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 now includes the long awaited amendments and refinements in the MFI Ordinance of 2001.