ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has introduced new Consumer Protection Principles for Non-Banking Microfinance Companies (NBMFCs), mandating the issuance of a Key Fact Statement (KFS) for borrowers to ensure transparency and consumer rights protection.
In a recently issued Circular No. 5 of 2025, SECP has directed all NBMFCs and the Chief Executive Officer of Pakistan Microfinance Network to adhere to these principles. This initiative supplements existing regulations under Circular 24 of 2018 and Circular 08 of 2024 and aligns with the Women Equality in Finance policy for the non-banking microfinance sector.
The newly introduced principles aim to enhance financial inclusion, promote transparency, and strengthen the relationship between consumers and microfinance institutions. The SECP has emphasized that consumers must be well-informed and treated fairly, with access to necessary financial tools and support for sound decision-making.
Key Compliance Directives for NBMFCs
NBMFCs are required to integrate the guiding principles outlined in Annexure-A of the circular into their operations. Among the key directives are:
- Clear Communication: Financial terms, conditions, and pricing must be communicated clearly and comprehensively.
- Key Fact Statement (KFS): Before loan disbursement, NBMFCs must provide borrowers with a summary of the KFS, preferably in their local language. The KFS must be simple, clear, and easily accessible.
- Loan Contracts: Contracts should be available in local languages, with a signed copy provided to clients and retained in company records.
- Fixed Terms & Conditions: The terms and conditions of financing cannot be changed before the loan reaches maturity.
Mandatory Disclosures Before Loan Disbursement
To enhance borrower awareness, NBMFCs must ensure the following disclosures:
- Fee Disclosure: All fees and charges related to financial products must be transparently disclosed at screening, approval, and disbursement stages.
- Total Cost of Credit: Borrowers must be provided with a clear breakdown of the total cost of credit, including interest rates, fees, and other charges.
- Risk Information: Financial risks associated with each product must be communicated clearly. Information should be made accessible through various channels, including in-person, online, and mobile platforms, and provided in multiple languages and formats to cater to diverse clients.
Grievance Redressal and Gender Data Reporting
NBMFCs must ensure that staff are adequately trained to handle grievances and comply with the reporting requirements for gender-disaggregated data across all performance metrics and complaint records, as specified in Circular No. 03 of 2025.
The SECP’s new directive underscores its commitment to protecting consumer rights and ensuring financial transparency within the non-banking microfinance sector. The move is expected to reinforce trust and accountability in the industry, benefiting both consumers and financial service providers.
