ISLAMABAD, Feb 26: The Swiss government has decided to strengthen micro finance sector of Pakistan by offering grant assistance.

The Swiss Agency for Development and Cooperation (SDC) has initiated a Financial Sector Strengthening Programme (FSSP). The first phase of which was for three years starting from January 1, 2003.

The governor, State Bank, Dr Ishrat Hussain, who inaugurated the launching of the programme on Wednesday, said micro finance was an important sector which needed all support with a view to alleviating poverty.

He assured that the central bank will provide all possible financial and technical support to promote micro financing.

“The central bank is a key player to alleviating poverty,” he said, adding that his Bank was trying to create more micro finance institutions. “We are encouraging small and medium enterprises (SMEs) to offer adequate financing for small farmers.”

He said women needed more financial support other than currently being offered to them by the Women Bank. The government, he pointed out, has adopted a comprehensive sectoral approach to enhance micro credit reach to maximum number of households. “We are liberalizing the financial sector and this will greatly help to have more funding available for small loaning,” he said.

The governor central bank called for making investment in infrastructure projects, social delivery services and capacity building for effectively reducing poverty. “We need an increased growth, which cannot be possible without having proper infrastructure,” Dr Ishrat said.

He said the Pakistan Poverty Alleviation Fund (PPAF), which was extended $100 million loan by the World Bank, was a wholesale micro finance lender. Then, he pointed out, Khushhali Bank was also contributing to alleviating poverty by offering small loans to the people. He said the State Bank has created deposit protection fund for poor people.

Foreign donors, Dr Ishrat said, could not be expected to offer loans all the time and that this job has to be firmly taken by the local banking institutions in order to reduce poverty.

chief technical adviser of the project, Zulfiqar Ahmad said that the financial sector strengthening programme was designed to assist in building the retail level capacity of micro finance Institutions in Pakistan.