yaseen anwar : microfinance developments in pakistan inaugural address by mr yaseen anwar, governor of the state bank of pakistan, at the 5th pakistan microfinance country forum, karachi, 2 december 2011. * * * distinguished speakers, guests, ladies and gentlemen! i am delighted to be invited to the 5th pakistan microfinance country forum. microfinance in pakistan has made good progress but must make major breakthroughs to reach millions of underserved people who require a wide variety of financial services. pakistan has one of the lowest financial penetration levels in the world with 56 % of the adult population totally excluded, and another 32 % informally served. however, despite considerable support from the government, donors and the state bank of pakistan, the microfinance sector has only been able to tap a small fraction of the potential market, with current active borrowers standing at roughly 2 million. now, i would like to share sbp ’ s vision on the development of microfinance and financial inclusion in pakistan and some of the initiatives taken by sbp. the history of microfinance is not very old in pakistan. in fact, efforts to mainstream microfinance into the formal financial system started in 2000 & 2001 when the government promulgated the microfinance ordinance. the passage of the law the allowed private sector to establish microfinance banks that are licensed and regulated by state bank of pakistan. since then, we have witnessed the establishment of new mfbs, transformations of large mfis, diversification of funding sources, development of inclusive financial services, emergence of alternative delivery channels, and piloting of “ microfinance – credit information bureau ” ( mcib ). these developments are indeed a sign of growth and maturity and a direct outcome of the enabling regulatory framework and market development initiatives for microfinance. the success of microfinance in pakistan is widely acknowledged by the international community. our microfinance regulatory framework has been ranked globally at the top in 2010 and 2011 by the independent “ the economic intelligence unit ” of uk ’ s “ the economist ” magazine. in developing regulations for microfinance, the state bank has pursued a bottom - up approach along with use of strong analytical and problem solving skills and industry consultation. since the inception of microfinance banking in pakistan, our goal has been to determine the proportionality of a regulation before it is put in place. hence, the regulatory approach has remained gradual and in line with the evolution of the sector

; now there are several contagion effects at different levels. bis central bankers ’ speeches so how do we address these challenges for a country like ours that is subject to exogenous shocks and maintain steady economic and social growth? our visionary business and political leaders must be alert to the challenges they face now and are likely to face in the future due to developments in other parts of the globe. on the domestic front, we need to manage our macro - economic fundamentals. both our economic and political leadership is faced with multiple challenges of trade imbalance, inflation, unemployment, power crises and security situation. the challenges for making good decisions on these fronts requires political will and a clear long term vision. there are no shortcuts to sustained economic development. we need to develop the right strategies and then translate these strategies into action. similarly the challenges for business leaders, though at a micro level, are by no means less critical. these challenges range from the survival of businesses in a stagnant business environment to developing strategies for further growth through developing new business models, new products or restructuring and re - engineering. we need to understand the issues and accept that in implementation we will make mistakes, but in the long run with continuous improvement we can be on the road to recovery. this is by no means an easy task. it is important to recognize the true nature of any problem, and develop workable solutions to these problems in a timely manner. leaders with perseverance and vision will tackle these issues successfully and emerge as the business leaders of today. effective leadership must also include skills to manage people and teams. management of human resources is extremely critical to the success of any business across the globe. an important challenge during difficult times is to ensure employees ’ performance is maintained at a high standard. owing a crisis, institutions must recognize they still need to retain their critical workforce. here i would like to underscore the importance of women representation in the work force. women represent almost half of the population of pakistan and a significant talent pool that is ignored. how can we as a nation progress if 50 % of our work force is in a non - productive capacity. given globalization and the crises we all face, let ’ s recap the traits of effective leadership that are universally applicable. leaders must be visionary to see future trends, anticipate institutional bottlenecks, remain competitive and be able to adapt rapidly to changes. they should be continuous learners, a necessity for enhancing leadership skills. leaders need also