In Karachi on April 17, 2023, in order to promote Pakistan’s microfinance industry, Standard Chartered Bank Pakistan Ltd signed an unfunded Risk-Participation Agreement with British International Investment (BII), the UK’s development finance institution and impact investor. The two organizations will embark on a USD40 million program, subject to approval from the State Bank of Pakistan, under which BII will assume 50% of Standard Chartered’s risk on local currency loans to the target industry.

In Pakistan, local lending to microfinance institutions is comparatively low, and the industry relies on international lending, which provides around 50% of microfinance funding. By establishing a long-term local currency lender in the market through this program, BII will assist Standard Chartered in broadening its reach throughout the microfinance industry and advancing the bank’s goal of broader financial inclusion.

The risk-participation agreement between Standard Chartered and BII reflects the companies’ shared goal of establishing a long-term, reliable local currency lender in Pakistan. It also enables the Bank to support the State Bank of Pakistan’s policy objectives and prioritize lending to industries like agriculture, agri-related businesses, SMEs, and women entrepreneurs. Also, it supports the UN’s Sustainable Development Goals, which include improving SME formalization and growth, ensuring women have access to economic opportunities, and boosting resilience to economic shocks (SDG1) (SDG8).

The initiative will concentrate on “Wholesale Microfinance Lending,” which provides loans to microfinance companies so they may continue operating and lend more credibility to clients. They will be able to maintain and expand their enterprises as well as better manage their cash flow as a result. Through these collaborations, Standard Chartered will be able to promote financial inclusion in sectors that have historically been underserved by banks, guarantee access to credit, and open doors to the potential for long-term growth.

A signing ceremony for the deal was placed in Karachi to commemorate BII’s 75th birthday. The DFI also commemorated 35 years, over $350 million in investments, and a reaffirmed commitment to financial inclusion in Pakistan.

Present at the signing, Sarmad Lone, Regional Head, Client Coverage Corporate, Commercial & Institutional Banking Africa & Middle East, Standard Chartered Bank said:We strive to expand the reach and scale of financial services; expanding accessible banking and connecting clients to opportunities that promote access to finance and economic inclusion. This collaboration allows us to develop the capacity to support ventures that are focusing on SME and agri-adjacent sectors. It will also help us build our capacity to support innovation in financial services”.

Sarah Mooney, British Deputy High Commissioner to Karachi and Director of Trade Pakistan, said: “I am delighted that BII continues to provide strategic investment to Pakistan’s economy. Innovative financial products such as this are key to empowering small businesses, creating jobs, and increasing sustainable economic growth and cooperation. This agreement evidences UK’s commitment to achieving sustainable development goals and working together with all Commonwealth members for prosperity and trade.”

Habib Yousuf, Regional Director, South Asia at British International Investment, added: “This facility represents an opportunity to deepen our relationship with Standard Chartered Bank and establish a credible banking partnership in the country to support the long-term development of the microfinance sector. At BII a key part of our mandate is to support inclusive economic growth and this investment will increase access to finance for SMEs across Pakistan, with a focus on those in the most challenging contexts.” 

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