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Pakistan Governor SBP to Launch Pilot MF-CIB on May 21
Source: brecorder.com
Source Date: Thursday, May 20, 2010
Focus: Institution and HR Management
Country: Pakistan
Created: May 24, 2010

Governor State Bank of Pakistan (SBP), Syed Salim Raza will launch a pilot Micro Finance-Credit Information Bureau (MF-CIB) in Lahore on May 21, 2010. The MF-CIB, which is a joint venture of Pakistan Microfinance Network (PMN), UK's Department for International Department (DFID), Citi-Foundation, and SBP, will be a landmark achievement for the Microfinance sector in Pakistan. Globally, this initiative is being viewed as a unique public-private partnership model in which SBP, PMN and its members (association and industry players) will be working together to build synergies and provide a much-needed service for the microfinance industry. Moreover, the MF-CIB will be a significant step towards improved risk management practices and reducing over-indebtedness of low-income clients. Initially, the pilot credit bureau will contain data only from the eleven Microfinance Providers (MFPs) working in Lahore district. These players comprise three Microfinance Banks, five Microfinance Institutions, two Rural Support Programmes & one Commercial Finance Institution. The pilot will start reporting "negative" (defaulters) list supplied by these organisations. The pilot Credit Bureau in Lahore will serve as a centralised database to store all past and present credit transactions of an individual who has been declared a defaulter. Currently, Microfinance Banks (MFBs) regulated by SBP, have access to SBP's e-CIB; however, a large number of MF clients (approximately 50%) are served by non-regulated MFIs with no credit history of their customers either at SBP or a private CIB. Both MFBs and MFIs are operating in the same market with good chances of overlapping customers and thus, risk of multiple-lending and over-indebtedness exists. The pilot bureau will provide an opportunity for the MFPs to experience real benefits of a fully functional credit bureau as it will provide client's credit profile, containing demographic information, ensuring proper identification including pertinent information relating to the creditworthiness and repayment capacity of an applicant. MFBs can use this pilot Credit Bureau to broaden the potential lending base, promptly determine potential borrower's credit worthiness, streamline credit investigation process, timely repayment due to public awareness of reporting back to bureaus and reduce lender losses. Whereas, borrowers can have the benefit of increased availability of credit, lower borrowing costs, increased purchasing power and incentive to build a credit history. It may be mentioned here that in recent years, Microfinance outreach in Pakistan has grown rapidly. The total number of Microfinance borrowers as of December 2009 stands at 1.83 million as compared to only 330,000 in December 2003. This has been supported by an enabling policy and regulatory environment provided by SBP and the sustained commitment by government of Pakistan. This upward trend is likely to continue over the next few years. Moreover, Microfinance outreach in Lahore stood at 195,501 active clients in December 2009. Other districts of Pakistan that account for a relatively large proportion of total national outreach (active borrowers) are: (i) Karachi at 103,302 ii) Faisalabad at 100,497; and (iii) Bahawalpur at 74,587 as of December 2009.
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