World Bank approves $102m for Resilient, Accessible Microfinance Project

ISLAMABAD: The World Bank’s Board of Directors approved $102 million in financing for the Resilient and Accessible Microfinance (RAM) Project, which aims at enhancing 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” said Najy Benhassine, World Bank country director for Pakistan. “This project is part of our broader commitment to promoting financial inclusion in Pakistan and to increasing resilience to climate change, as spelled out in our new 10-year Country Partnership Framework.”

The RAM Project is expected to benefit nearly 1.89 million people (including more than 1 million women and over 350,000 youth), especially those in vulnerable and 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.

The project will provide increased access to microcredit for individuals and small businesses, providing them “recovery loans” to help them gain financial stability.

“The Resilient and Accessible Microfinance Project has been designed based on lessons learned 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.”

The project will be implemented by the Ministry of Finance through the State Bank of Pakistan. It will be 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 of the project include the establishment of a Climate Risk Fund, innovative use of agro technology solutions, capacity building for microfinance institutions, and the 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). The 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. The GSFF supports poor and vulnerable countries and people with increased access to financial protection against climate shocks, disasters, and crises.

Project documents noted that despite significant growth in recent years, however, the sector serves less than a quarter of its potential market size, is small relative to peer countries, while macro growth numbers hide concerning undercurrents.

The sector serves 26.2 percent of its potential market size of 40 million borrowers in the country, which leaves a significant gap in outreach, while also indicating significant potential for growth. The size and outreach of the sector also lags peer economies.

Unadjusted for differentials in GDP and population, Pakistan’s microfinance sector, as sized by the outstanding loan portfolio is five percent the size of India’s, 20 percent of Bangladesh’s, and 33 percent of the Philippines.

Copyright Business Recorder, 2025