ISLAMABAD, May 16: The International Finance Corporation (IFC) here on Thursday signed a Memorandum of Understanding (MoU) with Network Leasing Corporation Limited (NLCL) to pursue a guarantee of $2 million equivalent of local currency borrowings.

With credit enhancement from the proposed guarantee, NLCL will borrow from a locally represented bank and use the funds to expand its portfolio of leases to the SME and micro enterprise sectors.

The proposed guarantee is part of IFC’s strategy to strengthen financial institutions serving the SME and micro enterprise sectors in Pakistan. Small and micro businesses are key drivers of economic growth in the country but ignored by the formal financial sector. With this guarantee, IFC seeks to encourage banks to provide funding to institutions addressing the needs of the low income urban and semi-urban entrepreneurs.

Mr James D. Wolfensohn, President of the World Group, said at the signing ceremony, “the World Bank group is committed to assisting the development of the SME and micro enterprise sectors. Small and micro enterprises are a key ingredient in economic growth and poverty reduction in Pakistan and the leasing sector, in particular, has great potential to assist in the development of such businesses. For growth in the micro business sector to take off, however, the support of the local banking sector in providing funding is crucial and this project seeks to encourage such participation.”

Mr. Asif Siddiqui, Managing Director of NLCL, responded, “We are pleased that IFC has agreed to assist us in obtaining funding from the banking sector. This transaction will enable us to exercise leverage our ability to raise funds at competitive rates and enhance our ability to serve the needs of low-income micro entrepreneurs.”