The World Bank on Wednesday approved a $102 million loan for Pakistan under its Resilient and Accessible Microfinance (RAM) Project.

The initiative - introduced under the new 10-year Country Partnership Framework (CPF) - seeks to bolster the resilience of the microfinance sector amid growing climate risks.

According to the World Bank, the loan will be disbursed through the Ministry of Finance and the State Bank of Pakistan (SBP), ensuring that microfinance institutions (MFIs) can continue providing financial services, even during climate-induced economic disruptions.

The project is expected to benefit nearly 1.89 million people, including over 1 million women and 350,000 youth, by increasing their access to credit and financial stability.

World Bank Country Director for Pakistan Najy Benhassine highlighted the importance of the project in supporting livelihoods of vulnerable populations.

"Microfinance is a critical tool for supporting the livelihoods of vulnerable populations in Pakistan. This project will 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," he said.

He further stated that the project aligns with the World Bank’s commitment to promoting financial inclusion and climate resilience in Pakistan under the CPF.

The 2022 floods

The initiative draws lessons from Pakistan’s devastating 2022 floods, which severely impacted small businesses, farmers, and low-income households. Task Team Leader Namoos Zaheer emphasized that the project is a significant step toward financial empowerment, particularly for women, small farmers, and rural communities.

"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," Zaheer stated.

Key features of the RAM project

The project includes several strategic components to enhance the resilience of Pakistan’s microfinance sector, such as:

Climate risk fund: A financial buffer to support microfinance institutions during economic shocks caused by climate disasters
Agrotechnology solutions: Leveraging innovative digital tools to support farmers and small businesses
Capacity building for MFIs: Strengthening financial institutions to improve their service delivery and risk management
Risk management frameworks: Developing policies to mitigate financial instability in times of crisis
The project will also provide ‘recovery loans’ to help individuals and small businesses regain financial stability following economic or climate-induced disruptions

International support and co-financing

In addition to the $102 million loan, the project is co-financed by a $23 million grant from the Global Shield Financing Facility (GSFF). The GSFF is a multi-donor trust fund hosted by the World Bank Group and financed by Canada, Germany, Japan, Luxembourg, and the United Kingdom.

Economic analysts have welcomed the initiative, stating that enhancing financial access for marginalized communities is crucial for Pakistan’s economic recovery. However, they stress the need for transparent implementation and oversight to ensure that funds reach the intended beneficiaries.