Microfinance accountholders enabled to invest in govt securities

KARACHI: The central bank on Wednesday allowed microfinance banks (MFBs) to offer investor portfolio of securities (IPS) accounts to customers in a bid to provide greater opportunities for investment in government securities and diversifying funding for this exclusive avenue.

“Microfinance bank (MFB) account holders have been allowed to open IPS Accounts with any scheduled bank to invest in government securities,” the State Bank of Pakistan (SBP) said in a statement. “In order to invest in government securities, individuals and retail investors need to open an IPS account to hold, sale and purchase of these securities.”

Previously, only individuals and entities having a rupee denominated account with scheduled banks could open IPS accounts. The main attraction for investment in government securities was their secure nature and attractive profits, which were 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 MFBs. 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. Bankers welcome the SBP’s move to allow small bank account holders and savers to invest in the government papers such as the market treasury bills, Pakistan Investment Bonds and the government of Pakistan Ijara Sukuk. “It is a good development.. if the customer of the commercial bank can invest in the government securities, why can the customer of a microfinance bank not do so,” asked a senior banker.

“However, we don’t see a big impact of this facility on the investment in the government securities. The demand for these instruments can come from the retail or corporate customers rather than small or individual ones,” he added.

MFBs would also need to create awareness about this facility among their customers, he suggested.

The SBP said the recent issuance of Customers’ Digital Onboarding Framework by SBP would 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. SBP is confident that new measures will further promote the culture of savings as these allow a more convenient avenue for channelising small investments in government securities, it said.