MICROCAPITAL STORY: Pakistan Poverty Alleviation Fund (PPAF) to Lend $3.4m to Microfinance Institution (MFI) BRAC Pakistan

The Pakistan Poverty Alleviation Fund (PPAF), a public-private partnership that promotes economic development, has signed an agreement with microfinance institution (MFI) BRAC Pakistan to provide it a loan facility of PKR 220 million (USD 3.4 million) for micro-lending activities.

Made under the PPAF’s microfinance program, the loan is expected to target 22,500 borrowers – all women – in 25 localities in three Pakistani cities.

PPAF was created in 2000 by the government of Pakistan with USD 100 million in World Bank and government funding. It is an autonomous body providing loans, grants, and technical assistance to 70 local partners with assets net of liabilities totaling PKR 18.4 billion (USD 300 million) (financial highlights). It has micro-credit receivables of PKR 5.6 billion (USD 92 million). PPAF reported return on assets for the year ending 2007 of 5 percent and a debt-equity ratio of 376.19 percent.

BRAC, formerly the Bangladesh Rural Advancement Committee, launched operations in Pakistan, as reported by MicroCapital, last year. Established in 1972 and based in Dhaka, the non-governmental organization (NGO) serves more than six million active borrowers and last reported assets of USD 619.4 million, with a gross loan portfolio of USD 528.8 million. Its return on assets as of year-end 2007 was 1.47 percent, and its debt-equity ratio was 384.22 percent.

MicroCapital recently summarized a study of the securitization of BRAC loans, the first of its kind for a microfinance organization. In February, BRAC received USD 22 million in financing from Citi and the International Finance Corporation (IFC).

By Stephen Son

Additional Resources:

Oanda: FX Converter

Pakistan Observer: “PPAF extends finance facility of Rs 220m to BRAC”

World Bank: Pakistan Poverty Allevation Fund Project

PPAF: Financial Highlights

MIX Market: Profile for BRAC

MicroCapital.org article, October 12, 2006: “Bangladesh’s BRAC to Extend Operations into Pakistan”

MicroCapital.org article, March 21, 2008: “PAPER WRAP-UP: BRAC Micro-Credit Securitization Series I: Lessons from the World’s First Micro-Credit Backed Security (MCBS), by Ray Rahman & Saif Shah Mohammed”

MicroCapital.org article, February 25, 2008: “Citi teams with IFC to Support Expansion of BRAC Microlending in Bangladesh with USD 22M, Part of USD 55M Financing Deal”