lastly, there are concerns over gender and regional participation will have to be critically examined and addressed in order to make microfinance ’ s ability to fight poverty more meaningful. new initiatives 5. today the biggest challenge faced by microfinance is scaling up. although microfinance operations can become successful in achieving sustainability, however, initially these cannot grow on solely deposit mobilization or retained earnings, nor can it raise capital in financial markets. in order for microfinance to play a bigger role in improving livelihood opportunities for the poor and alleviate poverty, it must be scaledup significantly and must become sustainable to be able to generate profits and mobilize deposits and capital from alternative sources. this would require a number of things including institutional strengthening and specific interventions to resolve market failures. the commercialization for greater outreach and sustainability require greater institutional building blocks which in turn require new partnerships. 6. i am pleased to announce that sbp today is launching three facilities for the support of microfinance sector to promote financial inclusion. 1 ) the microfinance credit guarantee facility 2 ) the institutional strengthening fund ; and 3 ) the improving access to finance services fund 7. these measures are expected to ease liquidity constraints of microfinance providers in view of the tighter liquidity conditions and sudden spike in inflation which has severely affected the poor and marginalized segments of the society. the microfinance credit guarantee facility 8. this is expected to increase the flow of credit to microfinance sector. the facility aims to incentivize banks / dfis to channelize funds to mfbs / mfis for on lending to low income segment of the population. the facility will provide credit guarantees of up to 40 percent of the funding provided by banks / dfis and aims to develop market and graduate poor borrowers to mainstream financial service providers. the facility will be established at sbp with uk government financial inclusion program grant funds equivalent of up to gbp 10 million to be used as the guarantee fund. the state bank has issued necessary guidelines for operationalizing the facility which were finalized after due consultation with stakeholders. 9. commercial banks are allowed options to undertake microfinance business directly and in partnership with mfis by providing wholesale funds to them for on - lending through four different modes i. e. a ) mf counters in existing branches, b ) standalone mf branches, c ) establishment of independent subsidiary mfb, and d ) linkage with ngo - mfi. the mcg facility is

companies. under the prevailing legislative structure the supervisory responsibilities in case of banks, development finance institutions ( dfis ), and microfinance banks ( mfbs ) falls within legal ambit of state bank of pakistan while the rest of the financial institutions are monitored by other authorities such as securities and exchange commission and controller of insurance. in pakistan, while the overall assets of the financial sector have increased from rs. 5. 202 trillion in 2005 to rs. 11. 107 trillion in 2011, the share of the financial sector in terms of gdp is very low at 57. 4 percent. in 2011, banks held 74 percent of the financial assets while the share of nbfis was only 4. 7 percent of the total financial sector assets which was around 7. 6 percent in 2005. the low financial sector to gdp ratio and nbfis shadow banking : scoping the issues : a background note of the financial stability board, 2011. bis central bankers ’ speeches declining share in financial sector assets clearly underscores the need for financial sector development and diversification of financial sector assets to attract investors with different return expectations and risk appetite and channelize financial resources for the economic development of the country. therefore, today ’ s conference is very important and we should use this opportunity to understand the key bottlenecks in the way of financial sector development and also come up with concrete measures to address these shortcomings in a sustainable manner. alan greenspan identified the role of nbfis in strengthening an economy, as they provide “ multiple alternatives to transform an economy ’ s savings into capital investment [ which ] act as backup facilities should the primary form of intermediation fail ”. 2 on the other hand, the nbfis offer an alternative to typical commercial banking saving - investment products. however, in pakistan, nbfis other than investment banks and leasing companies which offer saving and investment products on a relatively small spectrum need to develop appropriate and affordable products to increase its market share. the key negative outcome of this is that there remains limited access to funding resources and relatively higher risk avenues to earn spreads. here i would like to briefly touch on the major constraints that the nbfi sector in pakistan is beset with : first, although there has been an increasing effort by nbfis to broaden the range of their business activities and product base, thereby diversifying their revenue streams, the sector is yet to make a breakthrough in this regard. second, the sector is fragmented and each nbfi