specific sectors. in 2001 sbp issued microfinance ordinance and supportive prudential regulations as well as guidelines to allow setting up of national and regional mfbs and now 6 national level mfbs are licensed. the mf ordinance has been amended last year to ensure that minimum loan size being offered by mf be raised to rs150, 000 to allow providers to service mf business requirement and now mf are allowed to engage in remittances businesses. banks are allowed to lend to small and medium enterprises clean i. e. without collateral up to rs3 million and now sbp is considering broadening it to include small enterprises. in parallel, there are several initiatives to extend financial services to small borrowers. these include : sbp ’ s - sme financing strategy that advocates promotion of credit guarantee schemes and venture capital funds, establishment of sme training centers and capacity building of banks ’ sme loan officers, sme credit risk scoring and competitiveness benchmarking and triennial survey on smes to estimate their demand for the financing. in tandem, sbp has introduced prudential regulations for agricultural financing and guidelines for livestock and fisheries financing ; estimated agricultural credit demand for complete value chain from production to export by the farmers / growers ; and simplified and standardized loan documents, and offered three years revolving credit scheme with one time documentation and automatic renewal on annual cleanup of principal plus markup for production loans to farmers. sbp has further allowed banks to finance against market / realizable / forced sale value of the agriculture land, urban properties, gold / silver ornaments, etc. and also against two personal sureties ( up to rs. 500, 000 – us $ 8, 333 ) in addition to passbook of the land etc. these initiatives have contributed significantly in enhancing formal institutional agricultural credit disbursement for small borrowers. besides allowing commercial banks and removing caps on house loans and bank based exposure limits for housing finance, the house building finance corporation ( hbfc ) is being corporatized to deal with the back log and demand for new housing units in pakistan, estimated at 19. 3 million including back log of 6 million low income housing units. hbfc, with support of the government, has announced to promote low income housing on sound banking principles. islamic banking, which carries appeal for shariah compliant clients, is being promoted to cater for underserved sectors such as smes, agriculture sector and micro enterprises through sharia

down in the following years due to both overall slowdown in economic activities and the policy - reversal by the government to re - allow institutional investment in nss. the corporate sector issued only two bonds worth rs 6. 1 billion during fy09. in view of the above, the following factors could potentially facilitate the development of a debt market in pakistan. ( i ) the banking sector, which has a virtual monopoly on providing financing to all sectors of the economy, can play a central role in the development of the debt market. banks are often among the most important issuers, holders, dealers, advisers, underwriters and guarantors in the market. given the skewed nature of their balance sheets with maturity mismatch issues, banks can issue long - term bonds for asset liability management ( alm ). this is particularly relevant from the perspective of financing long term projects. to further manage their risk profiles in changing interest rate environments, there are now sophisticated risk ‐ management tools such as interest rate swaps ( irs ) at their disposal. ( ii ) the central bank has a crucial role in promoting secondary market trading of debt securities – by improving the effectiveness of monetary policy implementation. efforts to reduce the volatility of short - term interest rates, while credibly signaling the policy stance, go a long way in increasing investor confidence while promoting the maturity transformation of financial intermediaries ’ portfolios. moreover, stable money market rates foster repo activity and anchor the yield curve as trading develops in longer maturities. sbp has focused essentially on improving the transmission of the policy rate, by managing market liquidity and maintaining the o / n repo rates close to the discount rate. this approach has proved to be very effective and sbp will continue to work towards further improving the mechanisms of monetary policy implementation. ( iii ) development of the term structure of interest rates depends on regular issues in the primary market, increased trading activity in the secondary market, and providing ease of entry and exit to both the issuers and the investors. regular auctions of pakistan investment bonds ( pibs ) since may 2006 is a step in this direction. developing bond markets and enhancing the capacity of public - and private - sector borrowers to issue long - dated, domestic currency denominated debt securities is high on the country ’ s policy agenda. among other factors, the presence of the requisite investor base is crucial for the development of both the primary and the secondary markets in debt securities