EU programme to build banking and business in Pakistan

Summary: May 22, 2002: EC launches Euro 50 million programme to build banking and business in Pakistan (Brussels/Islamabad)

Chris Patten, European Commissioner for External Relations, and Shaukat Aziz, Minister of Finance of the Government of Pakistan today signed a 50 million euro Financing Agreement and launched a five year project to promote reform of the Financial Sector in Pakistan. Speaking in Islamabad, Mr. Patten said: "The EC is contributing 50 million euro to underpin the Pakistan government's Poverty Reduction Strategy and specifically, to support its efforts to upgrade Pakistan's financial services sector. Our assistance will focus on the rural poor: better access to banks and micro finance will help create jobs in rural areas and support SME's development. Jobs and growth act like an insecticide on the breeding grounds for extremism, and will contribute to the stability of Pakistan and the region.

This programme is a part of a comprehensive package of assistance from the EC in response to Pakistan's support in the fight against terrorism. Other measures included trade concessions in the area of clothing and textiles as well as accelerated disbursements under an ongoing education sector programme. The initiative for this package dates back to my last visit to Pakistan in September 2001, another example of a promise delivered".

The EC financial services programme will focus on the regulatory and institutional issues which remain to be addressed in micro-finance and financial services for small and medium enterprises, as well as building on recent reforms in order to improve the outreach and service provision to the poor, and to promote small and medium-sized enterprises, particularly in rural areas.

The programme will build on the inputs and relevant experiences of other donors in the sector, and particularly World Bank and Asian Development Bank (ADB) support to the areas of commercial banking and micro-finance. It is hoped that it will achieve the following results:

Establishment of a legal and regulatory framework that promotes and facilitates an increased participation of banking institutions in the provision of financial services to the rural poor and to Small and Medium sized Enterprises (SMEs);
An increase in the number of sustainable private sector based micro-finance institutions (MFIs) licensed by the State Bank of Pakistan and operating in the rural areas;
Strengthened SME support structures at all levels;
Significant increase in the number of savers/borrowers, particularly in the rural areas, and expansion in micro-finance credit turnover.
SME bank branches accessible throughout Pakistan and a substantial growth in lending activities;
Gender equality in savings/borrowing opportunities and training provision;
Extensive local awareness of the financial services available, strengthened and wider ranging community capacities for economic development and consequent increase in community mobilization.

The Financial Sector programme forms part of the EC's Country Strategy Paper for Pakistan which was adopted by the European Commission on 21 May, 2002.

Ref: EC02-100EN
EU source: European Commission
UN forum:
Date: 22/5/2002

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