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The Presidents / Chief Executive Officers
All Microfinance Banks
Dear Sirs,
Amendment in Microfinance Credit Guarantee Facility (MCGF)
Please refer to AC&MFD Circular No. 03 of 2012 dated June 21, 2012 and other instructions issued from time to time on the subject.
2. The MCGF Guidelines have been revised to facilitate Commercial Banks/ DFIs for lending to Tier 2 Microfinance Banks (MFBs)/ Microfinance Institutions (MFIs). The MFBs/ MFIs Tiering Criteria, for the purpose of MCGF, is as follows:
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MFBs/ MFIs (Tier 1) |
MFBs/ MFIs (Tier 2) |
Institutional Profile |
Mature, financially sustainable, and large MFPs that are operational for 5 years or more |
Small or medium sized, slightly less mature MFPs that are operational since 3 years or more |
Size (Gross Loan Portfolio |
> Rs. 3,000 million |
Rs.500 million or more |
Sustainability |
i) Positive RoA for the last year AND
ii) PAR > 30 days should be < 10 %
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i) Improving trend in RoA in last 3 years and RoA in last year should not be <-10% AND
ii) PAR > 30 days should be < 10 % |
Transparency |
Audited financial statements for at least the last 3 years |
Audited financial statements for at least the last 3 years |
3. The extent of risk coverage provided to the Lending Institutions or investors under the MCGF will be as follows:
Beneficiary |
Type of Financing |
Guarantee |
Risk Coverage |
Microfinance Bank/ Microfinance Institutions (Tier 1) |
Bilateral |
Banks/DFIs |
25% First Loss Guarantee or 40% Partial Guarantee |
| Redeemable Capital |
Individual Investors through Trustee |
Microfinance Bank/ Microfinance Institutions (Tier 2) |
Bilateral |
Banks/DFIs |
60% Partial Guarantee |
The eligibility of MFPs for various risk sharing options will be assessed on the above criteria. The MFPs failing to meet any of Tier 1 criteria shall be assessed against Tier 2 criteria.
4. The interest rate under MCGF shall not exceed 2 (two) per cent over and above the Karachi Interbank Offer Rate (KIBOR) of relevant tenor. The tenor of KIBOR should be the same as of tenor/ re-pricing tenor of the loan.
5. All Banks/DFIs/MFPs are advised to finalize their funding deals under MCGF and submit their cases to SBP BSC for issuance of subject Guarantee as per procedure envisaged in the guidelines attached herewith.
6. This supersedes all earlier instructions/guidelines issued in this regard.
Please acknowledge receipt.
Encl: Revised MCGF Guidelines
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