MICROCAPITAL STORY: Pakistani Government Agency PPAF (Pakistan Poverty Alleviation Fund) Launches USD $45 million PRISM (Program for Increasing Sustainable Microfinance)

Pakistan’s PPAF (Pakistan Poverty Alleviation Fund), a government program to support poverty alleviation, recently launched PRISM (Programme for Increasing Sustainable Microfinance). PRISM’s main objective is to assist Pakistani microfinance institutions that largely rely on donor funding in forging new partnerships with commercial funders. The program’s establishment represents an acknowledgement by policy makers that Pakistan’s microfinance institutions have proven themselves to be commercially viable enterprises and worthy targets of commercial investment in lieu of grant support. The PRISM program has an operating budget of USD $45 million, and involves partnerships with 72 organizations working in 33,000 villages. In addition to government support, PRISM was financed by a USD 35 million loan from IFAD (International Fund for Agricultural Development).

PPAF is a government program, established in 2000 with USD 100 million in World Bank and Pakistani government funding. PPAF provides loans, grants, and technical assistance to microfinance institutions across the country. Support of the microfinance sector is part of a broader strategy of poverty alleviation that includes drought mitigation, education, and health interventions. At the end of its 2007 fiscal year, PPAF held PKR 5.6 billion (USD 80.4 million) in accounts receivable from lending activities supporting microenterprise development. PPAF held total assets of PKR 18.4 billion (USD 264.2 million), return on assets of 5 percent, and a debt equity ratio of 376.19 percent.

In May 2008, PPAF made headlines on MicroCapital when it loaned USD 3.4 million to nonprofit microlender BRAC Pakistan, which BRAC will use to increase client outreach.

The International Fund for Agricultural Development (IFAD) is an agency of the United Nations, established as an international financial institution in response to a food crisis that occurred in Africa during the 1970s. IFAD’s mission is to eradicate rural poverty in developing countries by working with governments, NGOs and other partners to increase access to financial services, technology and other resources.

By Ryan Benson, Research Assistant

Additional Resources:

MICROCAPITAL STORY: Pakistan Poverty Alleviation Fund (PPAF) to Lend $3.4m to Microfinance Institution (MFI) BRAC Pakistan, by Stephen Son, May 6, 2008.

Pakistan Poverty Alleviation Fund: Financial Highlights

IFAD: Home

IFAD: Programme for increasing Sustainable Microfinance

World Bank: Pakistan Poverty Alleviation Fund Project

World Bank: Home

Yahoo: Currency Converter

Pakistani Tribune: PPAF Links Microfinance to Commercial Banking, July 3, 2008.

Associated Press of Pakistan: SBP governor for strengthening micro-finance industry, July 3, 2008.