ISLAMABAD, Feb 7: Mobile banking and mobile phone-based technology will be explored as delivery channels to lower transaction costs aimed at improving the poor's access to financial services in Pakistan.The Asian Development Bank (ADB) has agreed to provide necessary assistance to help improve access to financial services in Sindh and the NWFP.

The new funding will be part of the $320 million 'Improving Access to Financial Services Programme', approved in December 2006.

The objective is to reach about 15,000 people in Sindh and NWFP in terms of providing them inexpensive credit.

All microfinance banks are eligible to submit their proposals to develop such innovative delivery channels.

Initially, a $2 million grant from ADB's Japan Fund for Poverty Reduction (JFPR) will be financed by the Government of Japan, which will test ways to expand microfinance outreach and services to the poorest in Pakistan.

The project will develop innovative savings products, complete with policies and procedures that will be disseminated to all microfinance banks.

The First Microfinance Bank (FMFB) will test the new products in Sindh and NWFP, while the Kashf Foundation, after obtaining a license to be a microfinance bank, will test them in Lahore, benefiting around 2,000 clients.

According to the ADB, the poorest have fewer assets, fewer job opportunities, and greater vulnerability to economic shocks.

They generally remain outside conventional microfinance programmes.

This project specifically targets that segment of the population.

Another microfinance institution will be selected to pilot a system for targeting the poorest, where safety nets are provided in the form of food stamps, and skill trainings are provided, along with access to savings and credit.

The project will also support financial literacy training for at least 1,000 people, with a special focus on women. It aims to increase the knowledge, skills, and attitudes necessary for the poor to manage their household finances.

The poor need deposit services to better manage emergencies, smooth consumption, meet expected demands for large sums of cash, and take advantage of investment opportunities.

The demand for savings products may even far outstrip the demand for loans among poorer households.

The Ministry of Finance is the executing agency for the project which will be carried out over about three years.

The JFPR was set up in 2000 with an initial contribution of $90 million, followed by additional contributions totalling $155 million in 2002, and annual contributions up to 2006 bringing the total amount to $360 million.