A circular issued by the State Bank of Pakistan (SBP) stated that it has withdrawn the facility of issuing credit guarantee, which was an incentive to financial institutions in lending to small businesses. The SBP had launched the Microfinance Credit Guarantee Facility (MCGF) in December 2008 to incentivise commercial banks and DFIs for the provision of commercial capital to microfinance providers for on-lending to their clients.
This MCGF has played an active role in easing commercial funding for microfinance sector, which aided in developing a strong relationship between banks and microfinance providers, it added.
The MCGF is now at the end of its lifecycle and it has successfully demonstrated the viability of microfinance industry to the commercial banking sector, the SBP stated. Furthermore, Pakistan Microfinance Investment Company (PMIC) has been incorporated to meet the funding needs of the sector, it added.
Consequently, the decision has been taken whereby the SBP would terminate to issue new guarantees under MCGF, the circular said, adding, the guarantees issued earlier would remain valid till their expiry.
