ISLAMABAD, Dec 23: The Asian Development Bank (ADB) has approved a new $320 million funding to help improve access of Pakistan's poor to wider financial services.

Pakistan, the bank said, had achieved growth rates averaging over 7.5 per cent for the past three years, and reforms have led to a better and more predictable environment for public and private investment aimed at creating new jobs and higher incomes.

According to an announcement of the ADB made on Saturday, improved growth has cut poverty and increased prosperity. “However, 24 per cent of the population still lives below the poverty-line,” it said.

To ensure that growth is inclusive and sustainable, more reforms are needed that are backed by specific actions targeting those left behind, the bank said. The new funding is officially called the Improving Access to Financial Services (Phase-I) Programme.

Microfinance reaches fewer than one million people in Pakistan, but the potential market is many times this size -- about 20 million people. The government has thus made microfinance a key theme under its Medium-Term Development Framework 2005-2010 and the broader Strategic Directions to achieve Vision-2030.

The sector has improved, but still does not touch vast numbers of people. Building a more inclusive financial sector means deepening the quality of the service and expanding the coverage, while at the same time striving for efficiency.

The ADB-backed programme will address these challenges by developing a supportive legal and regulatory environment and removing bottlenecks and constraints at two strategic levels -- the formal and informal intermediary networks and clients.

Key activities will include the promotion of better technology for delivering financial services more efficiently and at lower cost expanding the range and quality of financial products and services, including those for the Islamic market developing public-private partnerships stepping up reliable business and credit information and systems expanding fast, reliable and lower-cost remittance services for overseas workers capacity building for financial institutions and authorities and support for literacy (financial and basic) to improve access to finance and its utilization for sustained economic growth.

There is a large potential demand for microfinance services among the poorest people in Pakistan, especially for savings and remittances facilities. Improving access, the Bank said, will improve their opportunities for income-generation, thus reducing their poverty and vulnerability.

The programme is supported by two loans -- $300 million from ADB's ordinary capital resources (OCR) with a 15-year-term (including a grace period of three years) and $20 million from ADB's concessional special funds resources with a 24-year term (including a grace period of eight years).

ADB's Japan Special Fund, financed by the government of Japan, is providing a $2 million technical assistance grant to support implementation of strategic measures under the programme.

The Ministry of Finance is the executing agency for the programme, which will be conducted over about two years.