Release number IFAD/50/07

Rome, 22 November 2007 – A US$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 US$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 US$10.3 million to the programme. The Pakistan Poverty Alleviation Fund (PPAF) will also provide US$700,000 and its partner organizations a further US$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 US$422 million have helped finance 22 programmes and projects in Pakistan.

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IFAD is an international financial institution and a specialized United Nations agency dedicated to eradicating poverty and hunger in rural areas of developing countries. Through low-interest loans and grants, IFAD develops and finances programmes and projects that enable poor rural people to overcome poverty themselves. There are 191 ongoing IFAD-supported rural poverty eradication programmes and projects, worth a total of US$6.6 billion. IFAD has invested US$3.1 billion, with cofinancing provided by partners including governments, project participants, multilateral and bilateral donors. These initiatives will help about 82 million poor rural women and men to achieve better lives for themselves and their families. Since starting operations in 1978, IFAD has invested US$9.8 billion in 751 programmes and projects that have reached more than 310 million poor rural women and men. Governments and other financing sources in recipient countries, including project participants, contributed US$9.2 billion, and multilateral, bilateral and other donors provided another US$7.2 billion in cofinancing.