As per parameters, MFBs board will constitute a 'Remuneration Committee' with well-defined objectives, authority and tenure to formulate a comprehensive and transparent Remuneration Policy that will be approved by the shareholders on pre or post facto basis in the Annual General Meeting.
Remuneration will be fixed in Pakistani Rupees invariably; nevertheless, payment of the same can be made to foreign directors in equivalent foreign currency, where necessary. Under first category, those MFBs which have Asset size of above Rs 25 billion or After Tax Profit of above Rs 250 million (As per last audited annual accounts), may pay Independent Directors up to Rs 200,000 as Remuneration for a Board/Committee meeting and Rs up to Rs 50,000 to other Non-Executive Directors.
Under the second category, all other MFBs which do not fall in the first category will pay e maximum Rs 200,000 to Independent Directors and up to Rs 25,000 to other Non-Executive Directors. According to the SBP, these are the maximum remuneration limits. Microfinance Banks may determine remuneration of their Board members (including the Chairman) taking into consideration their own governance structure, the level of responsibility & expertise of the concerned directors while remaining within the maximum limits as per their respective category and other instructions given in this circular. Further, the remuneration limits along with thresholds for assets size and profitability defined in above table will be reviewed by SBP after every three years.
Traveling, boarding and lodging expenses of a Director for attending Board and/or its committee meeting(s) will be paid by the MFB at actuals. In this regard, the Remuneration Policy shall clearly specify the parameters for such expenses whereby additional costs should be borne by the concerned Director.
MFBs will also ensure that no additional payments or perquisites are paid to the Non-Executive Directors and Chairman except as mentioned in above clauses and the Executive Directors will only be paid usual TA/DA as per MFBs' standard rules and regulations.
The Remuneration Policy will ensure that remuneration to Directors commensurate with their qualification, experience besides responsibilities assigned and performance thereto. According to the Remuneration Policy should outline performance indicators to evaluate performance of Board members and adequately envisage provisions for accountability of Directors for their conduct according to the scope of their responsibilities and scale of remuneration.
No consultancy or allied work will be awarded to a Director or to the firm(s), institution(s) or company(ies), etc, in which he individually and/or in concert with other Directors of the same MFB, holds substantial interest. Administrative expenses pertaining to the office, staff and security allocated to the Chairman, if so required, should be determined rationally.
The remuneration and other benefit/facility provided to the board members, will be required to disclose in the annual financial statements in a proper and transparent manner." The SBP has advised all MFBs to ensure meticulous compliance of the revised instructions within six months as the non-compliance will attract punitive action under relevant provisions of the Microfinance Institutions Ordinance, 2001.