ISLAMABAD, Dec 24: The Asian Development Bank (ADB) on Tuesday disbursed $20.9 million for the ongoing Microfinance Sector Development Programme (MSDP).

While releasing this second tranche, the ADB report commends the effective leadership role of the Government of Pakistan, including the State Bank, in instituting an enabling policy, legal and regulatory framework for the development of microfinance sector.

According to a handout issued by the Khushhali Bank, the ADB praised the strong commitment of the government to its poverty reduction agenda. The ADB report notes the effort of Khushhali Bank — the first licensed microfinance bank in Pakistan — in adopting good governance and successful practices in banking for the poor to emerge as a viable bank with nearly 60,000 clients and 98 per cent repayment rate.

Complementing the MSDP reforms, the ADB board approved $250 million Rural Finance Sector Development Programme (RFSDP) on December 20, 2002 for transforming Zarai Taraqiati Bank Limited into a sustainable financial institution for effectively meeting the financial needs of farmers and rural entrepreneurs. Reform of Zarai Taraqiati Bank (former Agricultural Development Bank of Pakistan) was initiated as part of the MSDP.

The RFSDP also includes a ‘new bank fund’ of $15 million to provide concessional assistance for institutional development to promoters of licensed microfinance banks in rural areas.

Shaukat Aziz, adviser to prime minister on finance, in his policy statement on Nov 4, had reiterated the government’s resolve for establishing a pro-poor financial system as a critical element for combating the rising incidence of poverty. This was to be undertaken in a manner that was consistent with the overall reforms in the banking sector in terms of autonomy, good governance, privatization and sustainability.

The MSDP was launched in February 2001 to effectively retail a range of financial and social services to the poor, especially women. The MSDP objectives include enhancing the access of microfinance services for the poor households, especially women, for increasing household income. The MSDP also aims at building the capacity of the poor to effectively utilize microfinance services and reduce the risks faced by the poor. The ADB is supporting the programme with two concessional facilities totalling $150 million with repayment term 34 years.