Prudential Regulations for Microfinance Banks/Institutions of 2007


(amended through 2010)

Prudential Regulations for Microfinance Banks and Institutions provide regulations for Microfinance Banks (MFBs), issued by the State Bank of Pakistan, apply to all MFBs that the State Bank of Pakistan has licensed.  

The regulations address the following topics:

  • The definition of terms such as “approved securities”, “equity”, “exposure”, etc;
  • Minimum capital requirements for a MFB to commence business;
  • Extent of exposure to contingent liabilities;
  • Maintenance of cash reserves and liquidity;
  • Statutory reserves;
  • Deposit protection;
  • Restrictions on certain types of transactions;
  • Maximum loan size and maximum exposure of a borrower;
  • Classification of assets and provisioning requirements;
  • Investments and other assets;
  • Rescheduling and restructuring of loans;
  • Pricing of products and services;
  • Prevention of the criminal use of MFB channels;
  • Removal of records;
  • Management;
  • Places of business;
  • Reconciliation of inter-branch accounts;
  • Audits;
  • Operational policies;
  • Criteria for Board members and the Chief Executive;
  • Statistical submission requirements;
  • Credit ratings;
  • Penalties on violation of prudential regulations;
  • Definition of “poor person”;
  • Disclosure of lending and deposit rates by MFBs; and
  • Declaration of fidelity and secrecy.

These regulations have been amended by MFD Circular No. 2 of 2010 (amending MFB prudential regulations on cash reserve & liquidity), MFD Circular No. 2 of 2010 (amending various MFB prudential regulations), and BSD Circular No. 7 of 2010 (amending MFB prudential regulations on minimum capital requirements). All three aforementioned circulars can be found under “Related Amendments”.