In order to increase financial inclusion in Pakistan, the SECP is providing enabling regulations for the non-banking microfinance institution segment. Specialised Companies Division Commissioner Zafar Abdullah said this while speaking at a seminar on Islamic microfinance at the SECP head office.
Microfinance promotes financial inclusion without compromising the dignity of the individuals and it is only befitting that interest-free financing should enjoy the support of both policy makers and citizens, he added.
Microfinance is a regulated activity in Pakistan and only those entities, which are either licensed from the SBP or the SECP can undertake the microfinance business. A company registered under the companies ordinance can become a non-bank finance company or an NGO for providing microfinance. Twenty entities have already obtained a license from the SECP and more are in process.
Becoming a regulated entity offers huge benefits to the microfinance providers, including greater donor confidence, more fundraising opportunities, and recognition as a financial institution. The SECP’s framework allows microfinance providers to use both conventional and Islamic modes of financing. In developing microfinance regulations, the SECP has been actively engaging with stakeholders in microfinance including Pakistan Microfinance Network, Pakistan Poverty Alleviation Fund, as well as providers of microfinance, explained Saima Ahrar from SECP Policy, Regulation, and Development Department concerning microfinance.
Dr Amjad Saqib, Executive Director of Akhuwat, the largest interest-free loan provider in Pakistan, said that it had disbursed Rs37 billion among 1.8 million households with a 99.9pc recovery rate. It relies on donations, qarze husna and a spirit of volunteerism.
Usman Hayat, head of Islamic Finance Department at SECP, pointed out that the proposed Sharia governance framework by the SECP is meant to cover all sectors regulated by SECP and it will address the sector-specific requirements of Islamic microfinance institutions.
This seminar on Islamic microfinance was organised in collaboration with Center for Excellence in Islamic Finance (CEIF) IMSciences Peshawar, and participants from the Ministry of Finance, the National Rural Support Program, and academia attended it.
