MICROCAPITAL BRIEF: PPAF, Karandaaz, Kreditanstalt für Wiederaufbau (KfW) Establish Pakistan Microfinance Investment Company (PMIC)

The Pakistan Poverty Alleviation Fund (PPAF), a government-backed entity that supports the Pakistani microfinance industry; Karandaaz Pakistan, a Pakistan-based private sector company funded by the UK government; and Kreditanstalt für Wiederaufbau (KfW), a German development bank, recently signed a shareholders’ agreement to set up the Pakistan Microfinance Investment Company (PMIC). Under the agreement, PPAF will contribute PKR 3 billion (approximately USD 28 million), Karandaaz Pakistan will contribute GBP 15 million (approximately USD 22 million) and KfW will contribute EUR 7 million (approximately USD 8 million) as initial equity.

The objective of PMIC is to provide liquidity to microfinance providers, with the hope of creating 300,000 new job opportunities per year. Although the fund is still in the process of meeting the regulatory requirements to become a non-bank finance company (NBFC), it is expected to be operational by July 1, 2016.

PPAF provides loans, grants and technical assistance to microfinance institutions across Pakistan. As of June 30, 2015, it had total assets of PKR 32 billion (approximately USD 308 million). Karandaaz Pakistan is a special purpose vehicle that was created in 2014 by the UK’s Department for International Development to bolster entrepreneurship, microfinance and small business development within Pakistan. The size of the fund has not been disclosed. KfW is a state-owned development bank in Germany that reported total assets of EUR 503 billion (approximately USD 573 billion) as of December 31, 2015.

About Pakistan Poverty Alleviation Fund (PPAF)
PPAF is a government program that was established in 2000 with USD 90 million in funding from the World Bank and USD 10 million from the Pakistani government. PPAF provides loans, grants and technical assistance to microfinance institutions as part of PPAF’s strategy of poverty alleviation that also includes drought mitigation, education and health interventions. As of June 30, 2015, PPAF reported total assets of PKR 32 billion (approximately USD 308 million).

Karandaaz Pakistan
Karandaaz Pakistan was established as a private entity in 2014 to promote access to finance for small businesses. It has three work streams: digital financial services; corporate investment and credit; and knowledge management and communications. Karandaaz Pakistan has financial and institutional support predominantly from the United Kingdom Department for International Development (DFID) and the US-based Bill & Melinda Gates Foundation. No financial information on the organisation has been made available.

About Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW)
Headquartered in Frankfurt am Main, Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW) is a development bank owned by the German government. KfW has three goals: to reduce poverty, make globalization “fair” and conserve natural resources. KfW collaborates with local financial institutions in approximately 60 countries, including microbanks, commercial banks, village savings banks, non-governmental organizations and regional microfinance funds. KfW reported total assets of EUR 503 billion (approximately USD 573 billion) as of December 31, 2015.

By Imke Herholdt, Research Associate

Sources and Additional Resources
[1] Karandaaz: PPAF, Karandaaz Pakistan and KfW Sign Agreement to Set Up Pakistan Microfinance Investment Company
[2] Radio Pakistan: Germany & UK to set up Micro-finance Investment Company in Pakistan
[3] The News: PPAF, KfW sign deal to set up Pakistan Microfinance Investment Company
[4] MicroCapital Universe Profile: Pakistan Poverty Alleviation Fund (PPAF)
[5] Pakistan Poverty Alleviation Fund (PPAF)
[6] kfw
[7] MicroCapital Universe Profile: Kreditanstalt für Wiederaufbau Entwicklungsbank (KfW)

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