Islamabad, Pakistan, June 14, 2002—The International Finance Corporation, the private sector lending arm of the World Bank Group, will make an equity investment of about US$2.7 million (Pakistan Rupees 160 million equivalent) for a 24 percent stake in Pakistan’s first private sector-licensed microfinance institution, The First MicroFinanceBank Ltd (FMFBL).

The microfinance sector in Pakistan is underdeveloped and dominated by public sector entities.  IFC's investment, alongside that of reputable domestic and international investors, is designed to demonstrate that microfinance institutions can be financially sustainable.  The principal sponsors of the project are the Aga Khan Fund for Economic Development (AKFED) and the Aga Khan Rural Support Programme (AKRSP).

AKFED is the economic development arm of the Aga Khan Development Network (AKDN), a group of private, non-denominational development agencies seeking to improve opportunities and living conditions in specific regions of the developing world, especially Africa and Asia.  Active in the fields of industry, financial services, tourism development, and infrastructure in 15 countries across South and Central Asia and Sub-Saharan Africa, AKFED operates as a network of affiliates with more than 90 separate project companies employing over 15,000 people and controlling assets in excess of $1 billion.

AKRSP—a non-profit organization established in 1982—has operated a successful integrated development scheme across six northern Pakistan districts generating savings of more than $7 million and providing small loans to more than 20,000 people, while seeking to maintain an equitable gender balance amongst borrowers.

FMFBL has established its head office in Islamabad where it has opened its first branch.  Additional branches are planned throughout the country, including in major cities such as Rawalpindi, Karachi, and Peshawar.  Over the course of the first two years, FMFBL will absorb the clientele of AKRSP’s microfinance program.

Technical assistance funding for the project is drawn from the SME Capacity Building Facility, a $7.1 million initiative to support innovative efforts in the field of micro enterprises and SMEs that IFC launched last year.  The facility supports up to 40 percent of the costs of pilot projects that are unique and replicable and involve close partnership with outside institutions.

IFC’s Country  Manager for Pakistan, Mr. Farid Dossani commented, “Making credit available to small and micro businesses is crucial to economic growth in developing countries.  This initiative will provide basic financial services to underserved rural and urban people by helping to mobilize savings and improve access to credit.”

Mr. Sultan Allana, AKFED’s representative on FMFBL’s board and FMFBL Chairman said, “We are committed to providing assistance in addressing issues relating to poverty alleviation in Pakistan and view this initiative as a first step towards institutionalizing our approach in this underdeveloped sector.  Based on the experiences gained through AKRSP’s credit and savings program which has been in operation since 1982 and AKFED’s involvement with several microfinance projects around the world, we hope to establish a sustainable and high impact institution in Pakistan in the coming years.”

IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives.  IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.  Since its founding in 1956 through the close of the last fiscal year on June 30, 2001, IFC committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries.  IFC’s committed portfolio at the end of FY01 was $14.3 billion.