Please refer to Section 10 (2) of the Microfinance Institutions Ordinance, 2001 which states that “Not less than fifty-one per cent of the paid up capital of a microfinance institution shall be subscribed by the promoters or sponsor members and the shares subscribed to by the promoters or sponsor members shall remain in the custody of State Bank and shall neither be transferable nor encumbrance of any kind shall be created thereon without prior permission, in writing, of the State Bank”.

2. It has been decided that the sponsor shares and subsequently issued bonus/right shares issued to sponsors of Microfinance Banks (MFB) shall be deposited in the Central Depository Company of Pakistan Ltd (CDC) in the following manner:-

(i) All sponsor shares and subsequent right and bonus shares, including those deposited with SBP Banking Services Corporation (BSC), shall be deposited in a blocked account with the CDC. The procedure for deposit of sponsor shares in CDC blocked account is provided in enclosed Annexure-A;

(ii) No withdrawal of the sponsor shares from CDC blocked account would be allowed without prior written permission of SBP;

(iii) Blocked account should be opened by the sponsor shareholders of MFBs exclusively for deposit of the sponsor shares and subsequently right and bonus shares issued thereon; and

(iv) Charges for opening and operating of the blocked account with CDC will be borne by the sponsor shareholders.

3. For the purpose of these instructions, the “sponsor shares” and “sponsor shareholders” shall have the following meanings:

i) Sponsor Shares mean 5% or more paid-up shares of an MFB, acquired by a person(s) individually or in concert with his family members (including his spouse, lineal ascendants and descendents and dependents brothers and sisters), group companies, subsidiaries, and affiliates/associates. Such acquisition of shareholding will include all the shares acquired by aforesaid person (s) including, interalia, through

(a) as original subscriber/promoter of the MFB,
(b) subsequent right / bonus issues;
(c) market based acquisition deal,
(d) reconstruction/ restructuring of an MFB carried out by SBP,
(e) strategic sale through privatization,
(f) amalgamation of MFBs, or (g) any other mode of acquisition. All shares acquired by common shareholders, who are also sponsor shareholders of amalgamating MFB in amalgamation transaction shall be considered Sponsor Shares.

ii) Sponsor Shareholders mean all those shareholders of an MFB holding sponsor shares. The members of the Board of Directors of an MFB holding sponsor shares will be considered Sponsor Directors.

4. These instruction shall not be applicable to the shareholding of Federal and Provincial governments in MFBs.

5. The above instructions have been issued in exercise of the powers conferred on SBP under Section 22 of the Microfinance Institutions Ordinance 2001. All the MFBs are advised to ensure meticulous compliance of these instructions.

6. Please acknowledge receipt.

Encls: (Annexure-A)