now includes the long awaited amendments and refinements in the mfi ordinance of 2001. among others, the amendments ; ( i ) empower sbp to introduce flexibility and broadening of microfinance institutions to include microfinance banks, ( ii ) give sbp flexibility in the determination of crr and slr with a flexible monitoring system, ( iii ) provide sbp the option of determining the definition / threshold income level of the poor, ( iv ) strengthen provisions to introduce explicit clauses regarding licensing of new mfis, separate licensing requirements for existing ngo - mfis, new start - up mfbs as well as improving provisions related to suspension of licenses, ( v ) bring in line with secp guidelines on corporate governance, the terms of external auditors and extending period of submission of accounts, and ( vi ) strengthen regulatory powers of sbp. these amendments are quite far reaching, are in line with the stakeholder ’ s demands and hold the promise of providing the desired level of flexibility both at the regulatory cum supervisory level, while for provincial level mfb. the minimum requirements are rs 100 million for district level, 500 million for national level. easing constraints of the industry. microfinance institutions will now be able to tailor their products to meet the needs of their customers as they move along the prosperity continuum. the amendments have also made it possible to increase the business viability and diversity of institutions by the emergence of regional microfinance banks that might obtain license for five adjacent districts with the prescribed minimum capital requirements. 4 the enhanced regulatory powers of sbp are aimed to ensure proper regulatory and supervisory oversight of the licensed mfbs. the amendments would also help improve the corporate governance of microfinance banks to become socially responsible and financially sustainable institutions. as an additional feature, mobile banking guidelines have been designed to facilitate mfbs to penetrate their target market. sbp has issued ngos / rural support programs / cooperative transformation guidelines. fit and proper criteria has been laid down for ceos and management of mfbs. guidelines have also been issued for commercial banks interested in engaging in microfinance business. some unfounded myths often complicate the development and understandings of microfinance. recognizing this, in pakistan we need to encourage a paradigm shift in the rapidly evolving operating environment for the microfinance sector. ¾ first, there is a need to move away from subsidization of microfinance services to commercialization of such financial services. this

, underprivileged households and undercapitalized enterprises. the experience with the banking sector reforms in pakistan has therefore exploded the myth that the formal finance can only be made available to the organized firms and well - to - do families and individuals. the conventional wisdom that the banks will lose money if they broaden their access to rural population or small enterprises does not hold any grounds looking at the results achieved by the banks in the last few years. for the middle class who form the backbone of any economy, we have allowed the commercial banks to offer mortgage financing, auto financing, consumer financing and islamic banking. there has been an impressive response to these products. most of the autos are now purchased through bank or lease financing. the banks have attracted million or so new customers from the middle and lower income groups who have availed of financing in these new areas. i fully endorse the view of the learned authors of the report that large incumbent companies in developing countries can stifle entrepreneurial energy and initiative but a dynamic financial sector, in which new entrants and incumbents can get finance under competitive terms, can create competitive pressures in the market. this is exactly what pakistan is trying to do. we have done away with effectively subsidizing large private sector firms which were selling low quality products at high prices under a regime of controls. we have allowed liberal entry and sale of imported goods and inputs and also removed high tariffs and quotas so that small firms can also produce goods domestically at low prices. least that i am misunderstood that we have reached nirvana i wish to make it clear that we have just made a modest beginning in this journey towards reaching out to the poor and the middle class. the journey is long, tortuous and the road ahead is full of stones and boulders. we have to work hard to remove these impediments on our way and continue marching towards our destination without getting fatigued. i hope the recommendations of the report will not only be disseminated widely but also acted upon faithfully.