Community fund: PPAF seeks allocation of five percent of CPEC investment

Pakistan Poverty Alleviation Fund (PPAF) has recommended allocation of 5 percent of China-Pakistan Economic Corridor (CPEC) investment into a Community Connectivity Fund (CCF) for rural community-driven development of Balochistan, leading to improvement in quality of life and reducing vulnerability of the rural poor of Pakistan.
In an exclusive talk with Business Recorder here Monday, Chief Executive Officer (CEO) PPAF, Qazi Azmat Isa said the government should create a CCF for the uplift and development of poor, rural regions of Balochistan. A fixed amount of 5 percent may be allocated from the CPEC investment for the development of Balochistan.
The PPAF has recommended building a community development component into the overall CPEC project, that would have long-lasting impact on the country's socio-economic growth through improved stability, connectivity and accessibility to rural areas. Connectivity will give the local communities more reliable and quicker access to outside products, services, information and socioeconomic linkages, and give external service product providers improved access to rural communities. Participation in the benefits of CPEC will bring hope and stability into communities and regions that have felt marginalized from the national mainstream.
In Balochistan, the PPAF has supported 15 civil society partners in 18 districts, 239 union councils and 5,000 villages and has invested its own resources in times of disaster, and provided support when no other organisation has been able to access communities in the province.
About the Pakistan Microfinance Investment Company (PMIC), Qazi Azmat Isa said that the PPAF, the United Kingdom's Department for International Development (DFID) through Karandaaz and Germany's development bank (KfW) have signed a shareholders' agreement for the establishment of the Pakistan Microfinance Investment Company under which they will co-invest in the PMIC.
The tripartite coalition among the three shareholders is based on the initial equity investment of Rs 6 billion through contribution of 49 percent by PPAF, 38 percent by Karandaaz and 13 percent by KfW where PPAF has provided PKR Rs 3,000 million, DFID £15 million and KfW €7 million as initial equity contributions for this venture.
He said the objective of the company is to provide market-based financing mainly through debt initially to microfinance providers serving micro, small and medium enterprises (MSMEs) in Pakistan potentially accompanied by technical assistance. The PMIC board comprises members from the private sector having expertise in the fields of banking, finance, social sector development and overseeing financial affairs of large financial institutions with representation from PPAF.
The PMIC will support institutions which provide responsible and sustainable access to financial services for underserved individuals and enterprises that achieve job creation, increase income and improve lives of the poor and thereby contributing to a robust financial ecosystem. As is clear from the vision and mission, the PMIC inherits the institutional values of PPAF and will follow the double bottom line approach of financial sustainability and positive social impact. The PMIC will build upon the foundations PPAF laid fifteen years ago by providing responsible financial services to the millions of poor and financially excluded individuals of Pakistan.
He explained that the potential market for microfinance, according to the Pakistan Microfinance Network, is estimated at 20.5 million individuals while active borrowers as of December 2015 were 3.7 million. With clear demand, the market is poised for growth, however, the sector remains constrained due to lack of funds. Conservative estimates depict that in order to reach 10 million clients by fiscal year 2020, the industry would require additional debt for on-lending of up to Rs 300 billion. One-third of this amount will be financed through deposits raised by Microfinance Banks but long and short term debt will continue to remain the main drivers of growth.
Additional debt of over Rs 200 billion and equity of over Rs 45 billion will be required to meet the growing financing needs of the sector. This will necessitate obtaining funds from more commercially-minded sources, such as international microfinance investment vehicles (MIVs) and domestic sources such as commercial banks, capital markets, and even depositors, Qazi Azmat Isa added.