The Asian Development Bank (ADB) is likely to provide $320 million loan by the end of this year for 'Improving Access to Financial Services Sector Development Program', aimed at reducing poverty and sustaining economic growth through putting in place an inclusive financial sector.
Official sources told Business Recorder that out of the total amount, the Bank would provide $300 million from its Ordinary Capital Resources (OCR) and the remaining amount from its concessionary Asian Development Fund (ADF).
This program would support in stabilisation of the financial sector by ensuring access to sustainable institutional financial services for a majority of poor and low-income households and their micro enterprises at competitive prices.
According to sources, the program will assist the government in improving performance and efficiency of the financial sector at the lower levels, increase outreach and product and service innovation, and utilise new technologies and applications to reduce transaction costs associated with delivery of financial services.
According to the bank documents, with growing income disparity, the importance and role of microfinance is well recognised along with the urgent need for greater outreach of sustainable financial services to rural and remote areas.
In 2000, the Government launched the Microfinance Sector Development Program (MSDP) that concentrated on the establishment of a single microfinance institution, the Khushhali Bank (KB), the first microfinance bank in Pakistan.
The MSDP also supported development of legal frameworks, which included the ordinance to establish KB and a separate ordinance to govern the establishment and operation of all other microfinance banks. The MSDP is an on-going project and scheduled to be completed by 2007.
The bank says that the abundance of subsidised credit line has not resulted in the envisioned outreach or provision of financial services needed by the poor. A broader scope of measures, encompassing microfinance and also reaching beyond to include such fundamental issues as property rights, land registration of the poor and private sector participation is required for achieving an inclusive financial system.
The Pakistan Country Strategy and Program Update (CSPU) 2006-2008 broadly supports expansion of the outreach of small and medium-sized enterprises and microfinance services, and strengthening institutions with private sector participation.
The government's request for support to improve access to financial services is within this overall framework of country assistance to Pakistan for development and poverty alleviation, and complements other on-going ADB assistance programs in the financial sector, the ADB said.
Comments
Comments are closed.