Source: Symbiotics.
Original article available here.
ISLAMABAD, October 17 – State Bank of Pakistan expects to receive first tranche of the approved assistance of 50 million pounds (USD 87 million) from UK-based Department for International Development (DFID) in the ongoing month, aimed at expanding the outreach of microfinance to five million borrowers by 2012, The News has learnt.
The cash-strapped central bank is waiting for dollar or any other foreign currency in a bid to build up its rapidly depleting foreign currency reserves.
The SBP and DFID have already signed a Memorandum of Understanding (MoU) for Financial Inclusion Programme (FIP) and both sides are now working out details for the release of amount out of the total 50 million pounds. “It is expected that DFID will release its first tranche in the ongoing month or by early next month,” a source in the donor agency told The News here on Thursday. The programme, under which money will be disbursed to FIP through SBP, will focus on mobilising much-needed market-based resources for the microfinance sector. The DFID will provide first loss guarantee of up to 10 million pounds from its grant financing. The programme will heavily invest in innovative technology-based products for the poor and will also support liquidity in the microfinance sector under the prevailing cash crunch situation in the financial market. The outcome will directly contribute to the Millennium Development Goal 1, which is “reduce income poverty by half by 2015”. When Dr Saeed, in charge of FIP in State Bank, was contacted over phone at his office in Karachi, he said they were working out details of the programme, but did not exactly know when DFID would release its first tranche. “It is better you ask this question to DFID people,” he said. Sources said more than 17 per cent of Pakistan’s population (27 million) lives on less than $1 a day and 73 per cent (116m) lives on less than $2 a day. Impressive economic growth of the past four years and successful financial sector reforms have not really addressed persisting inequalities among regions, classes and between genders. The outreach of microfinance and other financial services to the poor and marginalised groups in Pakistan remains very low as compared to other Asian countries. Penetration rate of microfinance borrowers is 2pc in Pakistan against 35pc in Bangladesh, 11pc in Indonesia, 29pc in Sri Lanka and 25pc in Vietnam. The FIP aims to transform the financial market with a clear objective to provide equitable and efficient financial services to the otherwise excluded poor and marginalised population. At present, there are only one million microfinance borrowers in the country. Under the FIP, Pakistan has set a target of reaching out to three million microfinance borrowers by 2010 and five million by 2012. In addition to the microfinance sector, the FIP will focus on developing financial inclusion policies and interventions for small and medium enterprises, rural population and low-income housing sector. The FIP will not only provide better livelihood opportunities for the poor and marginalised groups but it will also offer insurance against shocks, improved skills and higher investment in health and education at the household level.
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