Islamabad, Pakistan, May 16, 2002
—The International Finance Corporation (IFC)—the private sector lending arm of the World Bank Group—has signed a Memorandum of Understanding (MOU) to pursue a guarantee of US$2 million equivalent of local currency borrowings by Network Leasing Corporation Limited (NLCL). With credit enhancement from the proposed guarantee, NLCL will borrow from a locally represented bank and use the funds to expand its portfolio of leases to the SME and micro enterprise sectors.
The proposed guarantee is part of IFC’s strategy to strengthen financial institutions serving the SME and micro enterprise sectors in Pakistan. Small and micro businesses are key drivers of economic growth in the country but remain underserved by the formal financial sector. With this guarantee, IFC seeks to encourage banks to provide funding to institutions addressing the needs of the low income urban and semi urban entrepreneurs.
NLCL was incorporated in 1993 and has been profitable since inception. As a pioneer in micro leasing, NLCL provides lease finance for small and micro entrepreneurs in urban and semi urban areas to enable them to acquire income-generating assets. About a quarter of the company’s business is directed at women-owned enterprises. NLCL is headquartered in Karachi and has branches in Lahore and Peshawar. It recently completed a rights issue to increase its equity capital to Pakistan Rupees 200 million.
Mr. James D. Wolfensohn, President of the World Bank Group, said at the signing in Islamabad, “The World Bank Group is committed to assisting the development of the SME and micro enterprise sectors. Small and micro enterprises are a key ingredient in economic growth and poverty reduction in Pakistan and the leasing sector, in particular, has great potential to assist in the development of such businesses. For growth in the micro business sector to take off, however, the support of the local banking sector in providing funding is crucial and this project seeks to encourage such participation."
Mr. Asif Siddiqui, Managing Director of NLCL, responded, “We are pleased that IFC has agreed to assist us in obtaining funding from the banking sector. This transaction will enable us to leverage our ability to raise funds at competitive rates and enhance our ability to serve the needs of low-income micro entrepreneurs.”
IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through the close of the last fiscal year on June 30, 2001, IFC committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. IFC’s committed portfolio at the end of FY01 was $14.3 billion.