World Bank approves $102m for microfinance
The board of directors of the World Bank has approved $102 million in financing for the Resilient and Accessible Microfinance (RAM) project to enhance access to microcredit and support the resilience of the microfinance sector and its borrowers, particularly in the face of climate-related shocks.
"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," World Bank Country Director for Pakistan Najy Benhassine said in a news release.
The RAM project, he said, was part of a broader commitment to promoting financial inclusion in Pakistan and increasing resilience to climate change, as spelled out in the World Bank's new 10-year Country Partnership Framework.
The project is expected to benefit nearly 1.89 million people (including more than one million women and over 350,000 youth), especially those that are vulnerable and belong to low-income rural communities.
By providing financial resources to microfinance institutions, the project ensures that they can continue to provide services even during climate-induced financial pressures.
RAM will provide increased access to microcredit for individuals and small businesses, giving "recovery loans" to help them gain financial stability.
"The Resilient and Accessible Microfinance project has been designed based on lessons learnt from the devastating floods of 2022 and is a significant step to bolster financial inclusion in Pakistan," said Namoos Zaheer, Task Team Leader for the Project.
"It will enhance economic empowerment and resilience of those at the bottom of the economic pyramid, particularly women, small farmers and families in rural areas, who are more prone to climate shocks," she said.
The project will be implemented by the Ministry of Finance through the State Bank of Pakistan. It 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 include the establishment of the Climate Risk Fund, innovative use of agro technology solutions, capacity building for microfinance institutions and 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). GSFF is 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 crisis.
A day ago, a follow-up meeting was held between Federal Minister for Finance Muhammad Aurangzeb and a World Bank team to discuss Pakistan's National Growth and Fiscal Programme under the 10-year Country Partnership Framework, which includes $20 billion in commitments.
According to a press release issued by the Ministry of Finance, the framework focuses on key development areas, including health, education, climate resilience and sustainable growth. Senior officials of the Ministry of Finance and the Federal Board of Revenue attended the meeting.
The primary focus was on the World Bank's financing for economic reforms. The bank's team presented their ongoing work on the National Growth and Fiscal Programme, covering strategies for inclusive and sustainable growth, revenue mobilisation, expenditure quality and service delivery efficiency.
A key objective of these reforms is to enhance favourable conditions for private investment while ensuring that public resources are allocated effectively for inclusive development. The World Bank also briefed the finance minister on its analysis of policy proposals gathered from various trade bodies and chambers during pre-budget consultations.