance products and services.

The decree imposes certain restrictions on the following activities:

• Criminal use of MFI/ MFB channels for the purposes of money laundering and other unlawful trade;
• Undertaking of cash payments outside the MFI's/MFB's authorized place of business;
• Removal of records and documents.

Finally, the Act specifies requirements relating to:

• Cash payments, accounts and audit;
• Submission of statistical returns.