RAWALPINDI, Nov 23: A $46 million programme will boost commercialisation of the microfinance sector and make it available to about 160,000 new clients -- at least half of them women.

The programme for increasing sustainable microfinance will be partly funded by a loan of $35 million from the International Fund for Agritultural Development (IFAD).

“It is time for microfinance in Pakistan,” says Nigel Brett, IFAD country programme manager for Pakistan.

“Future growth in this sector will depend partly on microfinance institutions and commercial banks forging successful financing partnerships. This programme will work to build such partnerships,” he added.

The loan agreement was signed at the IFAD headquarters in Rome on Thursday by the Minister and Charge d’ Affaires of Pakistan Embassy in Rome, Jamil Ahmad, and IFAD’s President, Lennart Bege.

Banks and commercial financial institutions in Pakistan will contribute 10.3 million dollars to the programme.

The Pakistan Poverty Alleviation Fund (PPAF) will also provide 700,000 dollars and its partner organisations a further 600,000 dollars.

Access to micro-finance in Pakistan is still very limited and unmet demand is enormous. To date, the sector has relied largely on donor funds.

“These existing funds are already failing to meet demand and only limited donor funding can be expected for micro-finance in the future,” says Brett. “Unless commercial funding sources can be tapped, the growth of the sector will be constrained.”

Pakistan’s government recognises micro-finance as an important tool for reducing poverty in the country and supports the principles of market competition, commercialisation and innovation.

It wants to reach a target of three million borrowers within the next three years.

The country’s banks and micro-finance institutions have said they are willing to work together to expand outreach in services, such as loans, savings, insurance and credit.

The IFAD-supported programme will work with three groups: small farmers, livestock owners, traders and micro-entrepreneurs; women and households, headed solely by women; and vulnerable rural households living below the poverty-line.

“When the programme closes, a number of high-performing micro-finance institutions reaching out to these groups will have developed partnerships with commercial banks,” says Brett.

“Through programme-supported mechanisms, such as cash collateral, guarantees, letters of credit and equity contributions, commercial banks will increase their lending to micro-finance institutions and this will lead to the overall growth of the micro-finance sector.”

With this programme, IFAD loans and grants totalling more than $422 million have helped finance 22 programmes and projects in Pakistan.