KARACHI: The State Bank of Pakistan (SBP) has allowed Microfinance Banks (MFBs) to treat gold as eligible collateral with zero percent weight for calculation of capital adequacy ratio (CAR), a statement said.
In a circular, the central bank advised presidents and chief executives of all the microfinance banks regarding the changes made for calculation of CAR.
Analysts said that the initiative was taken to increase the advances of MFBs, which were badly affected during the last quarter of 2010.
The advances of MFBs declined by 7.5 percent to Rs9.985 billion by December 2010 against Rs10.79 billion in September 2010, they said.
The analysts said that it would also help the small business units or individuals to obtain loans against gold.
The MFBs credit growth was overall positive in 2010, however, due to floods the issuance of loans was badly affected.
“The negative growth was mainly due to the devastating floods during the third quarter of 2010 that gripped most parts of the country,” the SBP said in a report on MFBs.
“Moreover, an overall difficult macroeconomic environment continues to challenge the credit growth of microfinance players,” the central bank added.