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The Asian Development Bank (ADB) is a multilateral development finance institution dedicated to reducing poverty in Asia and the Pacific. Established in 1966 it is funded and owned by 61 member countries. The ADB has been operating in Pakistan since 1966 in a variety of capacities. In Pakistan ADB provides soft loans to the government as well as technical assistance grants implemented by a diversity of partners.
The
key areas of ADB assistance in Pakistan are defined around the strategic
priorities of sustainable pro-poor growth, inclusive social development, and
good governance. ADB has first supported microfinance development in Pakistan
through the microfinance components of a series of community-based multisectoral
area development programs, funded by ADB loans approved between 1996 and 1999
The
first ADB stand-alone microfinance initiative was the Microfinance Sector
Development Program (MSDP) launched in 2001 and implemented by the Pakistani
Poverty Alleviation Program (PPAF). The MSDP comprised two loans, a first loan
to support the reform program of the microfinance sector and a second loan to
provide services to the poor and institutional strengthening. The most recent
initiative, dated 2003, is ADB lending under the Rural Finance Sector
Development Program, implemented by the Ministry of Finance, which includes two
loans to support the institutional strengthening of the rural development bank,
Zarai Taraqiati Bank Ltd (ZBTL), the State Bank of Pakistan and the project
management unit at the Ministry of Finance.
Initiated
in 2001, the Microfinance Sector Development Program (MSDP) defines a policy,
legal, and institutional framework in order to facilitate microfinance service
delivery. This project has three main objectives:
To
support the development of a conducive regulatory framework, which resulted
in the promulgation of the Microfinance Institutions Ordinance 2001 enabling
the establishment of sustainable microfinance banks.
To
facilitate the development of a microfinance bank as a public-private
partnership, the Khushhali Bank.
To
initiate the restructuring of Development Finance Institutions, mainly the
Agricultural Development Bank of Pakistan, which is now called the Zarai
Taraqiati Bank Ltd.
In
addition a series of funds, managed by the State Bank of Pakistan, were set up
to support the development of microfinance outreach in Pakistan, such as the
Microfinance Social Development Fund, the Community Investment Fund, the Risk
Mitigation Fund and the Deposit Protection fund.
The
Rural Finance Sector Development Program (RFSDP), started in 2003, has been
designed to assist the Government of Pakistan in accelerating rural economic
growth by addressing key constraints in rural finance. The program aims at
ensuring the permanent access to institutional financial services for a majority
of rural households at minimal transaction costs and encourage private sector
participation in the rural finance sector. The program has four components:
create
a favourable policy environment to the development of a market-oriented,
mostly private-owned financial sector.
To
continue institutional restructuring and reforms, especially the key rural
finance institution, ZBTL.
To
start a new bank fund, managed by the State Bank of Pakistan, which will be
used as capital for lending to rural microfinance institutions.
To encourage product and process innovations. A pilot insurance scheme will be proposed to rural borrowers, to cover crop insurance related to natural disasters (floods, droughts).
ADB
programs have a nation-wide outreach in Pakistan.
As
a multilateral development bank, ADB collaborates with the Government of
Pakistan and the State Bank of Pakistan. Through the implementation of its
microfinance lending and technical assistance, ADB has also entered into
partnerships with the Khushhali Bank, the Bank of Khyber, and a number of NGOs
involved in microfinance.
As
stated by the ADB, the key objective of the MSDP is to reduce poverty, and more
specifically to develop the microfinance sector to efficiently provide financial
and social services to the poor. ADB expects that the microfinance services will
have a significant impact on poverty reduction by increasing incomes of poor
households, enhancing outreach (especially women), building social capital and
reducing risks faced by the poor.
ADB
microfinance assistance in Pakistan is ADB first experience with a sector
development approach, using a public-private partnership. The nature, scope and
size of the assistance provided make a substantial impact on microfinance in
Pakistan.
Contract
awards for ADB projects in Pakistan have averaged $376 million annually over the
past 5 years. Presently, 53 public sector loans covering 38 projects are under
implementation, of which 83% loans are rated satisfactory.
In
microfinance the following soft loans have been provided recently to the
government of Pakistan:
Microfinance
Sector Development Program: US$
70 million
Rural
Finance Sector Development Program: US$
250 million
Web
site: www.adb.org/Pakistan and
related ABD projects documents in Pakistan.
