MICROCAPITAL STORY: International Fund for Agricultural Development (IFAD) Contributes USD 35 Million to Microfinance Program in Pakistan

The International Fund for Agricultural Development (IFAD), a specialized agency of the United Nations, has announced that it will contribute a USD 35 million loan to a new microfinance program worth USD 46 million in Pakistan that aims to expand its microfinance services.

Programme for Increasing Sustainable Microfinance, a five-year program started in September 2007, aims to promote the commercialization of the microfinance sector in Pakistan by forging partnerships between microfinance organizations (MFIs) and commercial banks. According to Nigel Brett, IFAD’s country program manager for Pakistan, these partnerships will enable banks to increase lending to MFIs through program-supported mechanisms, like cash collateral, guarantees, letters of credit and equity contributions. The program will target three groups: small farmers, livestock owners, traders and microentreprenuers; women and households headed solely by women; and rural households living below the poverty line.

In addition to IFAD’s support, banks and commercial financial institutions in Pakistan will contribute USD 10.3 million. The Pakistan Poverty Alleviation Fund (PPAF), a World Bank-funded nonprofit poverty alleviation agency, and its partner organizations will also provide USD 1.3 million in support.

To date, the Pakistani microfinance sector has relied largely on donor funds, which are failing to meet demand. Tapping into commercial funding sources will help Pakistan to reach its target of three million borrowers within the next three years.

IFAD is an international financial institution and a subdivision of the United Nations focused on eradicating rural poverty through empowerment in developing countries. IFAD has invested USD 3.1 billion in 191 ongoing IFAD-supported programs. Since its inception in 1977, it has invested USD 9.8 billion in 751 programs and projects that have reached over 310 million poor rural women and men. With the Programme for Increasing Sustainable Microfinance, IFAD’s loans and grants in Pakistan total to more than USD 422 million in 22 programs and projects.

By Mary Fu

Additional Resources:

International Fund for Agricultural Development (IFAD): “IFAD supports US$46 million programme to boost microfinance in Pakistan”

IFAD: Programme for Increasing Sustainable Microfinance

IFAD: About

World Bank: Pakistan Poverty Alleviation Fund (PPAF)