now evolving in a number of countries. for instance : in bangladesh grameen bank and asa report that 97 % and 78 % of its total 12 million clients, respectively are women. in mexico, 98 % of the 765, 362 clients of banco compartamos ’ s are women. in indonesia, bank rakyat indonesia reports 50 % of its client are women. this ratio is 70 % in afghanistan and 50 % in pakistan. most microfinance institutions ( mfis ) / microfinance banks ( mfbs ) report a high return on equity and assets and recovery rate is by and large over 90 %. 13. global and regional challenges of reducing poverty and mdgs are daunting but attainable provided there is more accelerated, aggressive, brutal and frontal attack through well coordinated and cohesive economic and social policies as dealing with “ poverty ” is complex given its dimensions and multiple causative factors. 14. recognizing this dilemma, the evolution of financial inclusion that aims to broaden and deepen access to development finance for all, of which microfinance is a subset, is timely. ultimately it is a well functioning and efficient financial market which can deal more holistically with provision of financial services to the economy and population. however, emphasis on building financial inclusive system is an integral and core pillar of financial sector reforms. this has emerged in direct recognition that growth and development of finance does not alone address question of “ access. ” 15. direct intervention to build financially inclusive system is critical as one recognizes fully ( i ) financial markets failures and imperfections such as information asymmetries, lack of sensitivity to gender and redistributive dimensions of resources and wealth and high transaction costs etc. ; ( ii ) high price and non - price barriers such as lack of credit history and collateral and connection ; and ( iii ) other constraints such as lack of literacy and entrepreneurial skills, etc. 16. over the years, there has been substantive development in the architecture and thinking on financial inclusion. while there is no “ one - size fits all ” strategy or approach but it is important to recognize few core or necessary conditions aside from host of other sufficient conditions that are needed to maximize the benefits derived from a well designed financial inclusion strategy. at the outset, it is critical to understand the size and dimension of financial exclusion. 17. drawing from this broad framework, state bank of pakistan ( sbp ) has launched a financial inclusion program with the assistance of

in monetary management monetary policy of pakistan now for some years has been largely supportive of the dual objective of promoting economic growth and price stability. it achieves this goal by targeting monetary aggregates ( broad money supply growth as an intermediate target and reserve money as an operational target ) in accordance with real gdp growth and inflation targets set by the government. qualitatively monetary policy formulation and its implementation has improved substantially, benefiting from the following actions. • first, legislative changes to the state bank of pakistan act has empowered the sbp and sbp central board to formulate, conduct and implement its monetary policy • second, a monetary and fiscal board has been set up to ensure formal monetary and fiscal policy coordination and this board is currently chaired by the prime minister in his capacity as finance minister with representation from economic ministries. • third, the fiscal responsibility and debt limitation act 2005 mandates a steady reduction in revenue deficit to zero by 30th june 2008 and maintaining it thereafter, and reducing total public debt to sixty percent of gdp by 2013 and below that limit thereafter. these two principal steps lay the foundation for reducing fiscal subservience of monetary policy that for years served to complicate monetary management and allowed the government unlimited recourse to low and fixed interest rate financing. • fourth, sbp continues to refine the institutional mechanism for monetary policy formulation and its regular review. for instance, sbp has replaced the open market policy and review committee by the monetary and exchange rate policy committee. this committee meets bimonthly to establish parameters of broad monetary policy and reviews monetary and economic conditions on a regular basis and recommends changes in monetary policy instruments. • fifth, sbp treasury's capacity has been strengthened to manage financial markets and related activities more effectively. proactive conduct of monetary operations and management of market volatility has helped improve market flows. the open market operation ( omo ) process has been institutionalized with better flexibility vis - a - vis tenors and frequency. from 1995 - 2005, sbp's monetary operations were focused on t - bill auctions and predetermined schedule of weekly omos of fixed tenors with no forecasting capability of market liquidity. this resulted in a high degree of volatility in overnight ( o / n ) & shortterm money market rates. during 2005, sbp treasury introduced the money market computerized reporting system ( mm - crs ) for banks which helped in not only assessing the market liquidity, but to improving the