Pakistan: Guidelines for Islamic microfinance business

Sep 2007
United States, September, 10 2007 - State Bank of Pakistan has formulated guidelines for provision of Islamic microfinance products and services by financial institutions titled Guidelines for Islamic Microfinance Business by Financial Institutions which aimed at broadening the coverage of microfinance products and services to low income segments of the society in a Shariah compliant manner.

These guidelines stipulate four types of institutional arrangements for offering Islamic microfinance on establishing full fledged Islamic Microfinance Banks (IMFBs), Islamic Microfinance Services by Full-fledged Islamic Banks, Islamic Microfinance Services by Conventional Banks and Islamic Microfinance Services by Conventional Microfinance Banks (MFBs).

According to the press statement issued by SBP on Monday, the criteria mentioned in these guidelines shall be in addition to the requirements already issued by SBP under respective category of financial institutions. These regulations and guidelines, by any means, are not replacing the regulations and guidelines already issued by SBP from time to time in this area.

Commercial and microfinance banks interested in building Islamic microfinance portfolio should review the different institutional/organizational arrangements and select, one or the combination of more than one mode, based on their organization structure, capacity and overall objectives.

Pakistan is among the few countries in the world, which has a separate legal and regulatory framework for Microfinance Banks. The framework allows microfinance and commercial banks to extend range of microfinance services to poor and low income people through various arrangements.

With the growing popularity of Islamic Banking in the country, it was deemed necessary to provide options for provision of Islamic microfinance services by microfinance and commercial banks as well as allowing full fledged Islamic microfinance banks in the country.


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