Standard Chartered Bank Pakistan Limited recently signed an unfunded Risk-Participation Agreement with British International Investment (BII), the UK’s development finance institution and impact investor, to provide support to the microfinance sector in Pakistan. Subject to authorisation from the State Bank of Pakistan, the two institutions will enter into a USD40 million programme, under which BII will cover 50 per cent of Standard Chartered’s risk on local currency loans to the target sector.
Local currency lending to microfinance institutions in Pakistan is relatively low and the sector relies on foreign currency lending which accounts for approximately 50 per cent of microfinance funding. Through this programme, BII will help Standard Chartered expand its outreach across the microfinance sector by establishing a long-term local currency lender in the market, in line with the bank’s vision for broader financial inclusion.
The Risk-Participation Agreement between Standard Chartered and BII reflects the companies’ joint vision to create a long-term, sustainable local currency lender in Pakistan and will also allow the Bank to support the policy goals of the State Bank of Pakistan and prioritise lending to sectors such as agriculture, agri-adjacent businesses, SMEs, and women entrepreneurs. It also helps contribute to the UN’s Sustainable Development Goals on enhancing resilience to economic shocks (SDG1), ensuring economic opportunities for women (SDG 5) and increasing the formalisation and growth of SMEs (SDG8).
The programme will focus on ‘Wholesale Microfinance Lending’ offering loans to microfinance providers so they can maintain and extend more credit to customers. This will also enable them to better manage cashflow, maintain, and grow their businesses. Through such partnerships, Standard Chartered will be able to drive financial inclusion across traditionally underbanked sectors and ensure access to financing while creating opportunities for sustainable growth.
The agreement was marked by a signing ceremony in Karachi to mark BII’s 75th anniversary. The DFI also celebrated 35 years and over $350 million worth of investment in Pakistan as well as a renewed commitment to financial inclusion.
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 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 achieve 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.”
