Dubious affairs: PPAF’s lending to ‘risky’ organisations raises concerns
Fund’s watch list shows 70% of total portfolio with these NGOs.
ISLAMABAD:
In a move that deepens concern over its lending strategy, the Pakistan Poverty Alleviation Fund (PPAF) has declared more than half of its partner organisations as “risky”. The PPAF has lent Rs13.6 billion, or 70% of its total portfolio, for further distribution among the poor to these risky organisations, increasing the urgency to review the matter.
Out of 130 non-governmental organisations with whom the PPAF has entered into contracts, as many as 71 have been placed on the watch list, categorising them as low- to high-risk organisations, according to the PPAF’s latest watch list available with The Express Tribune.
As of June this year, the PPAF extended Rs13.6 billion in loans and grants to these organisations, showed the audited financial statement for fiscal year 2013-14.
In total, it has extended Rs13.9 billion in loans and another Rs5.3 billion in grants to all 130 organisations.
When contacted, the PPAF management admitted that these organisations have been placed on the watch list, insisting, however, that there was no risk attached to these loans.
These organisations received money from the PPAF for giving small loans at exorbitantly high interest rates to the poorest and to build community infrastructure. The development raises concerns as the PPAF’s operations are funded by seeking loans from the World Bank and grants extended by foreign countries.
Out of 71 organisations, as many as 22 are declared on ‘high risk’ and the PPAF has extended them Rs6.5 billion in loans and grants. There are 18 organizations that are on ‘medium risk’, which involves Rs2.8 billion in loans and grants. As many as 31 organisations are on low risk and have obtained Rs4.3 billion funding.
Of the total funding which these risky organisations got, as much as 67.6% or Rs9.3 billion was on medium to high risk, according to the PPAF’s financial statement.
According to an official having insight of the PPAF’s working, the fund puts the organisations on the watch list on the basis of evaluations of risks to portfolio, aging of the lending, provisioning of loans and progress on the agreed objectives.
In its written reply, the PPAF said the “watch list is primarily based on the rigorous field visits and desk reviews carried out throughout the year”. The PPAF said it was aware of all the various social and financial aspects of each partner organisation and the watch list would serve as an ongoing due diligence tool.
Sources in the PPAF said that the management relaxed disbursements and recoveries criteria and allowed small organisations to expand beyond their capacities, resulting in the current alarming situation.
According to PPAF’s watch list, poor recoveries, negative equity of partner organisations, issues with utilisation of funds, delay in submission of statements of expenditures, inaccurate data reporting, deviation from agreed outputs and slow progress were some of the main reasons behind putting these organisations on the watch list.
The Asasah, the Centre for Women Cooperative Development, Buksh Foundation, Save the Poor, Community Uplift Programme, Balochistan Environmental and Educational Journey, Taraqee Foundation, Community Mobilization and Development Organization, Balochistan Rural Support Programme, Balochistan Rural Development Society, BRAC (Rs625 million), National Rural Support Programme (NRSP Rs3.6 billion) and Sindh Rural Support Organization (Rs965) are placed on high risk. However, the NRSP is likely to be placed on medium risk due to improvement in indicators.
Thardeep Rural Development Programme (Rs1.3 billion) and Rural Community Development Society (Rs636 million) are among medium risk partners. Sindh Rural Support Organization (Rs817 million) and Kashf Foundation (Rs2.2 billion) are among low risk partners, showed the watch list and audited accounts of the PPAF.
Published in The Express Tribune, November 22nd, 2014.
In a move that deepens concern over its lending strategy, the Pakistan Poverty Alleviation Fund (PPAF) has declared more than half of its partner organisations as “risky”. The PPAF has lent Rs13.6 billion, or 70% of its total portfolio, for further distribution among the poor to these risky organisations, increasing the urgency to review the matter.
Out of 130 non-governmental organisations with whom the PPAF has entered into contracts, as many as 71 have been placed on the watch list, categorising them as low- to high-risk organisations, according to the PPAF’s latest watch list available with The Express Tribune.
As of June this year, the PPAF extended Rs13.6 billion in loans and grants to these organisations, showed the audited financial statement for fiscal year 2013-14.
In total, it has extended Rs13.9 billion in loans and another Rs5.3 billion in grants to all 130 organisations.
When contacted, the PPAF management admitted that these organisations have been placed on the watch list, insisting, however, that there was no risk attached to these loans.
These organisations received money from the PPAF for giving small loans at exorbitantly high interest rates to the poorest and to build community infrastructure. The development raises concerns as the PPAF’s operations are funded by seeking loans from the World Bank and grants extended by foreign countries.
Out of 71 organisations, as many as 22 are declared on ‘high risk’ and the PPAF has extended them Rs6.5 billion in loans and grants. There are 18 organizations that are on ‘medium risk’, which involves Rs2.8 billion in loans and grants. As many as 31 organisations are on low risk and have obtained Rs4.3 billion funding.
Of the total funding which these risky organisations got, as much as 67.6% or Rs9.3 billion was on medium to high risk, according to the PPAF’s financial statement.
According to an official having insight of the PPAF’s working, the fund puts the organisations on the watch list on the basis of evaluations of risks to portfolio, aging of the lending, provisioning of loans and progress on the agreed objectives.
In its written reply, the PPAF said the “watch list is primarily based on the rigorous field visits and desk reviews carried out throughout the year”. The PPAF said it was aware of all the various social and financial aspects of each partner organisation and the watch list would serve as an ongoing due diligence tool.
Sources in the PPAF said that the management relaxed disbursements and recoveries criteria and allowed small organisations to expand beyond their capacities, resulting in the current alarming situation.
According to PPAF’s watch list, poor recoveries, negative equity of partner organisations, issues with utilisation of funds, delay in submission of statements of expenditures, inaccurate data reporting, deviation from agreed outputs and slow progress were some of the main reasons behind putting these organisations on the watch list.
The Asasah, the Centre for Women Cooperative Development, Buksh Foundation, Save the Poor, Community Uplift Programme, Balochistan Environmental and Educational Journey, Taraqee Foundation, Community Mobilization and Development Organization, Balochistan Rural Support Programme, Balochistan Rural Development Society, BRAC (Rs625 million), National Rural Support Programme (NRSP Rs3.6 billion) and Sindh Rural Support Organization (Rs965) are placed on high risk. However, the NRSP is likely to be placed on medium risk due to improvement in indicators.
Thardeep Rural Development Programme (Rs1.3 billion) and Rural Community Development Society (Rs636 million) are among medium risk partners. Sindh Rural Support Organization (Rs817 million) and Kashf Foundation (Rs2.2 billion) are among low risk partners, showed the watch list and audited accounts of the PPAF.
Published in The Express Tribune, November 22nd, 2014.