Source: International Fund for Agricultural Development (IFAD).
Original press release available here.
ROME, November 22 – A USD 46 million programme will boost commercialization of the microfinance sector in Pakistan and make microfinance services available to about 160,000 new clients – at least half of them women.
The Programme for Increasing Sustainable Microfinance will be funded partly by a loan of USD 35 million from IFAD.
“It is a pivotal time for microfinance in Pakistan,” says Nigel Brett, IFAD’s country programme manager for Pakistan. “Future growth in this sector will depend partly on microfinance institutions and commercial banks forging successful financing partnerships. This programme will work to build such partnerships.”
The loan agreement was signed at IFAD headquarters today by the Embassy of the Islamic Republic of Pakistan’s Minister and Charge d’affaires, a.i. in Rome, Jamil Ahmad, and IFAD’s President, Lennart Båge.
Banks and commercial financial institutions in Pakistan will contribute USD 10.3 million to the programme. The Pakistan Poverty Alleviation Fund (PPAF) will also provide USD 700,000 and its partner organizations a further USD 600,000.
Access to microfinance in Pakistan is still very limited and unmet demand is enormous. To date, the sector has relied largely on donor funds.
“These existing funds are already failing to meet demand and only limited donor funding can be expected for microfinance in the future,” says Brett. “Unless commercial funding sources can be tapped, the growth of the sector will be constrained.”
Pakistan’s government recognizes microfinance as an important tool for reducing poverty in the country and supports the principles of market competition, commercialization and innovation. It wants to reach a target of three million borrowers within the next three years.
The country’s banks and microfinance institutions have said they are willing to work together to expand outreach in services such as loans, savings, insurance and credit.
The IFAD-supported programme will work with three groups: small farmers, livestock owners, traders and microentrepreneurs; women and households headed solely by women; and vulnerable rural households living below the poverty line.
“When the programme closes, a number of high-performing microfinance institutions reaching out to these groups will have developed partnerships with commercial banks,” says Brett. “Through programme-supported mechanisms such as cash collateral, guarantees, letters of credit and equity contributions, commercial banks will increase their lending to microfinance institutions and this will lead to the overall growth of the microfinance sector.”
With this programme, IFAD loans and grants totalling more than USD 422 million have helped finance 22 programmes and projects in Pakistan.
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