yaseen anwar : ethics, corporate governance and financial inclusion speech by mr yaseen anwar, governor of the state bank of pakistan, at the chartered financial analyst ( cfa ) convention and excellence awards ceremony, karachi, 4 july 2012. * * * messrs jawaid iqbal, ashraf bajwa, governing board of the cfa association of pakistan, ladies and gentlemen : it is indeed an honor to be invited at this annual cfa convention – a gathering of the country ’ s finest analysts, investment and risk managers and the banking industry professionals. i also appreciate the efforts of cfa association of pakistan for arranging this convention at a very significant time in terms of both domestic and international economic perspectives. the progress cfa association of pakistan has made in raising the educational skills and ethical standards for investment analysts is highly commendable. i am delighted to learn that the association ’ s charter membership of the pakistan chapter is continuously increasing and its members are playing a significant role towards advancing professionalism in our financial institutions. taking benefit of this opportunity, i feel it is appropriate to discuss the importance of ethics in financial businesses, and the role of corporate governance in a highly dynamic financial world and the constantly and rapidly evolving regulatory regimes. i will also briefly touch upon recent initiatives taken for promoting financial inclusion and literacy in the country. a key issue in finance and investment management is the understanding and practice of ethical norms. if we closely analyze the recent financial turmoil, we will certainly find misconduct of ethical norms by a few leading market participants that ultimately translated into market panic and subsequently crashes. this implies that a few individuals benefited at the expense of the entire society. it is due to that huge cost to society that we have seen increased focus on ethics and in this regard, the cfa curriculum places due emphasis on the code of ethics and professional conduct for financial analysts and investment professionals. with the growing number of chartered financial analysts, the markets are expected to be better - off from their high ethical standards and improved knowledge of the financial markets, instruments and associated risks. we all agree to the notion that businesses need to be governed by a set of rules that protect the interests of all stakeholders. the codes of best practices and principles were in force internationally by the regulators and supervisors of various economic segments including the financial sector even before the events that led to the recent financial crises. but many of these standards were not adhered to effectively because they were either too general or perhaps the regulators had limited autonomy to implement the codes in its true spirit. we

million program funded by the uk department for international development ( dfid ) with several initiatives aimed at improving access to financial services for poor and marginalized groups and for small enterprises in pakistan. ( ii ) state bank has issued branchless banking regulations, which is the regulatory framework to promote banking in remote areas using technology. ( iii ) sbp encouraged microfinance institutions to transform into regulated entities. ( iv ) sbp encouraged partnerships between the post office ( po ) network and mf providers. post offices already manage over 4 million savings accounts, mainly small accounts below rs 10, 000, through more than 12, 000 branches. there is scope for the post office and mf providers to join forces with the latter acting as intermediaries for funds raised by pos, especially as mf providers are constrained by limited funding. ( v ) sbp is encouraging new international players including brac and asa who have already started microfinance operations in pakistan. ( vi ) sbp has set up a special micro finance focal group with an independent head and qualified staff to support these and other financial inclusion initiatives. 4. many of these initiatives are recent and have yet to demonstrate effect vis - a - vis improved outlook for microfinance. however, the effectiveness of some of these initiatives may be improved in light of inferences drawn from microfinance industry trends. broadly, the current outlook for microfinance remains optimistic, but we must examine emerging trends with caution. • first, the industry is still young and continues to be largely dependent on donor assistance to grow, which though necessary at infancy stage is an unsustainable approach to long - term development. it is, however, critical that mfbs move toward deposit mobilization to increase funds for on - lending to achieve of the national strategy of reaching 10 million clients by 2015. • second, cost - efficiency is especially important in the current environment of the global financial crisis where rising cost of borrowing will eventually impact cost of lending for mfis and mfbs as they move towards commercial funding. hopefully, the introduction of international players may encourage local organizations to develop cost efficient structures and improve the quality of available human resource. • third, resource deficiency exists for microfinance not only in the form of funding. human resource capacity must also be strengthened to provide quality microfinance services. capacity building will take time as human resource development will primarily have to come from organic means given the unique nature of the microfinance industry. •