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Evolution of Regulatory Framework for MF Sector in Pakistan
Understanding Pakistan's regulatory environment for microfinance
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This note gives an overview of the regulatory environment for microfinance in Pakistan. Pakistan's microfinance sector has been dominated by NGOs and rural support programs since the early 1980s. The State Bank of Pakistan is the main regulatory authority for the sector. The Ministry of Finance, supported by Asian Development Bank, launched the Microfinance Sector Development Program to regulate the governance of microfinance. The current regulatory environment enables microcredit providers to access commercial capital, increase service portfolio and offer e-banking to active borrowers.The note highlights major developments in Pakistan's microfinance sector and its regulatory environment. These include:
- Introduction of Microfinance Ordinance 2000;
- Establishment of Khushali Bank, the country's first microfinance bank;
- Formulation of Prudential Regulation for Microfinance Banking, 2001, which stipulates functions, capital requirements, ownership structure, audit and disclosure requirements and winding-up procedures for microfinance banks or institutions;
- Introduction of supporting regulations for microfinance.
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