Microfinance: Accountholders can invest in govt securities, says SBP

KARACHI: The State Bank of Pakistan (SBP) has allowed microfinance account holders to invest in government securities, a move aimed at providing them more investment opportunities.

In order to enhance the scope of Investor Portfolio Securities (IPS) Account to a wider set of institutions and investors and to promote diversification of marketable government securities, the SBP has decided to enable microfinance accountholders to invest in the government securities.

The State Bank of Pakistan (SBP) has taken this measure to provide greater opportunities for public to invest in government securities and in line with the objective of diversifying funding for this exclusive avenue.

According to SBP, Microfinance Banks (MFBs) have been permitted to offer Investor Portfolio of Securities (IPS) Accounts to their customers. In addition, Microfinance Bank account holders have been allowed to open IPS Accounts with any Scheduled Bank to invest in government securities.

“Microfinance banks are permitted to offer IPS accounts to their customers. Any Microfinance Bank intending to offer IPS accounts to their customers must fulfill the provisions of the abovementioned circular, inter-alia, regarding opening of IPS accounts, recording transactions in IPS accounts and reporting to customers and SBP”, a circular issued on Wednesday said.

Any individual or entity, maintaining their accounts with Microfinance Banks including Branchless Banking, are also allowed to open IPS account with any Scheduled Bank to buy or sell marketable government securities, it added.

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Now, individuals and retail investors need to open an IPS account to hold, sale and purchase of government securities. Previously, only individuals and entities having a PKR denominated account with Scheduled Banks could open IPS Accounts. The main attraction for investment in government securities is their secure nature and attractive profits, which are generally higher than the ones offered by banks on saving accounts.

The new measures allow two options for both regular and Branchless banking (BB) account holders of Microfinance Banks. Under the first option, account holders of MFBs can open IPS accounts with their MFB to use their funds for sale and purchase of government securities.

In the second option, account holders of MFBs can open IPS accounts with any Scheduled bank to invest in government securities. Both options allow account holders of MFBs to use amounts available in their accounts or BB/wallet for the investment.

The recent issuance of Customers’ Digital Onboarding Framework by SBP will further simplify and facilitate the process of IPS Account opening, under which banks and MFBs have been allowed to share customers’ KYC related information with any SBP/SECP regulated entity in compliance with applicable laws and regulations after obtaining customer’s consent.

These measures would also pave the way for development of systems to facilitate end-to-end investments in government securities in a completely digital manner.

The SBP is confident that new measures will further promote culture of savings as these allow a more convenient avenue for channelizing small investments in government securities.

Further, SBP has advised that all institutions (Scheduled Banks, Primary Dealers and MFBs) offering IPS accounts will ensure complete disclosure of prices, risks and other necessary information pertaining to investment in government securities through IPS accounts to their clients.

In addition, the institutions will, at minimum, display such information at their branches/place of business and websites to enable their clients to make informed decision regarding investment in government securities.

Copyright Business Recorder, 2022