SBP Increases Capital Requirements for Microfinance Banks

On May 19, 2025, the State Bank of Pakistan (SBP) announced a significant revision to the Minimum Capital Requirements (MCR) for Microfinance Banks (MFBs), aiming to strengthen the sector’s financial stability and promote sustainable growth. The State Bank of Pakistan (SBP) has updated its Prudential Regulations for Microfinance Banks (MFBs), mandating a phased increase in paid-up capital. National and provincial MFBs must raise their capital to Rs. 2 billion by June 2027.

The Capital Adequacy Ratio remains at 15%, and MFBs are now required to build a reserve fund using 20% of post-tax profits until it equals their paid-up capital.Contingent liabilities are capped at three times equity for the first three years, and five times thereafter. Stricter penalties have been introduced for non-compliance with Cash Reserve Requirements (CRR), including daily fines for failing to meet the minimum balance. These changes come as the sector recovers from COVID-19 and recent floods, with the SBP aiming to strengthen financial resilience and promote inclusive growth.