go a long way to help set up businesses on modern lines and will also bring with it the necessary experience and technological support for this industry. while development is underway, it is important to recognize the challenges we are beset with. of principal concern is the low coverage of microfinance services. the microfinance institutional framework currently supports barely 600, 000 active borrowers. existing coverage of the formal microfinance sector is only 10 % of the estimated 6 million households in need of microfinance. the requirements clearly are above these norms as currently one fourth of the population of pakistan is below the poverty line. another feature is the high concentration across institutions, in lending and among clients. khushhali bank and pmn provide the bulk of the services given their edge in starting business early on. but these institutions have only provided lending facilities without adequately tapping the deposit base of their clients. also, their lending profiles reflect a degree of concentration in select regions and sectors. as of march 2006, 41 % of loans distributed by the mfbs are for agri - inputs, 24 % for livestock, 26 % for small enterprises and 9 % for other purposes. this is because khushhali bank which accounts for the bulk of this business is rural focused. an analysis of gender - wise loans granted reveals that 84 % of borrowers are male. average loan size of mfbs is rs 9, 300. the microfinance business further faces difficulty in accessing alternative sources of investment particularly equity investment - which is a world wide problem. knowing how to conduct micro - businesses is an additional challenge in pakistan given its low financial and accounting literacy. the newly licensed institutions will not only help in diversifying the institutional risk and provide better coverage, but also introduce the much needed competition in this area. sbp has further developed the legal framework for microfinance institutions. mfis are governed and regulated by the mfis ordinance, 2001, the promulgation of which resulted in a paradigm shift in the microfinance industry, and has laid the foundation for the systematic growth of the sector. microfinance is now seen as a major tool for eradicating poverty. mfis ’ paid up capital requirements are lower than commercial banks at rs 250 million, 3 and to promote flexibility and innovation, sbp has adopted international standards in establishing requirements for capital adequacy, maximum loan size, credit and operational risks, kyc norms etc. the finance bill for 2006

european union, by offering a fast and efficient alternative to other payment providers, is one of the key reasons why the eurosystem is assessing the issuance of a digital euro. but it is not the only one. the role of the euro as monetary anchor is not only being put to the test by these new developments, but also, and probably more importantly, by the natural evolution of society. the increasing digitalisation of every aspect of our daily lives is reducing the use of cash as a means of payment. should it reach the point where cash is hardly used, the convertibility of central bank money and private money would be put at risk, affecting people's confidence in the latter. we believe that having a digital euro to ensure convertibility between these two types of money would underpin and protect the integrity of the euro as a unit of account. a digital euro could also foster innovation, increase the efficiency of payments, and reduce our current reliance on non - european payment solutions and technologies. i think the benefits of issuing digital central bank money for retail use are clear, but we cannot forget the other side of the coin. cbdcs come, indeed, with a number of challenges. the technical or operational ones, such as setting up a whole new payment infrastructure, giving digital access to central bank money to every citizen and delving into the intricacies of retail payments are obvious difficulties to surmount. however, what seems more challenging to me is being able to reach the delicate balance between achieving our policy objectives and, at the same time, avoiding collateral damage, to the transmission of monetary policy and particularly to the stability of the financial system. it would probably be short - sighted to think that a cbdc would have no impact on the financial system. of course it may replace cash to some extent, but it is difficult to believe that it will not attract a fraction of deposits as well. this means that a cbdc could have implications for financial stability, monetary policy, and the allocation of credit to the real economy. however, dispensing with its issuance in order to preserve the status quo is not an option either. let me explain. we are in the middle of a 3 / 6 bis - central bankers'speeches whirlwind of change, so the question should not be " what should we do to avoid change? " but rather, " what should we do to ensure the stability of the financial system, in the midst of change? ". that