Karachi, May 19, 2025 – The State Bank of Pakistan (SBP) has announced a significant policy revision by increasing the Minimum Capital Requirement (MCR) for microfinance banks (MFBs) to Rs2 billion.
This latest move is part of SBP’s broader efforts to strengthen the financial stability and risk management frameworks within Pakistan’s microfinance sector.
According to the new regulations issued by the SBP, all provincial and national microfinance banks must increase their MCR to Rs2 billion by June 30, 2027. The transition will take place in phases to allow institutions to gradually adjust their capital structures in line with the revised standards.
Currently, the MCR for provincial MFBs is Rs500 million. These banks are now required to enhance their capital to Rs1.5 billion by June 2026 and further raise it to Rs2 billion by June 2027. Similarly, national microfinance banks, which presently maintain an MCR of Rs1 billion, will need to increase their capital to Rs1.5 billion by June 2026 and then to Rs2 billion by the end of June 2027.
The revised MCR includes fully paid-up common shares, share premium account balances, reserves for bonus shares, and other approved instruments, minus any accumulated losses or discounts on issued shares. In addition, microfinance banks must continue maintaining a Capital Adequacy Ratio (CAR) of at least 15 percent of their risk-weighted assets.
To support the growing complexity and expansion of the microfinance sector, the SBP has also revamped the Prudential Regulations (PRs), categorizing them into three core areas: Risk Management, Corporate Governance, and Operations. These reforms aim to ensure that MFBs remain robust, transparent, and customer-centric as they scale up services across the country.
The new PRs integrate previous instructions issued by the SBP, reinforcing areas like governance standards, consumer protection protocols, and operational guidelines. SBP emphasized that all microfinance banks must comply with these updated rules immediately, unless stated otherwise. Any non-compliance may lead to regulatory penalties under applicable legal frameworks.
In addition, microfinance banks are required to maintain liquid assets—excluding the Cash Reserve Requirement (CRR)—equal to at least 12 percent of their demand liabilities and short-term deposits. Failure to meet CRR benchmarks will incur penalties as per SBP guidelines.
These latest updates reflect SBP’s firm commitment to building a secure, well-capitalized, and efficient microfinance banking sector in Pakistan.