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| This Summary of Project Information is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. |
Summary of Project Information (SPI) |
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| Project number | 11218 |
| Project name | AKRSP Micro Bank |
| Country | Pakistan |
| Sector | Finance & Insurance |
| Department | Global Financial Markets Group |
| Company name | First MicroFinanceBank Limited |
| Environmental category | FI |
| Date SPI disclosed | September 14, 2001 |
| Projected board date | November 5, 2001 |
| Status | Active |
| Previous Events | Invested: September 24, 2002
Signed: June 14, 2002
Approved: November 8, 2001 |
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| Project sponsor and major shareholders of project company |
The principal sponsors of the project are the Aga Khan Fund for Economic Development (AKFED) and the Aga Khan Rural Support Program (AKRSP). AKFED will have a 20% shareholding and AKRSP will have a 60% shareholding in the MicroFinanceBank (the bank). IFC will hold the remaining 20%.
AKFED is one of the agencies of the Aga Khan Development Network and is well known to IFC. AKFED will bring to MicroFinanceBank its expertise from its commercial banking as well as development banking operations worldwide. It is a for-profit institution that promotes sustainable economic development particularly in Asia and Africa by investing in projects in industry, tourism, and financial services, often acting as a catalyst for mobilization of other foreign institutional investors into the project. Its approach is to help build economically viable enterprises through a long-term equity participation combined with competent professional management, technical expertise and support. AKFED is currently the lead shareholder in five banks in emerging markets (Diamond Trust Bank in each of Uganda, Tanzania and Kenya, Development Credit Bank in India and KICB in Kyrgyzstan). Since 1995, AKFED has operated a micro-credit and small business program in Tajikistan. AKFED’s operations in Pakistan include an equity stake in New Jubilee Insurance company, one of Pakistan’s largest listed insurance companies.
AKRSP was established as a non-profit company by Aga Khan Foundation in 1982 and operates in six districts of the Northern areas of Pakistan and Chitral (NWFP). The know how and experience of key microfinance staff of AKRSP will be available to the bank. AKRSP’s principal mandate is rural development in an environmentally sustainable manner and improvement of the quality of life of people in these regions. The hallmark of AKRSP’s rural development strategy is working with groups of individuals that form democratic community based development institutions in each village. These include both village and women’s organizations (V/WOs). The V/WOs and AKRSP work collaboratively to implement a wide range of activities such as financial services, enterprise development, productive infrastructure and natural resource management. Today, about 80% of households in Northern Pakistan have membership in a V/WO and one third of all V/WO members are women. |
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| Total project cost and proposed IFC investment |
| Total project cost is estimated at US$7.7 million equivalent. IFC is expected to invest up to US$1.5 million equivalent for an equity stake of 20% in the bank. |
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| Location of project and description of site |
| The MicroFinanceBank is expected to be headquartered in Islamabad and will have a nationwide reach in both rural and urban areas. |
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| Description of company and purpose of project |
The project is to establish the first private sector microfinance bank in Pakistan, The MicroFinanceBank. The bank will start by principally absorbing the clientele of the microfinance program of AKRSP which has decided to separate its microfinance operations from its other activities in order to provide a full range of banking services to its clients and to expand its outreach nationally. The bank’s initial paid-up capital will be about PRs. 500 million (US$7.7 million equivalent), and it will be established as a non-listed public company under the Companies Ordinance of 1984 and as a microfinance institution (MFI) under the Microfinance Institutions Ordinance.
IFC will have a strong role in the project:
(i) Through this small, yet highly significant investment, IFC will participate in a pioneering effort to establish the first commercially oriented microfinance institution in Pakistan operating at the national level;
(ii) The project will establish a successful model MFI that can be replicated over time in Pakistan and other countries where AKFED operates; the expected increase in the supply of credit will positively impact currently underserved rural and urban areas and particularly the poor;
(iii) Working alongside AKFED and AKRSP, IFC will ensure that MicroFinanceBank is commercially oriented and operates using international best practice to achieve full financial accountability, sound corporate governance, high quality MIS, and strong policies and procedures.
The project is expected to have a strong development impact. It will:
(i) Improve governance in the financial sector. The project is expected to contribute to overall financial sector reform, and in particular, contribute to the development of financial infrastructure and improved governance within the financial system by expanding the role of the private sector;
(ii) Support growth of key sectors. The project would contribute to the development of Pakistan’s most dynamic sectors, in particular the agricultural sector and small and medium enterprises (SMEs), thus contributing to the resumption of economic growth and macroeconomic stability;
(iii) Contribute to more equitable growth. The project would contribute to more equitable growth by supporting the development of a sustainable, private microfinance institution which aims at improving access to financial services to a large under-served population in both rural and urban areas. |
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| Environmental and social issues - Category FI |
This is an FI Type 1 project according to IFC’s environmental review procedure. The MicroFinanceBank will be required to develop and implement procedures to screen loan applications for compliance with host country environment, health and safety requirements and for consistency with IFC’s Microfinance Exclusion List.
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| To contact the project company, please write to: |
Rosy Khanna, Investment Officer
Email:rkhanna@ifc.org, or
Momina Aijazuddin, Investment Officer
Email: maijazuddin@ifc.org |
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