World Bank approves $102 million to boost Pakistan's microfinance sector

Islamabad: The World Bank has approved $102 million for cash-strapped Pakistan for a project that aims to enhance access to microcredit and support the resilience of the microfinance sector and its borrowers, particularly in the face of climate-related shocks.

The financing under the ‘Resilient and Accessible Microfinance (RAM) project’ was approved by the World Bank board of directors on Tuesday, according to a statement issued by the World Bank.

Najy Benhassine, World Bank country director for Pakistan, said in the statement that microfinance is a critical tool for supporting the livelihoods of vulnerable populations in Pakistan.

“This project will help strengthen the resilience of the microfinance sector, particularly in the face of growing climate risks, ensuring that the sector can continue to provide essential financial services to those who need them most, especially in rural areas,” he said.

He also said that this project was part of the Bank's broader commitment to promoting financial inclusion in Pakistan and to increasing resilience to climate change, as spelt out in the new 10-year Country Partnership Framework.

According to the statement, the project will benefit nearly 1.89 million people, including more than 1 million women and over 350,000 youth, and especially those in vulnerable and low-income rural areas.

Through the provision of financial resources to microfinance institutions, the project will ensure that institutions can “continue to provide services even during climate-induced financial pressures”.

“The project will provide increased access to microcredit for individuals and small businesses, providing them ‘recovery loans’ to help them gain financial stability,” the statement read.

The project will be implemented by the Ministry of Finance through the State Bank of Pakistan and will be the first in a series of interventions to support the sector, to be designed and phased in close partnership with other international financial institutions.

Key components of the project include the establishment of a Climate Risk Fund, innovative use of agrotechnology solutions, capacity building for microfinance institutions, and the development of risk management frameworks to enhance the sector's resilience.

The project is co-financed by a $23 million grant from the Global Shield Financing Facility (GSFF), a multi-donor trust fund hosted by the World Bank Group and financed by the Governments of Canada, Germany, Japan, Luxembourg, and the United Kingdom.

GSFF supports poor and vulnerable countries and people with increased access to financial protection against climate shocks, disasters, and crises.

In February, a World Bank delegation visited the country to touch base on its economic reforms, including the privatisation agenda as a follow-up to the Country Framework Programme (CPF) finalised in January with indicative assistance of about $20 billion.

Pakistan has been a member of the World Bank since 1950. So far, the Bank has provided $48.3 billion to the country.