The World Bank’s Board of Directors on Wednesday approved $102 million in in financing for the Resilient and Accessible Microfinance (RAM) Project for improving access to microcredit and support the resilience of the microfinance sector and its borrowers, in the face of climate-related challenges.
“Microfinance is a critical tool for supporting the livelihoods of vulnerable populations in Pakistan,” World Bank Country Director for Pakistan Najy Benhassine said in a statement.
This project, he said, would help strengthen the resilience of the microfinance sector, particularly in the face of growing climate risks, ensuring that the sector can continue to provide essential financial services to those who need them most, especially in rural areas.
Benhassine added that this project is part of our broader commitment to promoting financial inclusion in Pakistan and to increasing resilience to climate change, as spelt out in our new 10-year Country Partnership Framework.
The RAM Project is expected to benefit nearly 1.89 million people (including more than 1 million women and over 350,000 youth), especially those in vulnerable and low-income rural communities.
By providing financial resources to microfinance institutions, the project ensures that they can continue to provide services even during climate-induced financial pressures.
The project will provide increased access to microcredit for individuals and small businesses, providing them ‘recovery loans’ to help them gain financial stability.
Namoos Zaheer, Task Team Leader for the Project, said: “The Resilient and Accessible Microfinance Project has been designed based on lessons learned from the devastating floods of 2022 and is a significant step to bolster financial inclusion in Pakistan.”
“It will enhance economic empowerment and resilience of those at the bottom of the economic pyramid, particularly women, small farmers, and families in rural areas who are more prone to climate shocks.”
The project will be implemented by the Ministry of Finance through the State Bank of Pakistan. It will be the first in a series of interventions to support the sector, to be designed and phased in close partnership with other international financial institutions.
Key components of the project include the establishment of a Climate Risk Fund, innovative use of agrotechnology solutions, capacity building for microfinance institutions, and the development of risk management frameworks to enhance the sector’s resilience.
The project is co-financed by a $23 million grant from the Global Shield Financing Facility (GSFF) — a multi-donor trust fund hosted by the World Bank Group and financed by the Governments of Canada, Germany, Japan, Luxembourg, and the United Kingdom.
Pakistan has been a member of the World Bank since 1950. Since then, the World Bank has provided over $48.3 billion in assistance. The current portfolio has 54 projects and a total commitment of $15.7 billion.