Acronyms - Pakistan Poverty Alleviation Fund · 2012-12-29 · Limited, Bank Al-Falah Limited,...

Acronyms

AKPBS Agha Khan Planning and Building ServicesAKRSP Agha Khan Rural Support ProgrammeBRSP Baluchistan Rural Support ProgrammeCB Capacity BuildingCECP Committee Encouraging Corporate PhilanthropyCED Credit & Enterprise Development (unit)CHC Community Health CenterCMDO Community Motivation and Development OrganizationCPI Community Physical Infrastructure (unit)DMPP Drought Mitigation and Preparedness ProjectDWSS Drinking Water Supply SchemeEDF Enterprise Development FacilityERD Evaluation, Research & Development (unit)F&A Finance & Accounts (unit)FPAP Family Planning Association of PakistanGTZ Gesellschaft fur Technische Zusammenarbeit

(German Technical Cooperation)H&E Health & Education (unit)HID Human & Institutional Development (unit)IA Internal Audit (unit)IAUP Integrated Area Upgradation ProgramIFAD International Fund for Agriculture DevelopmentIR Islamic ReliefIRC Indus Resource CenterKfW Kreditanstait fur Wiederaubau (Reconstruction Credit Institute)KIBOR Karachi Interbank Offered RateM & C Media & Communication (unit)MC MicrocreditMGPO Mountain and Glacier Protection OrganizationNA Northern AreasNRSP National Rural Support ProgrammeOAKDF Omar Asghar Khan Development FoundationPO Partner OrganizationPRSP Punjab Rural Support ProgrammePWMC PPAF Water Management CenterRnR Reconstruction & Rehabilitation (unit)RCDS Rural Community Development SocietyRHC Rural Health CenterSAFWCO Sindh Agricultural and Forestry Workers’ Coordinating OrganizationSRSP Sarhad Rural Support ProgrammeTF Taraqee FoundationTRDP Thardeep Rural Development ProgrammeWWOP Women Welfare Organization Poonch

Annual Report 2008

Contents

Chairman’s Message ...................................................................................................2Chief Executive’s Statement .........................................................................................4

1. Overview.............................................................................................................62. Credit & Enterprise Development .........................................................................83. Community Physical Infrastructure.....................................................................164. PPAF Water Management Center .......................................................................245. Health & Education ...........................................................................................326. Human & Institutional Development ..................................................................38 Gender & Development..............................................................................447. Rehabilitation & Reconstruction.........................................................................468. Evaluation, Research & Development .................................................................529. Media & Communication ..................................................................................5610. Human Resource, Procurement & Administration...............................................6011. Internal Audit....................................................................................................6212. Finance and Accounts .......................................................................................6413. Directors’ Report ...............................................................................................68

Financial Highlights ...................................................................................................81Financial Statements .................................................................................................82

Figures

1. PPAF and POs: Market Share...............................................................................................................92. MC Disbursements: By Sector (FY 2003-08) ......................................................................................103. EDF Disbursements: By Sector (FY 2003-08) ......................................................................................104. Disbursements: By PO Type ..............................................................................................................115 Borrowers: By Location .....................................................................................................................126. Borrowers: By Gender.......................................................................................................................127. Capacity Building in Support of Lending ...........................................................................................148. Sectoral Distribution of CPI Schemes (FY 2007-08) ............................................................................199. Geographical Distribution of CPI Schemes (FYs 2000-08)...................................................................1910. Cumulative Sectoral Distribution of Infrastructure Schemes ...............................................................2211. Cumulative Sectoral Distribution of CPI Disbursements ......................................................................2212. Cumulative Distribution of CPI Schemes by PO ..................................................................................2213. Cumulative Distribution of CPI Disbursements by PO .........................................................................2214. Distribution of Approved Funds by Program Category (Rs. Million) ....................................................2715. Distribution of Beneficiary Households by Province............................................................................3016. Increase in Enrollments by Gender and School Type (FY 2007-08)......................................................3617. Distribution of Students by Gender and School Type (As of June 2008) .............................................3618. Healthcare Beneficiaries by Gender and Province (FY 2007-08) ..........................................................3719. Healthcare Beneficiaries by Province and Treatment Category (FY 2007-08) .......................................3720. Annual Community Training Beneficiaries..........................................................................................3921. Annual PO Staff Training Beneficiaries ...............................................................................................3922. Annual HID Grant by CB Category.....................................................................................................4023. Annual CB Grant in Support of Microcredit by PO Type .....................................................................4224. CB Grant as Percent of MC by PO Type..............................................................................................4225. Annual HID Disbursements ...............................................................................................................4226. Share of Funds Disbursed - Core Operations .....................................................................................7127. Provincial Distribution of Funds – Core Operations ............................................................................7128. Annual HID Grant by Category..........................................................................................................73

Tables

1. Geographical Distribution of Infrastructure Schemes by Beneficiaries .................................................172. Geographical Distribution of Infrastructure Schemes by Project Type (FYs 2000-08) ...........................183. Distribution of Infrastructure Schemes ..............................................................................................204. Rehabilitation of Infrastructure Schemes in Earthquake Affected Areas ..............................................215. Distribution of Projects by Beneficiaries .............................................................................................306. Social Sector Interventions by Province..............................................................................................357. PPAF Donor-wise Allocation of Funds ................................................................................................478. Distribution of Grant Funds amongst POs .........................................................................................489. Distribution to Beneficiary Households – PPAF Housing Grants ..........................................................4810. Disbursements – Core Operations .....................................................................................................7111. Financial Results ............................................................................................................................... 73

Boxes

1.1 Policy changed commensurate with market characteristics ................................................................152.1 Integrated Area Upgradation in Punjab.............................................................................................233.1 DMPPs bring Soan Valley back to life ................................................................................................263.2 “Eliminating Poverty in One Generation: A tough but attainable goal for Pakistan”............................273.3 Solar Home Systems .........................................................................................................................315.1 Citi-PPAF Microentrepreneurship Awards 2007 .................................................................................438.1 Baselines for conventional infrastructure projects ..............................................................................559.1 Immersion visits of journalists ...........................................................................................................59

Company Information

Chairman - General Body

Hussain Dawood Chairman, The Dawood Group

Members

Mueen Afzal Former Secretary General, Ministry of Finance, Government of PakistanRafiud Deen Ahmad Consultant, Orr, Dignam & Co.Rana Assad Amin Joint Secretary, Ministry of Finance, Government of Pakistan.Rashid Bajwa Chief Executive Officer, National Rural Support Programme.Javed Burki Former Civil Servant.Junaid Iqbal Ch. Additional Secretary, Economic Affairs Division, Government of Pakistan.Arif Hasan President, Aurat Foundation.Ashraf Muhammad Hayat Former Civil Servant.Akmal Hussain Managing Director, Sayyed Engineers Ltd.Ainullah Khan Kakarr Former Civil Servant.Shoaib Sultan Khan Chairman, National Rural Support Programme.Sono Khangharani Executive Director, Thardeep Rural Development Programme.Rajab Ali Memon Educationist.Hamayun Murad Managing Director, Orix Leasing Pakistan Ltd.Kaiser H Naseem Manager, Pakistan Corporate Governance Project, International Finance

Corporation.Aisha Ghaus Pasha Former Deputy Director, Social Policy and Development Center.Aijaz Ahmed Qureshi General Manager, Sindh Irrigation & Drainage Authority.Fazlullah Qureshi Former Member, National Electric Power Regulatory Authority.Muhammad Ismail Qureshi Secretary, Ministry of Petroleum, Government of Pakistan.Syed Ayub Qutub Executive Director, Pakistan Institute of Environment Development & Research.

Sadiqa Salahuddin Executive Director, Indus Resource Center.M Suleman Shaikh Honorary Chief Executive, Sindh Rural Support Organization.Jahangir Tareen Former Federal Minister, Government of Pakistan.Fareeha Zafar Director, Society for the Advancement of Education.

Company Secretary Iltifat Rasul KhanAuditors A. F. Ferguson & Company, Chartered AccountantsLegal Advisors Azam Chaudhry Law AssociatesTax Advisors A. F. Ferguson & Company, Chartered AccountantsBankers Royal Bank of Scotland, Allied Bank of Pakistan, Askari Commercial Bank

Limited, Bank Al-Falah Limited, Citibank, Faysal Bank Limited, Habib BankLimited, Hong Kong and Shanghai Banking Corporation Limited, NationalBank of Pakistan, NDLC-IFIC Bank Limited, Saudi Pak Commercial BankLimited, Standard Chartered Bank Limited.

Registered Office House No. 1, Street No. 20, Sector F-7/2, Islamabad, Pakistan.UAN: (+92-51) 111-000-102, Tel. 265 3304-05, 265 3597Fax. (+92-51) 265 2246, Email: [email protected]: www.ppaf.org.pk

Board of Directors

Hussain DawoodChairman

Mueen Afzal

Rafiud Deen Ahmad

Rana Assad Amin

Junaid Iqbal Ch.

Arif Hasan

Aijaz Ahmed Qureshi

Syed Ayub Qutub

Fareeha Zafar

Kamal HyatChief Executive/ManagingDirector

BoD Committees

Human Resource Committee

Hussain DawoodChairman

Aijaz Ahmed Qureshi

Fareeha Zafar

Audit Committee

Mueen AfzalChairman

Rafiud Deen Ahmad

Rana Assad Amin

Aijaz Ahmed Qureshi

PPAF — Annual Report 20082

Chairman’s Message

It is heartening to see that despite difficultcircumstances PPAF’s upward drivecontinued throughout the year 2008. Bythe end of June 2008, PPAF had disbursedRs. 34 billion through its regular partnerorganizations. As in the past, microcreditaccounted for a major share of the totalfunds disbursed (Rs. 25.7 billion).Consequently, PPAF continued to lead thedrive for increasing the number of clientsin the sector, and, at present, accounts for45 percent of the active microcreditborrowers in the country.

Physical infrastructure works have continuedto expand and disbursements of Rs. 5.5billion were made in the current year toprovide drinking water, irrigation channelsand sanitation facilities to the vulnerablein the poorest districts of the country. SindhCoastal Area Development pilot project wasintroduced with ass istance fromConsultative Group to Assist the Poor toaddress the pressing problems of thedestitute that are usually left out of thetraditional microcredit facilities.

Similarly, health and education facilitieshave been well received and there is

growing demand from communities toavail these and give their children a chancefor a better future. Both the communityschools and those which have been adoptedby PPAF from the government are doingexceedingly well, and we hope to take thesefacilities to scale in the future.

The sterling work accomplished by PPAF inthe earthquake areas, where it has helpedto construct over 90,000 houses, is receivinginternational attention. Recently, the“Golden Plough” of the World Bankrecognized outstanding systems,operational and monitoring features ofPPAF. In addition, PPAF executives wereinvited by the Government of China toshare experiences so that they may emulatethe same in order to mitigate the hardshipsof the victims of the recent earthquake inChina.

For all these achievements I must thank thevery constructive role played by membersof PPAF Board and General Body. Followinginternational best practice, two committeesof the Board dealing with Audit and HumanResources have been set up and are nowregularly meeting to facilitate and guide

PPAF — Annual Report 2008 3

the management in these important areasof work. I am grateful to them for theirtime and contribution.

Similarly, I would like to express myappreciation for members of themanagement team who continue to workwith dedication and have developed areputation of credibility and trust. Theymust continue to reinvent themselves tomeet the new challenges of increasedpoverty and hunger which threatens thevery fabric of the State.

It is a pleasure to report that the Governmentof Pakistan, whose facilitation and supporthave been the major reason for the successof this flagship program, have approved inprinciple the third PPAF project for whicha World Bank Mission is due in November2008.

Thanks is also due to our donors for theirstrong backing and belief in our ability todeliver effectively at the grassroot level, andfor giving us an opportunity to make adifference in the lives of the poor andvulnerable people of Pakistan.

Hussain Dawood


The year 2008 proved to be a challengingone. Internal political and social unrestcoupled with a fast deteriorating situationon the northern borders ushered in a periodof considerable uncertainty. These twofactors resulted in macroeconomicinstability.

Despite the unfavorable situation, PPAFresults were highly satisfactory, and allmajor targets were achieved well in time.The inbuilt advantage of having a credibleresource backed apex institution with in-depth presence in all provinces and regionsmitigated the risk factor to a large extent,and ensured steady progress.

Major strides were made in improvingcommunications with all stakeholders,particularly in microfinance where PPAF isa lead player. Arrangements were concludedthrough support of our donors to help ourlarge partner organizations access fundsfrom the commercial banks.

The support and enthusiasm of theChairman and Board of Directors continuedto play a constructive and positive role in

the development of PPAF as a world classinstitution. The close but professionalrelationship between the Board of Directorsand the management team has contributeda great deal to the success of the program.

The excellent performance of our partnerorganizations and their ownership of theprograms have made it possible to overcomethe most difficult of challenges – particularlyin the earthquake affected regions ofPakistan where despite great hardshipand hazardous conditions, a majortransformation has taken place.

Similarly, the role of the PPAF executives andstaff was outstanding. Their dedication in theface of mounting odds and difficulties servedthe institution well. My special thanks to themfor their hard work and relentless efforts.

I must also mention two outstandingindividuals namely Mr. Praful Patel, formerWorld Bank Vice President, South AsiaRegion, and Mr. John Wall, former CountryHead of the World Bank, whose timelyguidence and active support were crucialfor the success of the project.

Chief Executive’s Statement


We are indebted to the Government ofPakistan for reposing their trust in us, andtheir facilitation in developing this exemplaryPublic / Private Partnership to new heightsand international stature. Similarly the roleof our donors has been one of a truepartnership, with open discussions and anagreed way forward.

As a private sector delivery mechanism ofthe Government of Pakistan, we areconcerned with the extremely difficult socialand economic circumstances that haveemerged. We will do our very best to assistthe government to overcome the prevailingcrisis, and move ahead in a manner whichwill not reverse the gains of the past.

We pledge to serve our vulnerable peoplewith renewed zest and vigor.

Kamal Hyat

Overview


Over the last decade, Pakistan PovertyAlleviation Fund has emerged as the largestprivate sector initiative for wholesalingdevelopment support to civil societyorganizations in the country. PPAF hasplayed the role of lead agency instrengthening participatory developmentin the national framework. PPAF hasendeavored to mainstream marginalizedcommunities through provision of a broadrange of financial and non-financial servicesleading to better access, improved incomeand quality of life and sustainable livelihoodopportunities at the grassroots, and,simultaneously, catalyzed the enhancedabsorption and managerial capacities ofpartner organizations.

By year end, PPAF had disbursed almost Rs.34 billion through 73 partner organizationsunder its four regular windows: lendingfor microcredit/enterprise (almost Rs. 26billion), development of infrastructure(Rs. 5.5 billion), health and education (Rs.312 million), and human and institutionaldevelopment (Rs. 2.4 billion). These fundshave cumulatively financed over 2.3 millionloans, 16,450 infrastructure schemes, 180health and education facilities and over8,850 training events for participating

communities and staff of partnerorganizations.

By FY 2008, PPAF had emerged as themajor financier of microfinance market.Having practically driven the sector’sgrowth, PPAF has initiated steps for furtherconsolidation through mitigating supplyside constraints. For this purpose, resourceshave been generated to facilitate crowdingin of substantial commercial financing viacredit enhancement instruments. Whilecontinuing to assist smaller partnerorganizations with sufficient grant fundingin support of microcredit, the overall ratioof grant funding had been progressivelycurtailed.

While adhering to the double-bottom line,and in order to make loan utilization moreproductive, PPAF has initiated a pilot projectaimed at graduating destitute householdsto mainstream microfinance by developingappropriate social safety nets prior to assettransfers. The pilot will lead to more inclusivetargeting strategies and address specificneeds of the extremely poor.

Simultaneously, PPAF interventions inphysical and social infrastructure


Overview

development have matured to offer moreholistic solutions. The strategy of pursuingstand-alone village level interventions hasgradually given way to multiple sectoralprograms conceptualized for the benefitof larger communities and collectivedevelopment needs of less developed areas,especially those in drought affected/waterdeficient regions.

PPAF has continued to emphasize buildinginstitutional and human resource capacitiesof participating communities and civilsociety organizations with a view toinstitutionalizing a sustainable frameworkfor service delivery at the grassroots. Hencethe focus is on small/productive subsidieswith a clearly articulated exit strategy.

Over the last three years, the Social SectorDevelopment Program (health andeducation) has expanded to include primaryschools and community health centers inprivate sector as well as adopted frompublic sector, located primarily in leastaccessible areas with little or no access toquality healthcare or education.

PPAF’s Rehabilitation and ReconstructionProgram in the earthquake affected areas,while focusing mainly on the reconstructionof seismically-safe housing units, alsoincorporated substantive componentsincluding capacity building, livelihoodsrestoration, reconstruction of non-housinginfrastructure and focused interventionson disability. To date, PPAF has cumulatively

disbursed Rs. 14.5 billion to partnerorganizations, mostly for facilitatingreconstruction of housing and non-housinginfrastructure.

Today, Pakistan is faced with the twin crisesof food and energy insecurity and itspotentially debilitating impact on overallpoverty and vulnerability. As a nationalinstitution, PPAF is poised to play its part.Reflecting on this role is a track record ofresponsiveness to national challenges suchas the earthquake and drought.

To that end, PPAF is fully geared to securingthe future of the country’s poor througha strategy of community dr ivendevelopment. This strategy capitalizes onresource backed support and confidenceof the Government of Pakistan andinternational development partners, astrong platform of partner organizations,and most critically, the inherent strengthand resilience of poor and disadvantagedcommunities in the face of extremeadversity.


Credit and Entperprise Development

Timely access and steady availability offinance facilitates sustainable livelihoodsand sustains marginalized communitiesthrough seasonal shocks. It can help buildphysical and human capital, relievingopportunity constraints that hindereconomic growth from being distributedequitably. In Pakistan, the challenge at thegrassroots/retail level is sustainable provisionof financial services to communities at thelower end of the poverty scale.

The raison d être of PPAF was to invest inand capacitate civil society organizationsto develop as effective providers ofmicrofinance services and to expandoutreach across the country. As an apexintermediary, PPAF has combined the twinrole of market developer as well aswholesale financier for the sector. It hasfuelled the sector to a level where Pakistanis now recognized internationally as anemerging market for microfinance.

By the end of the reporting period, PPAFhad a market share of 45 percent of theover 1.7 million active microcredit borrowers

in Pakistan, while its partner organizationscollectively accounted for 61 percent sharein the sector (see Figure 1). PPAF hadcumulatively disbursed Rs. 25.2 billion to45 partner organizations for microcrediton-lending.

During the reporting period (FY 2007-08),CED unit disbursed a record of Rs. 9.1 billionto 39 partner organizations. Of this,approximately Rs. 8.9 billion were disbursedunder the WB financed microcredit window,Rs. 101 million under the EnterpriseDevelopment Facility (EDF) funded by WB,and Rs. 40.1 million under the new IFADfinanced Microfinance Innovation andOutreach Program (MIOP).

Under microcredit lending, agriculturecontinues to account for the bulk of PPAFdisbursements with a cumulative share of38 percent. This, together with the 17percent cumulative sectoral share oflivestock during the same period is indicativeof the fact that most of PPAF’s microcreditbeneficiaries are still located in rural areas(Figure 2).

Jun 06 Dec 06 Jun 07 Dec 07 Jun 080

102030405060708090

100

Figure 1: PPAF and POs: Market Share

46 40 43 44 45

54 60 57 56 55

PPAF POs(Non-PPAF Funded)

PPAF POs(PPAF Funded)

Years



accounted for a major portion at 44 percent(Figure 3). The other sectors under thefacility during the reporting period wereHandicrafts development 16 percent,Health/Education 20 percent, Agriculture/Livestock development 8 percent and othersmall enterprises accounted for 12 percentof the total disbursements.

PPAF’s commitment to developing thesector on competitive lines is furthermanifested in its readiness to work with adiverse set of service providers includingrural support programs, microfinanceinstitutions, non-governmental organizationsand the formal financial sector. Comparedto a largely uni-dimensional portfoliopredominantly catering to rural supportprogrammes initially, the PPAF has nowdiversified its portfolio (see Figure 4) toinclude many medium and small scale partnerorganizations.

This has spread the risk of PPAF fundedexposure across multiple institutionalstructures and business models. Suchdiversification has progressively contributedto the sector’s maturity and has beeninstrumental in the continuous developmentof innovative, more contextually relevantproducts. It has also enabled PPAF to havemore risk adjusted operations amid evolvingdiversity in operations and increasedexposures.

On the low end of the market, a muchsmaller average loan size, the microcreditwindow has a higher probability of reaching

At the same time, with an increasinglysubstantial portfolio of PPAF’s microcreditfunds being allocated to microfinanceinstitutions that are predominantlyurban/suburban based and have a largelyfemale clientele, the commerce sector’sshare at 37 percent has increased underthis window as well (Figure 2).

Under EDF, with loans ranging from Rs.30,000 to Rs. 100,000, most funds wereutilized in the commerce sector for theestablishment or incremental growth ofsmall enterprises and cottage industry which

Figure 2: MC Disbursements:By Sector (FY 2003-08)

(8%)Others

(38%)Agriculture

(17%)Livestock

(37%)Commerce

Figure 3: EDF Disbursements:By Sector (FY 2003-08)

(8%)

Agriculture/Livestock

(44%)

Commerce

(16%)

Handicrafts

(20%)

Health &Education

(12%)Others



the poorest households. To date, over twomillion PPAF supported microcredit loanshave been disbursed and the facilitycontinues to account for the major portionof PPAF’s credit portfolio.

The gradual increase in PPAF’s urban loanportfolio has been positively correlated witha reduction in the overall gender gap ofPPAF microcredit beneficiaries. Whereasonly 5.5 percent of PPAF’s approximately87,000 new female microcredit beneficiaries

in FY 2004-05 were located in urban areas,approximately 45 percent of the nearly373,600 new female beneficiaries in thecurrent financial year were urban based(Figure 5). With the percentage of womenbeneficiaries also improving in rural areas,their ratio in terms of overall microcreditbeneficiaries in the reporting period roseto a high of 47.5 percent, up from 35.8percent in FY 2004-05 (Figure 6).

This has partly been made possible by anincreasing focus on partner organizationswith exclusively female clients, particularlyin urban areas. The number of such POs hasincreased from one in FY 2000-01 to ten inFY 2007-08. Consequently, the share ofmicrocredit funding for such organizationshas increased from a mere 1.6 percent inFY 2000-01 to over 33 percent of totalmicrocredit disbursements in FY 2007-08.

Figure 4: Disbursements : By PO Type

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100

RSPs

MFIs

NGOs

'01-02 '02-03 '03-04 '04-05 '05-06 '06-07 '07-08

Years



To enable active rural poor to increasinglyaccess a wider range of sustainable financialservices and products that respond to theirneeds the Microfinance Innovation andOutreach Program (MIOP) funded by IFADwas initiated. A strong off-take wasregistered in terms of approved facilitiesduring the period under review.The US$ 20.8 million Innovation andOutreach (I&O) facility under the programallows partner organizations to pilot testand upscale innovative financial productsand delivery models for rural communities.

The facility constitutes two financing

windows: a regular window with loans ofup to Rs. 100,000 for enterprising individuals,and a private sector linkage window withloans of up to Rs. 300,000 for smallenterprises and trading/marketing operations.

During the reporting period, PPAF throughits partner organizations initiated fiveinnovative models under the Innovationand Outreach (I&O) facility of MIOP thatincludes Home Improvement Loans,Cooperative farming for women, increasingoutreach through settlement branches,enterprise development loans in rural areasand village banking in mountainous areas.

0

100,000

200,000

300,000

400,000

Male MaleFemale Female

Rural Urban

Figure 5: Borrowers: By LocationFY 05-06

FY 06-07

FY 07-08

FY 04-05

Figure 6: Borrowers: By GenderFemale

Male

FY 04-05 FY 05-06 FY 06-07 FY 07-080

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30

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70

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The Young Partner Program componentwould expand PPAF’s capacity to providemicrofinance services to rural areas byhelping PPAF develop new partnerorganizations. Under this component, twopartners have been selected as YoungPartner Development Initiatives (YPDIs) inrural Sindh and one as International LinkagePartner Initiative (ILPI) in rural Punjab.

With an eye on ensuring long termsustainability of the sector, PPAF is focusingon addressing supply side constraintsthrough strengthening market linkages andputting in place structures to facilitategreater leveraging capacity for partnerorganizations. Through the Programme forIncreasing Sustainable Microfinance(PRISM), an IFAD financed facility designedfor meeting these objectives, PPAF seeks toensure greater access to the commercialsector for partners with sustainableoperations by offering Credit Enhancementsto banks in the shape of cash collateral,letters of credit and/or direct guarantees.

PRISM further envisions the grant of equityfunds to dynamic microfinance institutionsto help build their capital and equity positionand for leveraging commercial financing,helping them to increase outreach andattain greater sustainability in the future.PPAF partners will simultaneously needmore professional assistance to exploitopportunities emanating from the aboveservices. For this purpose, PRISM has setaside funds for technical support in key

areas like institutional assessments,f inanc ia l / s t rateg ic p lanning andmanagement training, training innegotiation, business plan and manualpreparation, information systems designand deployment, credit ratings and legaladvice. Additionally, funds have beenallocated for promoting greater knowledgesharing in the sector and establishinginformation linkages that would ensure acontinuous dialogue process within thesector.

With the focus shifting towards a moremarket based approach, PPAF’s Board ofDirectors has approved an elevated eligibilitycriterion requiring greater efficiency inoperational/financial mechanisms andgovernance structures for partners seekinglarge quantum of funding. The growingfocus on entrenching market orientedpractices is further evident from PPAF’sdecision to adjust its lending rates for suchorganizations with KIBOR in order todiscourage reliance on subsidized loans



and at the same time offering 12 monthsgrace period in loan repayment, therebyallowing its fastest growing POs greaterflexibility and liquidity to expand theirmicrocredit programs.

The decision to progressively reduce capacitybuilding grants in support of microcreditoperations for large organizations utilizingPPAF’s regular microcredit window isanother instance of introducing goodmarket practices aimed at minimizingdependency and securing long termsustainability of partner organizations. Suchgrant funding has declined from 31.8percent of allocated microcredit funds inFY 2001-02 to a low of 4.9 percent in FY2007-08 (Figure 7).

In collaboration with CGAP, IFAD and FordFoundation, PPAF has initiated a pilot projectwith 1000 chronic poor beneficiaries indeveloping social safety nets and graduatingthem to mainstream microfinance over a30 months period. The program aims atbuilding capacities of target communitiesthrough food and health subsidies followedby skill development and asset transfer. The

project is expected to facilitate thedevelopment of newer products and servicesthat directly address the needs of the poorestand most vulnerable segments.

PPAF’s credit operations have grown toinclude more than 33,000 rural and urbancommunities across Pakistan. With a largenumber of beneficiaries graduating tocontract additional PPAF financed loans frompartner organizations, the impact on anumber of welfare indicators at thehousehold level has been visible and borneout through independent assessments bycredible third party evaluations. The challengenow is to facilitate the sector to become selfsustaining while continuing to address thedouble bottom line.

The year under review also witnessedincreased coordination between the CEDunit and other stakeholders in the sector,particularly the State Bank of Pakistan andPakistan Microfinance Network. In doing soCED endeavors to identify complementaritiesand develop synergies in further promotingand supporting the microfinance sector inPakistan.

CB as % of MCFigure 7: Capacity Building in Support of Lending

01-02 02-03 03-04 04-05 05-06 06-07 07-080%

5%

10%

15%

20%

25%

30%

35% 31.75

14.97 14.01 12.9210.78

7.444.89R

atio

n of

CB

to M

C

Box 1.1: Policy changes commensurate with market characteristics

With PPAF’s consistent support through credit lines and capacity building grants, many of its POshave become leading players in the sector. In changing market characteristics affecting PPAF POs,a study to assess credit and operational risks of PPAF’s credit operation was carried out by ShorebankInternational, Pakistan in 2007. The study focused on assessing credit risks transferred to PPAFthrough its POs’ credit operations depending upon their credit models, geographical & demographicaldiversity, governance and existing risk management frameworks. It recommended the followingpolicy changes which were implemented during the period under review:

1. POs availing facilities or having exposure of Rs. 500 million or above are classified as “Large”and are required to meet following criteria to avail/ continue funding from PPAF:

Separate books of accounts and audit of microcredit operationsAn automated loan tracking system to monitor portfolio performance and reportingPortfolio at risk ratio (> 30 days) < 5%Operational Self Sufficiency > 100%Risk Coverage ratio > 100%Periodic reports on performance indicators.

Proposed changes will allow PPAF to conduct stringent monitoring of credit operations of its largePOs.

2. When the microfinance sector was characterized by weak institutions and limited retail capacity,PPAF played a catalytic role in strengthening not only its POs but contributed immensely to thesector through policy dialogue and knowledge management. With PPAF’s financial and non-financial support, some of its POs have emerged as the country’s fastest growing and sustainableorganizations. Commensurate with this growth was a need to further support PPAF’s POs forincreased outreach so as to attain the target of 3 million borrowers by 2010. In view of their robustoperations and track record, PPAF revised its repayment terms to offer maximum benefit to its POs.Such terms are common with apex organizations in the world (notably PKSF in Bangladesh) andhas aligned PPAF to international best practices in terms of its operations.

In line with this and to best utilize PPAF’s resources, following repayment terms are now availablefor financially/ operationally sound POs meeting PPAF’s elevated eligibility criteria:

Grace period of a maximum of 12 months for repayment of principal amountCommencement of principal repayment after grace period and not exceeding 15 monthsServicing of mark-up on quarterly basis

3. PPAF’s base rate has always enabled its POs to benefit from opportunities for attaining self-sufficiency. However, in the wake of rising interest rates and to institutionalize a risk adjusted pricingmechanism, PPAF linked its rate to KIBOR for POs availing facilities or having an exposure of Rs.500 million and above.




Community Physical Infrastructure

The Community Physical Infrastructure (CPI)unit provisions development grants fordemand r e spons i ve sma l l - s ca l einfrastructure projects to marginalizedcommunities. All interventions followmobilization processes designed toaggregate household preferences intocommunity demands for identifyingsustainable and environmentally friendlyprojects at the grassroots level. Within thisframework, community ownership issecured through a cost sharing mechanismwhere par t i c ipa t ing communi t yorganizations are encouraged to shareproject costs and arrange maintenancefunds.

The unit emphasizes the central role ofcommunity organizat ions in theidentification of community needs as wellas the selection of project site andappropriate levels of service and technology.A multi-staged process prior to projectinitiation involves compulsory communityparticipation at different levels to facilitateinformed choices deemed essential for longterm sustainability of PPAF infrastructureinterventions. As a prerequisite for project

approval, community organizations haveto raise funds sufficient to bear one yearof operational and maintenance expenses.To date, 15,804 community organizationshave been formed to manage and maintainPPAF supported infrastructure schemes.

In eight years of operations, the unit hasaccepted community demands for over14,400 infrastructure projects through 49POs spanning 115 districts of Pakistan,Northern Areas and AJK, 4 agencies of theFederally Administered Tribal Areas (FATA)and the Islamabad Capital Territory. Ofthese, 6,854 infrastructure interventionsincluding stand alone conventional schemesas well as composite Integrated AreaUpgrading Pro jects ( IAUP) wereoperationalized under the CPI componentof the first WB financed project (PPAF-I:FYs 2000-04), while another 7,543 schemeshave so far been initiated under the secondWB project (PPAF-II: FYs 2004-08). Theabove schemes have cumulatively benefitteda population of over 7.5 million in over 12,800 rural and urban communitiesthroughout the country (Table 1).

Table 1: Geographical Distribution of Infrastructure Schemes by Beneficiaries

Projects Beneficiary Households Beneficiary PopulationPunjab 4,918 420,986 2,799,538NWFP 3,018 224,068 1,637,560Sindh 2,854 169,019 1,238,987Balochistan 2,429 157,365 1,149,575NA 383 33,741 269,357AJK 580 32,485 245,321FATA 90 7,885 72,855ICT 125 8,528 61,909Grand Total 14,397 1,054,077 7,475,102



PPAF supported infrastructure schemesfocus mainly on four broad sectors: DrinkingWater Supply, Irrigation, Sanitation andCommunications (Table 2 & 3). Each sectorfurther subsumes a variety of sub categories.For instance, most irrigation sectorinterventions in Punjab consist ofwatercourse lining projects, while irrigationchannels, Karez rehabilitation and pipeirrigation projects are more common inBaluchistan. Such diversity naturally flowsfrom differences in topographicalconditions, varying degrees of water scarcityas well as disparities in the level ofagricultural development, all factoring intodetermining community preferences thatguide PPAF’s development initiatives.

PPAF supported irrigation interventionshave stimulated local economies byfacilitating agricultural growth throughbetter utilization of scarce water resources.While such schemes have contributeddirectly to household welfare through

incremental increases in income andconsumption levels, equally important longterm benefits have accrued frominterventions in the sanitation, drinkingwater supply and communications sectors.For instance, construction of culverts,causeways and link roads within isolatedrural localities has improved intra-community movement, providing thefacilitative structure necessary for economicgrowth in the local context.

Table 2: Geographical Distribution of Infrastructure Schemes by Project Type (FYs 2000-08)

DWSS Irrigation Sanitation Roads Flood IAUP TIP DMPP* TotalProtection

Punjab 316 2,412 1,352 768 3 49 18 - 4,918NWFP 1,131 386 909 422 80 47 43 - 3,018Sindh 1,884 302 221 340 8 20 79 - 2,854Baluchistan 856 1,117 178 52 75 5 63 83 2,429NAs 165 86 13 75 36 7 1 - 383AJK 412 6 4 157 - 1 - - 580FATA 75 5 9 1 - - - - 90ICT 45 - 46 22 - 12 - - 125Total 4,884 4,314 2,732 1,837 202 141 204 83 14,397

* DMPP (Baluchistan includes, 26 DWSS, 45 irrigation and 12 flood protection subprojects

19


Marginalized communities have furtherexperienced increased real incomes byreaping the health dividend intrinsic toimproved sanitary conditions accompanyingnetworks of paved streets, communitylatrines, drains, and sewers. Similar healthbenefits are drawn from provisioningdrinking water supply schemes tocommunities that lack easy access to potablewater. The latter’s impact is even morepronounced in terms of relieving womenfrom carrying water over several miles of attimes intractable distances, enhancing theirproductive potential and increasing economicoptions for poor households.

In the current financial year, the unit initiatedwork on 2,685 new infrastructure schemes,of which the irrigation sector accountedfor 752 schemes, while 805,671 and 322schemes were initiated in the sanitation,safe drinking water, and communicationssectors, respectively (Figure 8).

To date, the unit has been successful inmanaging an equitable geographicaldistribution in the disbursement of fundsfor infrastructure development, whilesimultaneously concentrating on the mostdeprived regions. For this reason, thepercentage share of rural Sindh, NWFP andBaluchistan in terms of number of schemeshas tended to be much higher than theirrespective population share in the country(Figure 9).

While stand-alone conventional schemescontinue to form the majority of CPIinterventions, the unit has increasinglyfocused on a more holistic approach toinfrastructure development with theinitiation of a series of IAUP. The latterinvolves provisioning funds for initiatingmultiple interventions with a view tofacilitating a meaningful change in poorcommunities. A typical IAUP includes threeto six mutually complementary schemes (SeeBox 2.1) including interventions in drinkingwater supply, sanitation, communicationsand irrigation sectors. To date, 141integrated projects have been initiated atthe national level in collaboration with 17partner organizations, of which 42 IAUPswere initiated in the current financial year.


Figure 8: Sectoral Distribution of CPI Schemes(FY 2007-08)

Figure 9: Geographical Disbribution of CPISchemes (FY 2000-08)

AJK 4%

Baluchistan 17%NWFP 21%

Sindh20%

Punjab 34%

NAs 2.5%

ICT 1%

FATA 0.5%

Others 5%

Road/Bridge12%

(25%)DWSS

(28%)Irrigation

(30%)Sanitation



Similarly, the introduction of better andmore context-specific technologies throughPPAF’s Technological Innovations Projects(TIP) has allowed the poor to addresscommunity needs in ways that are moreefficient, cost effective and sustainable. Forinstance, wind and solar energy has beentapped for powering a variety ofinterventions including reverse osmosisplants for clean drinking water, solar lightsfor village electrification and solar pumpsfor irrigation. Simultaneously, the problemof water scarcity in some of the most aridregions of the country is being met throughwater efficient mechanisms like drip andsprinkler irrigation systems.

Table 3: Distribution of Infrastructure Schemes

PPAF 1 PPAF 11 TotalConventional 6,742 7,227 13,969

DWSS 2805 2,079 4,884Irrigation 2054 2,260 4,314Drainage & Sanitation 993 1,739 2,732Roads & Bridges 805 1,032 1,837Flood Protection Works 85 117 202

DMPP* 83 - 83DWSS 26 - 26Irrigation 45 - 45Flood Protection Works 12 - 12

IAUP† 1 140 141IAUP 1 140 141

TIP 28 176 204DWSS 24 21 45Irrigation 1 82 83Bio Gas - 15 15Electricity 3 57 60Incinerator - 1 1

Grand Total 6,854 7,543 14,397

* This pertains to the pilot Drought Mitigation and Preparedness Project (DMPP) in Baluchistan initiated during PPAF-I.† These do not include sub-schemes initiated under IAUP

21


The devastation wrought by the October2005 earthquake also obliterated theexisting network of small scale infrastructureincluding safe drinking water schemes,drainage systems and link roads. Nomeaningful rehabilitation of affectedcommunities was possible without therestoration of these facilities. Following acomprehensive survey conducted by partnerorganizations in their respective areas ofoperation. By the end of the reportingperiod, rehabilitation work on 395 out ofthe 669 initiated infrastructure schemes inaffected areas has been successfullycompleted (Table 4). Since the availabilityof safe drinking water was central to therecovery process, the rehabilitation ofDrinking Water Supply Schemes (DWSS),which accounts for approximately 77percent of rehabilitated schemes, wasprioritized.

Easy access to potable water not onlyensures a healthy population, it is amongstthe most rudimentary of building blocksessential for the existence of vibrant andproductive communities that can effectivelyparticipate in the national mainstream.


DWSS constitute 34 percent of all CPIconventional schemes initiated to date,followed by interventions in the irrigation(31 percent), sanitation (19 percent) andcommunication (13 percent) sectors (Figure10). PPAF’s irrigation sector interventions,albeit less numerous than DWSS, accountfor a larger quantum of funds disbursed (34percent) compared to a 22 percent sharefor safe drinking water schemes that havea lesser average per unit cost (Figure 11).

Table 4: Rehabilitation of Infrastructure Schemes in Earthquake Affected Areas(As of June 30, 2008)

PO Districts Projects Projects Cost of InitiatedInitiated Completed Project (Rs. Million)

SRSP Battagram, Mansehra 416 196 282NRSP Bagh, Poonch 91 80 40IRP Bagh 35 7 12.3WWOP Bagh, Poonch 76 63 31.2Sungi Abbotabad 48 47 30.6OAKDF Abbotabad 3 2 1.4Total 669 395 398



With the aim of reaching the largest possiblenumber of poor communities, the unit hasstruck partnerships with an increasingnumber of grassroots developmentorganizations with project areas spread farand wide across the country. The numberof PPAF partners in infrastructuredevelopment has risen from 10 in FY 2000-01 to 41 in the current financial year.Simultaneously, the unit has diversified its

portfolio to include a large number ofNGOs, compared to an almost completeassociation with Rural Support Programmes(RSPs) in the early years. However, owingto their operational capacity, RSPs continueto account for the largest individual sharein terms of number of schemes anddisbursements (Figures 12 & 13).

Figure 10: Cumulative Sectoral Distribution ofInfrastructure Schemes

Figure 11: Cumulative Sectoral Distribution ofCPI Disbursements

Others 24%

Figure 13: Cumulative Distribution of CPIDisbursements by PO

NRSP 24%

SRSP 16%

PRSP 16%

TF 6%

AKRSP 6%

TRDP 3%

BRSP 5%

Figure 12: Cumulative Distribution of Schemesby PO

Others 19%NRSP 25%

SRSP 13%

PRSP 18%

BRSP 3%

PIDS 4%

TRDP 9%

TF 6%

IAUP 8%

Irrigation 31%

Sanitation19%

Road/Bridge 13%

Others 3%

DWSS 22%

Irrigation 34%Sanitation 17%

Road/Bridge14%

Others 5%

DWSS 34%

AKRSP 2%

Box 2.1: Integrated Area Upgradation in Punjab

Basti Punj Khuha is a small village in district Khanewal, Punjab. Before the entryof PPAF into the area, the 214 households in the village lacked access to even themost basic civic amenities: household latrines were nonexistent; streets were un-surfaced and mostly remained inundated with wastewater; and there were nohealth and education facilities. Malaria, skin infections, respiratory diseases and ahost of water-borne diseases were a common phenomenon. The cumulative effectof this state of affairs on the community was colossal in terms of an overburdeninghealth crisis that constantly ate into restricted incomes heavily dependent onirregular daily wages and unpredictable small scale farming.

PPAF sanctioned one of its partner organizations, Village Friends Organization(VFO), to undertake a comprehensive needs assessment of the village in coordinationwith the community. Subsequently, work on an Integrated Area Upgradation Projectwas initiated with a number of integrated interventions including street surfacing,household latrines, sewerage system, wastewater stabilization pond, solid wastemanagement, security lights and a playing area for children. With the coming ofBasti Punj Khuha IAUP, the approximately 1,300 individuals in the village haveexperienced an immediate change in their lives, with an even greater transformationexpected in the long term. In addition to a reduced health burden, signs of whichare already apparent, the workload of women has been significantly reduced, whilechildren finally have the opportunity to play in a much cleaner environment on apiece of land specially designated for the purpose.

23



During the financial year, the CPI unitdisbursed Rs. 1.1 billion to 40 partnerorganizations. A total of 3,176 additionalcommunity organizations were mobilizedto take active part in the identification,development and management of PPAFsupported infrastructure schemes, whilethe coverage of PPAF’s infrastructureprogram increased to incorporate 2,055new villages/localities. The 2,643 schemesinitiated during the same period collectively

benefitted over 192,000 households acrossPakistan. With the extended PPAF-II drawingto a close in the next financial year, the CPIunit is well within reach of its overall targets.Simultaneously, the increased capacity ofpartner organizations has infused a greatersemblance of institutionalized servicedelivery at the grassroots, giving PPAF theconfidence to upscale its infrastructureprogram in the future.


PPAF Water Management Center

In addition to being one of the world’smost arid countries in terms of averageannual precipitation, Pakistan has in therecent past been severely water stressedwith growing levels of aquifer depletion,the accompanying ingress of saline waterinto heavily pumped ground reserves, andthe uncontrolled pollution of waterresources. Predicted climatic shifts pose aneven bigger challenge by potentiallyexacerbating the incidence of floods witheven worse long term prospects of extendeddrought periods. Poor water managementand the continuing lack of water storagecapacity have only added to the status quo,while the deficit in knowledge andpreparedness to meet existing and futurechallenges has cramped space for innovativesolutions and sustainable coping strategies.

The impact on the poor and on poverty ingeneral is particularly disconcerting.However, the looming environmental andhuman disaster can be avoided throughputting in place effective policies, strategiesand systems for prudent watermanagement, better preparedness andfocused generation and dissemination ofknowledge. The PPAF Water ManagementCenter (PWMC) was established to addressthese issues and support PPAF in its longterm strategy to address conditions thatperpetuate poverty, food insecurity, andvulnerabilities to a host of water relateddisasters. In pursuit of its objectives, PWMCfurther strives to evolve into a recognizedpolicy and technological hub in South Asiaby 2012.

Following PPAF’s participatory developmentframework, the Center emphasizes the roleof community organizations in projectidentification and implementation.Moreover, keeping in view the largergeographical scope of PWMC interventions,participating communities are organizedinto correspondingly larger structuresvarying from single-tier institutionalframeworks to those with nested hierarchiesof representative institutions, includingeither a single union council level task forceor a federation constituting of several suchtask forces.

Striving to introduce holistic solutions, allPWMC programs constitute severalintegrated interventions either in the samevillage or spanning a large number ofvillages within an objectively definedgeographical area. For instance, the DroughtMitigation and Preparedness Project (DMPP)cover large drought affected areas witheach project spanning one to three unioncouncils and constituting approximately ahundred sub-projects on the average. Thesetypically include delay action/check damsfor restoring water balance in addition tomeeting the community’s domestic andagricultural requirements; interventions forrehabilitating crucial aquifers; schemesaimed at more efficient water managementfor irrigation; and a variety of otherinterventions for flood protection, landreclamation, rangeland management andthe optimization of cropping patterns.

PWMC has to date initiated work on 25Drought Mitigation and Preparedness


Projects consisting of 1130 water focusedinterventions with a cumulative investmentof Rs. 961 million from funding windowsmade available by the World Bank and theUnited States Department for Agriculture(USDA). These projects have collectivelybenefitted 1,300 communities in 16


drought affected districts, followingintegrated strategies aimed at rechargingdepleted aquifer resources and their efficientexploitation through a variety of waterefficient irrigation mechanisms andinnovative agricultural methods (Box 3.1).

Box 3.1: DMPPs bring Soan Valley back to life

The 1997-2002 drought adversely affected life in Soan Valley, leaving the area’swater balance severely disturbed. With reduced recharge and unabated mining ofgroundwater, the water table fell by 20 to 30 meters over a period of five years.Simultaneously, reduced surface runoff resulted in rapid shrinking of wetlands astwo of the three Ramsar lakes turned into salt pans.

PWMC responded by pooling World Bank and USDA funds to implement twoDMPPs in partnership with Soan Valley Development Program (SVDP) for the benefitof the approximately 125,000 population spread over an area of 737 squarekilometers.

To date, all 108 subprojects under the World Bank funded DMPP, while 127 outof 144 subprojects under the USDA funded DMPP have been completed. Thesemainly include delay action dams, check dams, pipe irrigation, rain-water harvestingponds, drinking water supply and natural resource management projects.

Social mobilization assumes central significance with all sub-projects being identifiedand implemented by SVDP with the help of communities through a representativetask force. Additionally, the entire process of project formulation and implementationis overseen by a Steering Committee, which includes representation from PPAF,SVDP and the WWF-P.

Infrastructure interventions implemented under these projects have cumulativelyachieved a 30 to 40 percent reduction in water losses due to new efficient waterconveyance systems, which have made it possible to irrigate an additional 2,500acres of rainfed area. Already, communities have saved an estimated Rs. 7 to 10million in potential cost of diesel engine operated pumps, which have becomeredundant. The planned second generation of interventions will further lift localeconomy, while laying out a sustainable framework for market based ruraldevelopment.

27

The World Bank funded Sindh Coastal AreasDevelopment (SCAD) Program takes thisintegrated approach one step forward bycomplementing infrastructure interventionswith logically interlinked interventions inhealthcare, education, livelihood supportand the provision of financial services,leading towards the development of whathave been termed as Rural Growth Centers(RGCs). One RGC has already beeninaugurated in Keti Bandar during thereporting period, with 17 other plannedfor implementation in the program area(Box 3.2). Simultaneously, possibilities arebeing explored for their successfulreplication in other parts of the country.



Box 3.2: “Eliminating Poverty in One Generation: A tough but attainable goalfor Pakistan”

“So eliminating poverty is not just about lowering the number of people livingunder dollar one a day or some other arbitrary metric; it is fundamentally aboutenabling people to have the freedom to pursue the life that they want.I saw both the daunting difficulty of this challenge and the spark of hope thatinspires people to reach beyond their circumstances during a recent visit to KetiBunder, one of the poorest villages of Pakistan located in Thatta district, Sindh.These villagers have suffered several natural calamities in recent years…. But theyhave grabbed the opportunity offered by a village development program supportedby the Pakistan Poverty Alleviation Fund and the Aga Khan Rural Support Programme.They are now investing in their community, improving their schools, health facilitiesand water supply. With continued help they can provide their children theopportunities that they themselves never had. And therein the hope that I saw….”

“The dream of eliminating poverty in Pakistan is indeed achievable with sustainedefforts ... I hope that the people and government of Pakistan will take up thischallenge and keep in mind the vision of at least 40 million faces who all havehope, energy and talent way beyond the statistics that mark their status. I metthem in Keti Bunder.”

Excerpts from an article by Mr. Praful Patel, who last served as Vice President, South Asia Region,World Bank, captioned above in “Business Recorder” (October 2007)

Figure 14: Distribution of Approved Funds byProgram Category (Rs. million)

DMPP961.20

SCAD165.10

Micro Hydal102.96

IWEL 147.97

IWRM 169.15


With PWMC leading the effort in the fourSCAD program districts of Thatta, Badin,Karachi and Tharparkar, an integratednetwork of infrastructure interventions hasbeen put in place all along the Sindhcoastline, which has repeatedly sufferedfrom a devastating spell of natural disastersspread over a decade. To date, 345 schemeshave been initiated in the coastal beltincluding protection works for reducingvulnerability to sea intrusion, improvedsanitation and communication facilities, aswell as the introduction of innovativesolutions for provisioning safe drinkingwater and electricity through tappingrenewable sources of energy.

Given the scope of the program, PPAF hasengaged ten of its partner organizationswith clearly defined project areas to joinforces for taking the initiative forward. Thishas simultaneously generated opportunitiesfor building bridges across participatingorganizations and share knowledge for thecommon benefit of the target population.With active support from the Center, theSindh Coastal Areas Network (SCAN) wasformally put in place to promote linkagesamong member organizations throughworkshops, exchange visits, study toursand regular information sharing. SCAN hasdeveloped into a vibrant community ofdevelopment practitioners with growingnetworking activities incorporating linkageswi th other deve lopment sec tororganizations, prominent R&D institutionsas well as private sector manufacturers andsuppliers dealing in technologies that canbe uti l ized in the program area.

The success of SCAN is another step forwardin the direction of evolving a betterperspective on securing a viable long termsolution for efficient and sustainablemanagement of the country’s scarce waterresources. With a view to ensuring rapidinter-PO technology transfer and sharinglessons learnt in social mobilization, PWMCis currently working on the establishmentof a national level drought managementnetwork. The Pakistan Drought ManagementNetwork (PDMN) will also provide a forumto deliberate over policy issues impactingdrought and other water related disastersat the community level. This is envisionedto lead to the formulation of a nationaldrought management policy.

With a view to learning from the experiencesof other water focused and communitydriven efforts in poverty alleviation, theCenter plans to organize conferences on thenational, regional and international levels,engaging the best minds and the very bestof institutions on the subject.


29

In the meantime, PWMC has continued torefine program design with morecomprehensive solutions to meetingcommunity requirements. The IntegratedWater Management Programme (IWMP),a hybrid of DMPP and all other PWMCprojects, has been initiated with threeprojects presently in the implementationphase in Gilgit, Baltistan and Chitral. Inconformity with the Center’s emphasis oncontext relevant solutions to water relatedissues, IWMP in these areas has beenadapted to the particularities of the localterrain. Similar adjustments will be madewhen implementing IWM projects to otherareas. The three initiated projects underthis category will collectively include 196interventions with a total cost of Rs. 169.1million, 20 percent of which will becontributed by the communities.PPAF’s successes in infrastructuredevelopment in marginalized localities withlittle access to public services has largelybeen a function of its ability to mobilizeand strike effective partnerships withcommunities that are made responsible forproviding land and maintenance funds forall projects, besides sharing in the projectcost. In this way, community ownership issecured for better post-completionmanagement of all projects. Not only hasthis community centered approach led toa better decision making structure forselecting appropriate need basedinterventions, it has further allowed PWMCto avoid the pitfalls emblematic of publicsector water projects including weakimplementation strategies, delays inprocurement leading to cost overruns, and


a poor maintenance record emanatingnaturally from hazards associated with largecentralized bureaucratic structures followingnon inclusive development strategies fromthe outside.

Strong ties with communities have led tothe successful implementation of 40Integrated Water Efficient Irrigation (IWEI)projects. These include a total of 100 subprojects with an overall cost outlay ofRs. 148 million, of which 20 percent hasbeen contributed by communities. IWEIprojects cater to the needs of particularcommunities at the village level for betterutilization of water resources for irrigationthrough the successful integration of fourto five interventions involving sprinkler/dripirrigation, water channels, water courselining, and conduits. IWEI projects havefurther benefitted 4,000 households,minimized water losses, improved yieldsand added much needed increments tohousehold incomes.

In the mountainous regions of NorthernAreas and Chitral, IWEI projects have beensuccessfully integrated with MicroHydroelectric projects. The latter is anongoing program initially conceived tomeet household lighting, heating andcooking needs through sustainable powergeneration. In conjunction with IWEIprojects, their scope has been extended toinclude initiatives in water efficient irrigationpractices and food processing. The Micro/ Mini Hydroelectric projects, both as standalone interventions for power generationand as part of an integrated scheme




including IWEI projects, has furtherbenefitted 3,000 households in 30 isolatedmountain villages at a cost of Rs. 150million, with communities bearing 20percent of the project cost and takingresponsibility for project maintenance.

To date, PWMC led interventions havebenefitted 101,133 households in 1,622communities across the country (Table 5).Through its various program windows, theCenter has successfully invested Rs. 734million for delivering sustainable, need-based water related infrastructure tomarginalized communities. In the event,the Center has facilitated in securinglivelihoods, increasing income generatingopportunities and reducing vulnerabilitiesto seasonal shocks, while mitigating thesufferings of the poor living in diversecircumstances from low-lying flood-pronecoastal areas to water deficient deserts andmountain communities. Simultaneously,the Center has taken vital steps inestablishing sector wide linkages, whileinit iating discussion to generate,accumulate, refine and disseminateknowledge for finding long term solutionsto the country’s escalating water crisis.

Programme Category Number Number of Coverage Beneficiaryof Projects Sub-Projects (Villages) HHs

Drought Mitigation and Preparedness 25 1,130 370 66,000Integrated Water Management - 196 140 9,406Sindh Coastal Areas Development - 345 250 18,727Integrated Water Efficient Irrigation 40 100 100 4,000Mini/Micro Hydel 25 25 30 3,000Total 90 1,796 890 103,133

Table 5: Distribution of Projects by Beneficiaries

Figure 15: Distribution of Beneficiary Householdsby Province

Sindh30&

Punjab15%

NWFP30%

NAs 3%

Baluchistan22%

31PPAF — Annual Report 2008


Box 3.3: Solar Home Systems*

Villages Arab Soomar and Hussaini Faqir are located in a poverty stricken pocketof coastal Sindh on the outskirts of Karachi. The 110 households in the two villagesare almost exclusively dependent on off-shore fishing for livelihood support. Thecommunities face problems similar to the ones faced by the residents of Basti PunjKhuha (see Box 2.1), with one additional burden: both Arab Soomar and HussainiFaqir had no electricity. As a result, the communities were forced to use keroseneoil and firewood for lighting, which not only carried with it severe health risks butwas contributing directly to environmental degradation and an erosion of limitedincomes.

Keeping in view demands emanating from within the community, it was evidentthat PPAF had to prioritize the dire need for household electrification in a way thatis sustainable as well as consistent with the average income level of residents.Consequently, Indus Earth Trust (IET), one of PPAF’s most progressive partnerorganizations, was handed over the task to initiate two pilot Solar Home Systems(SHS) initiatives.

The pilot projects were based on models designed by two private entities (SMARTTechnologies and NUST). These differ only in operational details following projectcompletion with the maintenance of one pilot being looked after by a group ofthree to six households, while the same responsibility being shared by the wholecommunity in the other instance. The total cost of the two projects was estimatedat Rs. 2.5 million, of which PPAF contributed Rs. 2.3 million while Rs. 0.2 millionwas collected by the community.

The projects have directly contributed to household welfare by providing extraworking hours at night which households have utilized for running repairs on boatsand fishing nets. Previously, precious daylight hours were wasted on these activities.Similarly, women have found more time to engage in productive activities likeembroidery, while there has been a significant reduction in the incidence of snakebites at night as movement within and around the villages has become much safer.

* Project undertaken by CPI unit of PPAF.


Health and Education

The Health and Education (H&E) unitmanages PPAF’s Social Sector DevelopmentProgramme (SSDP) with the objective ofproviding quality healthcare and educationto marginalized communities. In three yearsof operations, the unit has facilitated civilsociety organizations in establishing anetwork of schools and Community HealthCenters (CHCs) where such facilities werenon-existent, in addition to revitalizinginefficient public sector institutions throughinjecting requisite funds, better managementpractices and quality teaching services.

Two of SSDP’s three currently operationalprojects are being financed by the WorldBank, i.e. the Health and Educationcomponent of Sindh Coastal AreaDevelopment Program (SCAD) and thegeographically more diffused Health andEducation component within PPAF-II. Athird project financed by the CommitteeEncouraging Corporate Philanthropy (CECP)focuses on the rehabilitation of Health andEducation facilities in earthquake affectedareas.

The design of WB financed projectsenvisions the development and sustenanceof new health and education facilities inthe private sector as well as the adoptionof poorly managed public sector facilities.On the other hand, CECP financed projectin the earthquake zone is conceptualizedas a Build, Operate and Transfer (BOT)model, where PPAF partners and communityorganizations jointly manage facilities withthe provincial departments of Health andEducation following their reconstruction

and rehabilitation in the first phase. In thesecond phase, which will commence at theend of the second year of operations, thesefacilities will be handed over to therespected government departments.

All PPAF supported interventions in thesocial sector prioritize strict quality control,long term sustainability and durable linkageswith communities. These objectives becomemutually reinforcing within an inclusivemanagement framework that underscoresthe role of participating communities indecision making. Consequently, while PPAFhas put in place a comprehensivemonitoring scheme to be strictly regulatedby respective partner organizations, it hassimultaneously encouraged the formationof community based health and educationmanagement committees with the mandateto identify gaps in service delivery andsuggest proposals for their redressal.

In many instances, community based healthand education committees, in consultationwith the implementing organization, haveproactively initiated administrative changesand held staff accountable for digressionfrom duty. Such an approach hasincrementally led to a culture ofaccountability and facilitated partnerorganizations in the better managementof a standardized product that is bothcontextually relevant and responsive tocommunity demands.

In FY 2007-08, 13 health committees and70 education committees were formed inPPAF supported private sector facilities and



adopted public sector institutions. Giventhe strategic importance attached to thesecommittees, all PPAF social sectorinterventions incorporate a comprehensivetraining module designed to equipcommunity representatives with the skillsrequired for meeting their responsibilities.These capacity building exercises have beenshown to pay dividends in terms of yieldinga procedurally efficient and substantivelyrich decision making structure at thecommunity level.

The quality of service delivery is furtherensured through capacity building eventsorganized for the staff of PPAF supportedschools and CHCs. In the Health sector,these events cover training in subjects likehygiene, counseling, mother-child andreproductive health, balanced diet, familyplanning, immunization, communicableand non-communicable diseases, safemotherhood and infant care. Similarly,teachers in PPAF supported schools areregularly provided with opportunities toattend subject specific refresher courses.

They are further trained in the developmentof child responsive teaching methodologies,which are complemented by capacitybuilding sessions in syllabus and classroommanagement, lesson planning, developmentof teaching material and phonics. In bothsectors, additional training sessions on recordkeeping, planning and management issuesare conducted to develop administrativeskills necessary for operational efficiency inall PPAF sponsored social sector interventions.

In three years, PPAF’s Social SectorDevelopment Programme has expanded toinclude 51 schools and 27 health facilitiesin the private sector (Table 6). Withoutexception, all facil ities have beenoperationalized in marginalized rural areas.For instance, PPAF’s financial and technicalassistance to the Marvi Rural DevelopmentOrganization (MRDO) has resulted in theestablishment of one CHC and sevenprimary schools within isolated communitiesinhabiting the arid wastelands of Tharparkardesert. In other parts of rural Sindh, wheredecadent social structures and public apathycontinues to constrain human advancement,PPAF’s partnership with exemplarygrassroots organizations like AKPBS (Thatta),IRC (Khairpur, Jamshoro), SAFWCO(Sanghar), and BRDS (Badin) has played itspart in mitigating vulnerabilities inducedby lack of access to quality health andeducation services. Similarly, RCDS, NRSP,SOS, FPAP and NRDP in rural Punjab, TF(Bolan, Kachhi) in Baluchistan, and CMDOin FATA have been actively pursuing similarobjectives as PPAF partners in their respectiveproject areas.



In addition to establishing new facilities,the Social Sector Development Programmehas focused on taking over under-performing government institutions in thehealth and education sectors. In Punjabalone, the unit has facilitated partnerorganizations in adopting 61 governmentschools where quality of infrastructure andteaching has verifiably improved. Of these,55 government schools have been adoptedin Mianwali, Rahimyar Khan, andBahawalpur districts. The latter two districtsare amongst the most educationallydeprived areas of the province in terms ofindicators such as adult illiteracy, childrenout of school and gender disparities ineducational attainment.

Perhaps never in the country’s history has aregion suffered so much in so little timethan the earthquake affected zone in AJKand Northern NWFP. As part of PPAF’s multi-pronged response to the calamity,reconstruction and rehabilitation of theregion’s health and educational infrastructurewas considered vital for long-term revival of

affected communities. With financial supportfrom CECP, which awarded PPAF US$ 12million from its South Asia Earthquake ReliefFund (SAERF), the task of reconstructingsixteen facilities – two primary and threehigh schools for girls, three primary and twohigh schools for boys, two rural healthcenters and four basic health units – wasinitiated in March 2007.

By the end of the current financial year,three facilities have been completed whilework on 13 is under progress under theCECP financed project. The threeimplementing partner organizations haveunfailingly adhered to the notion of buildingback better and worked tirelessly to developstate-of-the-art institutions equipped withrequisite equipment and facilities for qualityservice delivery. CHCs have labor rooms,pharmacies, laboratories, facilities for safedelivery and quality OPD services, whileschools are equipped with physics,chemistry, and biology laboratories,computers, tuck shops, playgrounds andother recreation facilities.

Table 6: Social Sector Interventions by Province

Schools CHC/BHU/RHCPvt. Sector Public Sector Pvt. Sector Public Sector

Punjab 18 61 9 -NWFP 2 6 7 3Sindh 24 18 5 2Baluchistan 2 - - 2FATA 5 - 2 -AJK - 6 - 4NA - - 4 -Total 51 91 27 11



With the increasing number of adoptedschools, the share of students benefittingfrom PPAF sponsored educat ioninterventions have increased more rapidlyin the public sector (Figure 16). As of June2008, 3,627 girls and 2,682 boys wereenrolled in PPAF sponsored private sectorschools, while another 6,576 girls and7,000 boys were enrolled in PPAF sponsoredpublic sector schools (Figure 17).

In the health sector, PPAF’s targetingstrategy has been designed to address thewidespread gender disparity in access tohealth facilities, which is particularly acutein rural areas where PPAF healthinterventions are located. Approximatelytwo-third beneficiaries of all PPAF healthsector interventions in the reporting periodwere women (and girls). Additionally, thetrend is consistent across all regions andprovinces of the country (Figure 18).

With rural areas of Punjab and NWFPaccounting for majority of PPAF healthinterventions, the number of OPD andmaternal care beneficiaries is mostlyconcentrated in these regions (Figure 19).However, rural Sindh and Baluchistan,where vulnerability to disease is higher incomparison to other regions, account forapproximately 65 percent of the nearly18,900 vaccinations administered duringthe current financial year.

By the end of the reporting year, H&E unithas cumulatively sanctioned disbursementsof over Rs. 190 million in the education

Figure 17: Distribution of Students by Genderand School Type (as of June 2008)

(35.2%)Public Sector

(13.5%)Private Sector

(18.2%)Private Sector

Public Sector(33.1%)

BoysGirls

Figure 16: Increase in Enrollments by Gender &School Type (FY 2007-08)

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sector through 12 partner organizationsand approximately Rs. 121 million through14 partner organizations in the healthsector under funding made available bythe World Bank. Similarly, another Rs. 13.6million has been sanctioned under CECPfunds for the effective operationalizationof reconstructed health and educationfacilities in earthquake affected areas. Thetotal enrollment in PPAF schools stood at19,885 (Girls 10,203; Boys 9,682) on June30, 2008, while PPAF supported healthsector interventions have collectivelymanaged approximately 173,558 OPD cases

and 15,056 cases of maternal care in thereporting year.

Concerted investments in human capital aresignificantly correlated with less incomeinequality and even lesser vulnerability tohealth and employment shocks in the longrun. By striving to rectify regional and genderdisparities in access to quality health andeducation services, PPAF’s Social SectorDevelopment Programme targets long termwelfare of participating communities throughtangible returns associated with greatereducational opportunities and good health.

Punjab BaluchistanNWFP Others

Figure 18: Healthcare Beneficiaries by Gender and Province (FY 2007-08)

9,343 7,024 664 1,120Male

5,710 6,876 950 6,060Female

Sindh

664

950

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Figure 19: Healthcare Beneficiaries by Province and Treatment Category (FY 2007-08)

9,343 7,024 664 1,120Others

5,710 6,876 950 6,060Baluchistan

12,636 8,028 1,628 6,102Sindh

40,777 29,524 6,068 4,402NWFP

34,952 18,716 5,746 1,185Punjab

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Human and Institutional Development

With the mandate to build institutionaland human resource capacities ofparticipating communities and civil societyorganizations, Human and InstitutionalDeve lopment uni t i s p ivota l toinst i tut ional izat ion of grassrootsparticipatory development at the nationallevel. Its multi-faceted operations haveyielded a sustainable service deliveryframework with exhaustive scope forupscaling, replication and the successfulexperimentation of newer products, whilesimultaneously increasing leveragingcapacity of partner organizations formaintaining diversified portfolios withmultiple funding options.

During the reporting period, the unitapproved funds worth approximately Rs.472 million to partner organizations insupport of their credit operations.Approximately Rs. 343 million (72.7 percent)of the above funds were sanctioned forsupporting institutional requirementsincluding recurring and non-recurringexpenses of partner organizations, whileapproximately Rs. 129 million (27.3 percent)were provisioned for meeting training needsof PO staff and participating communities.

The unit has remained committed to thedevelopment of a skilled human resourcebase necessary for supporting higher levelsof growth in the sector. For this purpose,regular training sessions are conducted forparticipating communities and staff ofpartner organizations. During the currentfinancial year, 67,628 community members,

including 24,459 women, were trainedwith PPAF financial and technical supportin fields ranging from agricultural andlivestock management to enterprisedevelopment and vocational skills (Figure20). Similarly, 3,497 staff members frompartner organizations attended PPAFsupported training sessions on diversesubjects including community mobilization,c red i t appra i sa l , loan port fo l iomanagement, delinquency managementand interest rate setting (Figure 21).

These achievements have been madepossible by the unit’s emphasis on diverting

Figure 21: Annual PO Staff Training Beneficiaries

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Figure 20: Annual Community Training Beneficiaries

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under this head increased from 20 percentof all capacity building funds in support ofPOs microcredit operations in FY 2006-07to 28 percent in FY 2007-08 (Figure 22).

The unit has further designed specificprograms to meet the sector’s growingappetite for enterprising young individuals,while simultaneously enabling partnerorganizations to achieve expected growthtargets on a sustainable basis. For instance,the unit runs a Junior Professionals (JP)program, which provides funds to partnerorganizations for training universitygraduates, who can be inducted at juniorposts following a training period of sixmonths with the partner organization. Theprogram involves a three monthsattachment period with a partnerorganization following one month ofintensive training at HID Center housedwithin the unit. Similarly, IFAD-fundedYoung Professionals Scheme (YPS) willprovide young people from poor ruralhouseholds the opportunity to join PPAF’scurrent internship program, with theadditional provision for supporting a furthereight months attachment with a partnerorganization on the latter’s request.

During the reporting period, 2 batchescomprising 24 internees completed theinternship program, while a total of 37 JPssuccessfully completed their training withpartner organizations. Similarly, under theYoung Professionals Scheme, 2 batchesconstituting 26 Young Professionals havecompleted training with PPAF. Under YPS,96 men and women will be trained in four

substantial funds for activities gearedtowards building human capital. Substantialtime and energy is invested in designingappropriate training modules matching thecapacities and requirements of communitiesand staff of partner organizations. GivenPPAF’s commitment to building humanresource base at grassroots, the quantumof funding for staff and community trainingprogrammes has increased from Rs. 76.9million in FY 2006-07 to approximately Rs.131.9 million in the current financial year.Additionally, financial resources allocated

Figure 22: Annual HID Grant by CB Category

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Capital CostTraining

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years, with 15 young professionalsgraduating for additional 8 monthsattachment period with POs. Together,these programmes are set to relieve partnerorganizations burdened by a high turnoverrate that has accompanied exponentialgrowth in the sector.

Having played a central role in this growth,PPAF continues to strive for consolidatingthe gains, particularly in rural areas wheremost of the country’s poor are located. Forthis purpose, HID unit, in coordination withCED unit, is in the process of implementingUS$ 6.3 million IFAD-financed YoungPartners Programme (YPP). In addition tothe Young Professionals Scheme, YPPconstitutes two further initiatives designedto enhance PPAF’s ability in developing newmicrofinance institutions in rural areas: TheYoung Partner Development Initiative (YPDI)facilitates new or existing partnerorganizations in setting up sustainable ruralfinance operations through provisioningfunds for on-lending and institutionalsupport covering staff/client training,systems development, capital and operatingcosts; while The International LinkagePartner Initiative (ILPI) provides youngenterprising individuals the opportunity toget hands-on training experience with arenowned regional Microfinance Institutionand facilitates them in setting up rural financeoperations – Linkage Partner Organizations(LPOs) – operating as independent MFIseligible to become full time PPAF partnerorganizations.

PPAF’s commitment to develop new partner

organizations through sufficient levels ofgrant funding for operational support is partof a long term investment aimed at ensuringsustainable delivery of financial services tothe poor. As many partner organizationshave attained maturity, achieving sustainableor near sustainable operational capacity withincreased outreach and a large outstandingportfolio, PPAF’s operational support hasdeclined. This decrease has been significantwith the percentage of grant funding insupport of microcredit operations decliningfrom 31.8 percent of disbursed microcreditfunds in FY 2001-02 to 12.9 percent in FY2004-05 to a low of 4.9 percent in thecurrent financial year.

This unprecedented decrease has largelybeen a function of reduced capacity buildingsupport – as percentage of disbursedmicrocredit funds – to large POs with betterresource mobilization potential, deeperoutreach and multiple donor options. Forinstance, although Rural SupportProgrammes (RSPs) have accounted forapproximately 60 percent of all annual PPAFcapacity building grants in support ofmicrocredit operations in the last threeyears, their collective ratio of capacitybuilding grants to disbursed microcreditfunds has declined significantly from 11percent in FY 2005-06 to 9 percent in FY2006-07 to a low of approximately 5percent in FY 2007-08 (Figures 23 & 24).Similar ratio for Microfinance Institutions(MFIs) with more competitive structures forincome generation has also declined from4.8 percent in FY 2005-06 to approximately1 percent in the current financial year.



The cumulative effect of these trends hascaused annual HID disbursements to declinein comparison to the previous financial yearfor the first time in five years (Figure 25).This decline is largely driven by significantchanges in PPAF’s disbursement pattern tolarger POs from amongst the RSPs andMFIs, which collectively account for 84percent of PPAF’s microcredit funds in thecurrent financial year, and reflects a definitepush towards the progressive achievementof a sustainable microcredit deliveryframework in the sector.

The unit is geared towards consolidatingthe above achievements through helpingsmall and medium sized service providersin attaining similar levels of sustainability.For this purpose, the unit keeps closelinkages with partner organizations tostrategize and monitor their progress on aregular basis, in addition to appraising theirneeds and capacities for ensuringappropriate levels of funding. During thereporting period, 13 monitoring/follow-upvisits and 26 appraisal visits were conductedto different partner organizations. Smallerpartner organizations have particularlygained from the unit’s technical supportin the development of efficient systems forsecuring clear and transparent policies andprocedures, in addition to benefitting fromthe unit’s emphasis on building efficientand object-oriented ManagementInformation Systems.

While regular spot checks of selectedtraining events have ensured the quality ofPPAF sponsored training events, the unit

Figure 25: Annual HID Disbursements

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Figure 23: Annual CB Grant in Support ofMicrocredit by PO Type

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Figure 24: CB Grant as Percent of MCby PO Type

'01-02 '02-03 '03-04 '04-05 '05-06 '06-07 '07-080%

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has further put in place a continuousfeedback mechanism to assess therelevance, efficacy and impact of its trainingprogrammes. During the reporting period,follow-up of 2,774 community trainingbeneficiaries was carried out to identifygaps and develop appropriate safeguardsfor future capacity building exercises.

As the sector expands further to include aproliferation of service providers at thegrassroots, the unit is well set to take onfuture challenges for the benefit of thepoor who will need continuous access toa range of financial and technical services.

Box 5.1: Citi-PPAF Microentrepreneurship Awards 2007

The HID unit, having successfully arranged three previous editions of Citi-PPAFMicroentrepreneurship Awards, was once again entrusted with the responsibilityof organizing the 2007 event. Awarded by an independent jury, the Citi-PPAFMicroentrepreneurship Awards are held each year to raise awareness, promotemicrofinance as a means for poverty alleviation and highlight best practices in thesector by celebrating the achievements of successful entrepreneurs.

This year, 16 organizations were finally short listed for awards: (1) TRDP (2) HelpIn Need (3) CSC (4) CWCD (5) Kashf Foundation (6) Save the Poor (7) NRSP(8) Swabi Women Welfare Society (9) First Microfinance Bank (10) OPD (11) OWPRA(12) Shah Abdul Latif Bhitaee Welfare Society (13) Narowal Rural DevelopmentProgram (14) SAFWCO (15) Khushali Bank, and (16) Orix Leasing Pakistan (Pvt) Ltd.

A total of 20 entrepreneurs, along with their respective credit officers, were chosenby an independent and eminent panel of judges from a long list of case studiesreceived from across the country. Out of the 20 selected entrepreneurs, 12 werewomen (see table below). Rs. 1,310,000 were awarded to 20 loan beneficiaryentrepreneurs while Rs. 340,000 were awarded to 20 loan officers.

Category Punjab Sindh NWFP Baluchistan TotalRural Male 1 1 1 - 3Rural Female 2 1 2 - 5Urban Male 2 2 1 - 5Urban Female 5 1 - 1 7Total 10 5 4 1 20


Poverty in Pakistan has a pronouncedgender dimension manifest in all welfareindicators including access to healthcare,education, and labor markets. Even greatergender disparities are latent at thehousehold level in terms of asset ownershipand the power to take independentdecisions. No poverty alleviation strategycan succeed without addressing these deep-rooted asymmetries, which are particularlyacute at the lower rungs of the welfareladder.

As the largest source of developmentfinance, PPAF is committed to addressingthe prevailing gender biases throughmaking gender concerns an intrinsic partof project design and implementation. Theeligibility criteria for partner organizationsencourage women participation at all stagesof the project cycle. Additionally, partnerorganizations are required to design servicesfor the benefit of women in all areas ofpartnership with PPAF including microcredit,rural infrastructure and capacity building.

As a natural corollary of PPAF’s commitmentto addressing gender asymmetries, thecollection of gender disaggregated data isprioritized for prospective programevaluation and impact exercises with aneye on plugging possible gaps in servicedelivery. Consequently, all partner

organizations are bound by mutually agreedupon implementation plans to submitgender disaggregated data for all PPAFsupported interventions.

During the current financial year, PPAFformally set up an in-house gender focalpoint with the mandate to conduct acomprehensive policy review from a genderperspective. In the first phase, PPAF’s ownpolicies and procedures were thoroughlyscrutinized, resulting in a draft gender policythat will be presented before the Board forapproval following consultation with allstakeholders.

Moving beyond the positive approach togender mainstreaming that the reviewfound to be largely present within theinstitutional and policy framework of PPAF,



a number of areas were identified where,given the organization’s potential toinfluence the development agenda at thenational level, a lot can still be accomplished.For instance, in its position as the premiersource of funding for civil societyorganizations, PPAF can leverage a higherlevel of women participation by facilitatingpartner organizations in the developmentof newer products that can effectivelyaddress the practical and strategic needsof women.

The IFAD funded Innovation and Outreach(I&O) facility for delivering innovative andneed based financial products to the pooraims at achieving the above objective byrequiring partner organizations to developa gender strategy as a necessary condition.PPAF has subsequently worked with partnerorganizations to develop such strategies.For this purpose, two consultativeworkshops have already been organized inKarachi and Quetta respectively, with similaractivities being planned for other partnersas well.

More importantly, there is a paramountneed to sensitize development practitionersat the national level. Gender mainstreamingis not possible unless it is instilled withinthe very organizational ethos and thinkingpatterns of institutions, even of those witha professedly concentrated focus on womenwelfare. Central to this is the problem ofcomprehending the full scope of genderconstructs, which also includes a thoroughknowledge of all relevant themes, issues,terms and concepts. To address these

concerns, PPAF took the lead in organizinga workshop on gender sensitization for itsstaff, providing the latter with anopportunity to asses and articulate genderconcerns through experience sharing anddebate. Facilitated by an internationallyrenowned trainer and a leading activist onwomen rights, the workshop went a longway in preparing grounds for arriving at acommon understanding of the issuessurrounding ‘gender’.

Conceptually, PPAF’s understanding ofpoverty has evolved over the years toincorporate and address both verticalinequalities based on degrees of incomeand consumption levels, as well ashorizontal inequalities induced by aninherent structural bias toward particularclasses or groups of individuals. Such anideational progression has allowed PPAF toinclude gender as an intrinsic part of amore holistic poverty alleviation strategywith better prospects of meeting futurechallenges.


Rehabilitation and Reconstruction

The Reconstruction and Rehabilitation (R&R)unit was established to facilitate PPAF’s rolein earthquake affected areas with themandate to lead the reconstruction effortin 34 union councils of Azad Jammu andKashmir and northern NWFP. In addition tothe reconstruction of seismically-safe housingunits, substantive components includingcapacity building, livelihoods restoration,reconstruction of non-housing infrastructureand focused interventions for people withdisabilities were built into the program asa holistic and inclusive long term solutionto reviving lives and livelihoods. The PPAFeffort was supported with generouscontributions from the donor communityincluding the World Bank, KfW, IFAD andCECP.

With an overall financial outlay of US$ 298million, the R&R Project is the largest privatesector reconstruction and rehabilitationproject of its kind in the earthquake affected

region with housing reconstructionaccounting for US$ 227.2 million (76percent) of the funds (Table 7). Anotherapproximately US$ 32 million was allocatedfor the reconstruction of non-housinginfrastructure, including schools, rural healthcenters, community centers, drinking watersupply schemes, link roads and sanitationfacilities. Additionally, a sum of US$ 3million was set aside for provisioninglivestock assets to vulnerable households,while another US$ 5 million was allocatedfor the rehabilitation of Persons withDisabilities (PWDs).

For effective implementation of the R&RProject, PPAF selected and assignedresponsibilities to six partner organizationson the basis of clearly laid out criteriaprioritizing organizational capacity and pre-earthquake operational presence in theregion. Accordingly, National Rural SupportProgramme (NRSP) in AJK and the Sarhad

Table 7: PPAF Donor-wise Allocation of Funds (US$ millions)

WB IFAD KFW CECP TotalHousing Reconstruction 198 17.51 11.67 - 227.18Small Scale Physical Infrastructure 16 1.67 .75 - 18.42Community Buildings 4 - - - 4Community Health Centers - - - 3.27 3.27Rural Health Center - - - 1.29 1.29Schools - - - 4.76 4.76Livestock Assets - 3 - - 3Operational and Training Support (PPAF) 5 0.72 0.86 - 6.58Operational and Training Support (POs) 15 1.9 1.42 1.39 19.71Consultancy - - 0.6 0.37 0.97Contingencies - 1.57 1.5 0.93 4Disability Project 5 - - - 5Total 243 26.37 16.8 12 298.17



Rural Support Programme (SRSP) in NWFPwere assigned larger project areas than theother four partner organizations, i.e., IslamicRelief (IR), Sungi Development Foundation,Omar Asghar Khan DevelopmentFoundation (OAKDF) and Women WelfareOrganization-Poonch (WWOP).

The share of funds subsequently allocatedto each partner organization was inaccordance with the geographical spreadand extent of damage recorded in theirrespective project areas. To date, PPAF hascumulatively disbursed Rs. 14.5 billion to

partner organizations as grants forreconstructing damaged housing and non-housing infrastructure, in addition toincremental grants for meeting operationaland capacity building requirements (Table8). Out of the overall disbursement ofapproximately Rupees 13 billion for housingreconstruction, PPAF partner organizationshave successfully transferred over Rs. 11.8billion to 120,608 affected households bythe end of the reporting period (Table 9).

Table 8: Distribution of Grant Funds amongst POs (As of June 30, 2008)

Geographical Housing Infrastructure Health and Operational & TotalArea Training Grant* (Rs. million)

SRSP 15 UCs (NWFP) 5,849.35 243.15 - 364.37 6,456.87NRSP 12 UCs (AJK) 4,624.95 51.77 44.06 183.10 4,903.89IR 4 UCs (AJK) 1,498.55 15.36 - 80.90 1,594.81SUNGI 2 UCs (NWFP) 579.88 40.58 - 43.59 664.05OAKDF 1 UC (AJK) 506.33 11.78 - 31.75 549.86WWOP 1 Rev. Village (AJK) 49.40 41.13 - 9.07 99.61MGPO - - 135.79 - 135.79CUP - - 66.39 - 66.39Total 13,108.46 403.78 246.24 712.77 14,471.25

* This does not include Rupees 16.572 million in additional costs disbursed for fulfilling training requirements in the affectedareas, e.g. Disaster Management Trainings, GSPs, etc.

Table 9: Distribution to Beneficiary Households - PPAF Housing Grants (As of June 30, 2008)

Processed Cases Disbursement to Affectees CD PD Total (Rs. million)

SRSP 55,475 4,288 59,763 5,573.60NRSP 35,055 1,925 36,980 3,997.18IR 11,995 258 12,253 1,247.00SUNGI 4,124 2,311 6,435 516.43OAKDF 3,539 1,170 4,709 392.15WWOP 346 122 468 40.75Total 110,534 10,074 120,608 11,767.10



The process of transferring funds tocommunities was initiated following acomprehensive damage assessment exercisecarried out by Social Mobilization Teamsin 34 union councils assigned to PPAF.Without dedication and resourcefulness ofthe 110 SMTs, which worked in adverseterrain and circumstances to meetchallenging targets, the PPAF R&R Projectcould never have been as successful. Priorto damage assessment, SMT personnelwere provided extensive training forfamiliarization with local housing structuresand construction models, in addition todeveloping their skills for conductingeffective damage assessment.

In all, over 122,000 housing structureswere successfully documented forprospective funds allocation with SMTsfollowing a standard criterion, placing eachassessed house into one of three categories:Completely Damaged (CD), PartiallyDamaged (PD) and Non-structural Damage(NSD). The subsequent transfer of fundsfollowed guidelines issued by EarthquakeReconstruction and Rehabilitation Authority(ERRA), with a single installment of Rs.50,000 for each household with a partiallydamaged housing structure and Rs.150,000 for each household with acompletely damaged housing structure.For the latter category, funds weretransferred in three installments of Rs.75,000, Rs. 25,000 and Rs. 50,000 eachat d i f fe rent s tages of hous ingreconstruction, following spot checks by

qualified engineers ensuring adherence topre-defined construction designs. By theend of the reporting period, PPAF partnerorganizations have successfully transferredsingle installment of Rs. 50,000 to over10,000 households with partially damagedhousing structures, while 110,534households with completely damagedhousing structures have received one tothree installments from Rs. 150,000allocated to each household in this category.

In order to meet the challenge of buildingseismical ly-safe housing units, acomprehensive training and awarenessprogram had to be launched simultaneouslyfor staff of partner organizations and withinaffected communities. A Training of Trainers(TOT) program was initially arranged forindigenous skilled labor, who weresubsequently hired to assist SMTs in trainingsessions conducted for local craftsmen. Thelatter sessions were conducted by SMTsoperating as Craftsmen Training Units(CTUs). While one SMT in each union



council operated as a CTU, othersfunctioned as Mobile Training Teams (MTTs)with responsibility of orienting houseowners in earthquake resistant techniquesat their doorstep. These orientation sessionswere attended by groups of 50 to 100community members at the village level.The over 2,100 community sessionsconducted by MTTs to date have beendecisive in spreading awareness as well asreadiness to strictly follow earthquakeresistant construction codes and designs.In view of these achievements, ERRArequested PPAF to take over the HousingReconstruction Center, previously run byGTZ, for a period of one year. The Centerprovides technical training and support toPPAF’s implementing partners in the 34UCs in addition to disseminatinginformation on safe housing reconstructionto communities.

The World Bank has conferred theprestigious “Golden Plough Award” to itsteam for effective and innovative supervision

of PPAF’s R&R Project. PPAF Task TeamLeader in the World Bank, Qazi Azmat Isa,received the award at an impressiveceremony during Sustainable DevelopmentNetwork (SDN) Week at the World Bankheadquarters in Washington. This closesupervision has enabled PPAF to consistentlyreceive ‘highest’ ratings from the WorldBank.

The above effort has enhanced competenciesfor meeting future crises at the grassroots,while helping build knowledge base indisaster management at national level.Simultaneously, R&R interventions havecreated jobs, increased income levels andfacilitated restoration of livelihoods on asustainable basis. Under IFAD-financedRestoration of Earthquake affectedCommunities and Households (REACH)project, US$ 3 million have been allocatedfor building livestock assets for 4,000 poorhouseholds through provisioning of one‘basic livestock unit’ equivalent to onefemale cattle\buffalo or a basic herd ofsheep and goats of similar value. Underthis project, the needs of households thatare amongst the most vulnerable includingwidows, orphans, elderly and the disabledhave been granted careful consideration inthe project design. This is manifested inthe distribution of livestock assets, as wellas in the development of participatoryCommunity Action Plans (CAPs) for assistingvulnerable households during housingreconstruction. Additionally, the World Bankfinanced Disability Project seeks to improvequality of life for persons with disabilities



and their families through targetedinterventions ensuring better mobility,improved health and increased participationin community life. The project is designedto support a whole range of activities fromraising community awareness andprovisioning quality rehabilitative servicesto sensitization and capacity buildingprograms aimed at project staff,communities and service providers.

R&R Project was a monumental undertaking,posing severe challenges at different levels.Every household in the 34 UCs assigned toPPAF had to be documented and level ofdamage ascertained, while large number ofgrievance cases inevitably emanating frompolicy decisions taken at official level had tobe expeditiously processed. Every new houseconstructed had to be checked forcompliance with guidelines issued forensuring resistance to possible futureearthquakes. For this purpose, extensivecapacity building programs had to be runfor project staff, artisans and communities,while all this had to be accomplished at areasonable pace in adverse weather andtopographical conditions. The reconstructionof seismically-safe housing units was onlypart of the challenge. For a comprehensiveand inclusive rehabilitation process to takeroot, grounds had to be prepared forsustainable livelihoods, with particular focuson the poor and vulnerable.

Given the magnitude of the disaster andscope of project, the cumulative success

achieved by the unit has further strengthenedPPAF’s faith in commitment, dedication andabilities of its staff and in the idea that givena minimum level of support, there is nothingthat organized communities cannot achieveon their own, irrespective of the depth andscale of the disaster. As R&R Project drawsnear its end, PPAF and its partners standtaller with greater experience and capacityin disaster management, while participatingcommunities have been capacitated towithstand future challenges with betterresolve and self assurance.


Evaluation, Research and Development

The Evaluation, Research and Development(ERD) unit supports PPAF operationsthrough collecting, consolidating, analyzingand disseminating information on PPAFinterventions to all stakeholders, includingPPAF Board of Directors, Government ofPakistan, donors, and the civil society.Additionally, the unit has the importantresponsibility of measuring and quantifyingthe poverty impact of PPAF interventions.

As a primary source of information for allstakeholders, the Quarterly Progress Reports(QPRs) monitor and document PPAFprogram activities and progress on a regularbasis. The unit diligently compiles thesereports through aggregating quarterlyprogress data received from the networkof PPAF POs. With a view to furtherstreamline the data collection and reportingprocess, the unit is currently implementinga web-based data acquisition and reportingsystem to expedite the process of datacollection and information dissemination.This will enable POs to submit data in realtime through a centralized databaseapplication. During the reporting period,two data entry modules, one each forPPAF’s credit and infrastructure operations,were successfully tested. The system furtherhas the capacity to generate a variety ofanalytical reports with flexibility andprecision.

During the current financial year, ERDorganized two training sessions for PO staffas a step towards institutionalization of thesystem at PO level. A comprehensive training

session was organized in Lahore for staffof 17 POs located in the region, while asecond training event was organized inHyderabad for POs based in Sindh. Prior toformal implementation, similar trainingevents are planned for remaining PPAF POsin the next financial year.

Simultaneously, ERD accelerated efforts forcollecting baseline socio-economic profilesof beneficiary communities for prospectiveimpact assessment of PPAF sponsoredinterventions. During the reporting period,baseline studies were completed for CPIconventional projects in Punjab, Sindh andAzad Jammu and Kashmir on the basis ofa representative sample of 1,400 beneficiaryand comparable non-benef ic iaryhouseholds (Box 8.1). This was followedby a baseline survey of Integrated AreaUpgradation Projects comprising 582households in Punjab and NWFP. Similarly,baseline data on 160 sampled householdsin two project and non-project villages wascollected for PPAF’s Solar Lights Pilot Projectoutside Karachi, while 347 and 340 sampledhouseholds each were enumerated as partof baseline surveys for PPAF financed SCADprogram and DMPP, respectively, in districtsThatta, Badin, Khipro and Loralai.

The process was further expanded toinclude PPAF’s Social Sector DevelopmentProgramme. For this purpose, one PPAFfinanced health facility, two adopted publicsector schools and 2 new PPAF supportedcommunity schools were selected in districtNarowal, Punjab. A set of three different



tools were developed in-house for collectingrelevant information on three levels – facility,teachers and students. In addition, simpletests were administered to students ofclasses 4, 7 and 9 to establish academicperformance benchmarks and assess thequality of education imparted at thesefacilities. Separate survey tools weredeveloped in-house to collect informationat the health facility level.

To complement the above efforts, ERD alsooutsourced important research work tocredible institutions and agencies. Duringthe reporting year, the unit worked withInnovative Development Strategies (IDS),which was selected to conduct a study onthe Cost of Delivery of PPAF DevelopmentInterventions. The study will help indetermining the cost effectiveness of PPAF’sdevelopment interventions, whileascertaining PO efficiency in the delivery offinancial and non-financial services to thepoor.

In order to perform its role more effectively,the unit continually strives to furtherenhance and update its capabilities andknowledge for carrying out sophisticatedand rigorous impact analysis exercises.During the reporting period, ERD unit staffattended a week long training course on“Impact Evaluation” organized by thePakistan Institute of DevelopmentEconomics (PIDE) in collaboration with theWorld Bank Institute, while individual staffmembers attended training courses inrelevant areas of research at renownedinstitutions.

Through its efforts to comprehend linkagesbetween poverty alleviation and PPAFinterventions, the unit has played animportant role in the organization’sevolution into a credible resource forparticipatory grassroots development. Inyears to come, the unit’s inputs will continueto inform decision making for effectivepolicy implementation and poverty targetingat the community level.



Box 8.1: Baselines of conventional infrastructure projects

The ERD unit carried out a comprehensive baseline study of CPI conventionalschemes across the country. Household and village level data drawn from arepresentative sample from Punjab, Sindh and Azad Jammu & Kashmir was collectedfor the purpose of impact assessment of infrastructure projects in the future. Datacollection in Balochistan and NWFP could not be initiated due to the prevailing lawand order situation. Information was collected on socio-economic attributes fromover 1400 households across three provinces. For each of the 51 (42%) sampledongoing schemes selected from a universe of 119 PPAF supported schemes in theseareas, baseline information was collected from 10 beneficiary households (treatmentgroup) and 5 comparable non-beneficiary households (control group) in nearbylocalities with no similar intervention.

Baseline survey of CPI conventional schemes

Province Districts HouseholdsTreatment Control

Punjab Attock 87 15Kasur 40 22Khushab 32 15Lodhran 77 34Mianwali 70 35Nankana 64 31Rahim Yar Khan 29 16Sheikhupura 41 19

Sindh Sanghar 110 40Sukkur 40 20Naushero Feroze 50 25Ghotki 72 32Tharparkar 40 20Umerkot 10 5

AJK Bagh 110 28Kotli 77 21Poonch 55 9Sudhnoti 19 1

Total 18 1,023 388


Media and Communication

With the responsibility to deliver PPAF’smessage to the world, the Media andCommunication (M&C) unit strives to buildbroad-based support for the organization’smission through communication of itsobjectives and activities. For the effectiverealization of its objectives, the M&C unithas successfully developed synergies withmainstream media, which has come torecognize PPAF’s defining role in positivelyaffecting the lives of millions across Pakistan.

Following a well-defined plan of action,the unit has, over the years, used a fullscope of media strategies, tools andproducts for voicing disempoweredcommunities. With the view to highlightingPPAF’s work and helping to mainstreampoor communities through focused mediaattention, the unit has, among other things,arranged immersion visits for journalistsfrom print and electronic media. Duringthe reporting period, such immersion visitswere carried out to four PPAF project areasin the interior of Punjab and Sindh provinces(See Box 9.1).

Additionally, the unit has focused oneducating a wider audience throughleveraging its partnership with mainstreammedia. This is evident from regularpublication of news items and featurearticles in leading newspapers highlitingPPAF vision in special documentaries andinterviews of PPAF core staff on popularnews and entertainment channels.

Moving beyond its role of spreading

awareness and mobilizing support forPPAF’s mission, the unit has contributed tothe literature on the scope and potentialof grassroots development in a number ofimportant ways. In addition to the regularpublication and dissemination of reports,brochures, manuals, flyers and fact sheetshighlighting different facets of PPAF activitiesand interventions, the unit prepares casestudies to analyze the latter’s impact onindividual beneficiaries and communities.The quarterly publication of PPAF’snewsletter, Povertyline, has further met thetask of keeping all stakeholders abreast ofthe organization’s multi faceted activities.

During the reporting period, the M&C unitdesigned and printed special flyersshowcasing traditional artifacts preparedby PPAF beneficiaries for display in SouthAsia Rural Livelihood Workshop andExhibition in Colombo, Sri Lanka. PPAFshowcased its experience in forgingpartnerships between commercial andcommunity organizations at the workshop– “Making Markets Work for the Poor” –aimed at shar ing experiences inprivate\public sector partnerships with therural poor, while exploring the potential ofa market-based approach to generatingsustainable income opportunities. Withinthis context, the workshop investigatedvarious approaches that have enabledcommunity organizations to become viablepartners and clients with commercial agri-business franchises, financial services, publicdistribution and social protection schemes.The workshop facilitated exchange of ideas



emerging in different contexts across theregion with potential for effective replicationin other locations.

The workshop lasted for three days, whichincluded two days of focused presentations,panel discussions and a Livelihood ExhibitSession, followed by a day-long visit tocommunity projects. A panel of successfulbusiness leaders from the commercial sectorand CEOs from development sectorincluding CE/MD of PPAF were invited toshare their achievements and approacheson the subject. The M&C unit designed aspecial set of panaflexes and flyers for theoccasion, in addition to establishing a boothfor exhibiting indigenous handicraftsprepared by PPAF beneficiaries from acrossthe country. The PPAF booth won acclaimsand attracted huge crowds from amongstvisitors and workshop participants.

In its role as a support unit, the M&C unitis called upon to complement the work ofother units on a regular basis. In thiscapacity, the unit’s work in support of PPAF

led operations in earthquake affected areasdeserves special mention. The unit’spersuasive media campaign underscoringthe dangers of noncompliance withconstruction guidelines issued by theEar thquake Recons t ruc t ion andRehabilitation Authority (ERRA) helpedreduce the incidence of unsafe constructionpractices and materials, making life easierfor PPAF’s Reconstruction and Rehabilitation unit and potentially saving precious livesfrom future incidents.

Similarly, the unit contributes to the successof all PPAF sponsored workshops, seminars,and ceremonies by providing the necessarymedia coverage and designing/printing allrelevant brochures, leaflets and othersupport materials.

The M&C unit has contributed towardscarrying forward PPAF’s objective ofmainstreaming poor communities bysuccessfully building on the achievementsof PPAF’s operational units. In continuingto present the transformation to a globalaudience, the unit hopes to do justice toPPAF’s role as a change agent.


Box 9.1: Immersion visits of journalists

Not only do immersion visits for journalists provide them insight into PPAF’swork, they helped in deconstructing urban perspectives on the rural conditionin general and on rural development in particular. Deep-rooted stereotypeson prospects of rural development and ways in which it can be achieved areshaken. Prominent amongst these stereotypes are beliefs that meaningfulrural development is only possible with massive injection of public funds; thatthe lack of good education terminally incapacitates rural communities fromdriving the development process from below on a self-help basis; and thatthe very hierarchical and deeply stratified rural social structure promotes avalue system that perpetually blocks initiative. While there might be a grainof truth in each of these propositions, the immersion visits teach journaliststhat for the rural condition to improve, drastic changes in neither of the abovefactors are necessarily a prerequisite.

During their immersion visits to Soan Valley (District Khushab, Punjab), DhokTabarak Shaheed and Sereh on the outskirts of Islamabad and to KhanMohammad Rajar, a 120-year-old village in District Sanghar, Sindh, the urbanperspective of journalists was jolted. There was a recognition that poor ruralcommunities can organize and take initiatives despite the lack of educationand the ubiquitous chains usually associated with the idiosyncrasies of ruralhierarchy. Equally important was the realization that rural lives can be positivelyaffected even in the absence of massive government involvement. In villageKhan Mohammad Rajar, for instance, media representatives learnt how withnominal outside assistance, one local community has organized to changetheir lives by effectively utilizing PPAF funds to build a viable and efficient dripirrigation system for cultivating 17 hectares of hitherto unproductive land,enhancing their coping capacities and impacting a range of socio-economicindicators. They also learnt how the same community has managed to developsustainable access to safe drinking water through the innovative utilizationof renewable energy sources. For journalists, it was a lifetime experienceinducing a fresh perspective on the rural condition and how it could betransformed. For PPAF, it was another step closer to changing mindsets.



Human Resource, Procurement and Administration

The Human Resource, Procurement andAdministration unit works to ensure highprofessional standards in the managementof PPAF’s human and physical resources.The unit’s three wings are committed torunning a well-coordinated operation forp r o m o t i n g o r g a n i z a t i o n a l a n dadministrative efficiency through the entirespectrum of relevant activities ranging fromhuman resource management to logisticalsupport, procurement of goods andservices, as well as the upgradation andmaintenance of facilities.

The Human Resource wing follows theunit’s objective of maximizing organizationalpotential through concerted investmentsin human capital. For this purpose, qualitytraining opportunities in renowned nationaland international institutions are availedfor enhancing skills and competencies ofPPAF staff. During the financial year, seventystaff members attended national trainingcourses in relevant fields. Additionally,twenty staff members were providedinternational training/ exposure atprestigious institutions.

During the financial year, the unitsuccessfully inducted seventy seven newstaff members to meet the burgeoningoverload consistent with the expandingscope of PPAF operations. In all such cases,the Human Resource wing followed astringent and transparent recruitmentprocess, which it considers vital for thelong term success and sustainability of theorganization.

The Procurement wing of the unit followssimilar standards in the procurement ofgoods and services. All procurementprocedures are regularly scrutinized to meetdonor guidelines and PPAF requirements.During the reporting year, 771 cases ofprocurement of goods and 258 casesrelated to procurement of services wereprocessed by the unit. Additionally, the unitactively seeks to upgrade competencies ofPPAF partner organizations, ensuring goodprocurement practices through continuousguidance and monitoring of procurementprocesses and procedures. The procurementwing has further responsibility of processingcases for outsourced activities.

The unit also provides logistic support tovarious PPAF units and offices. During thefinancial year, the Administration wingarranged close to 834 travel arrangementsfor PPAF staff both within and outside thecountry. The wing also has the importanttask of upgrading PPAF premises to ensurean enabling work environment.

The Human Resource, Procurement andAdministration unit has continually strivedfor achieving excellence through strictadherence to international best practicesin all aspects of its work. In recognition ofthe unit’s exceptional performance, the lastWorld Bank mission rated the procurementwing with the highest ranking of “highlysatisfactory”. The unit looks forward tomaintaining similar standards in years tocome with the objective to facilitating PPAF’scontinuous growth.


Internal Audit

The Internal Audit (IA) unit furnishes acontinuous stream of independentinformation to PPAF management with aparticular focus on ensuring high qualityin the management of financial andadministrative affairs. Following a well-defined scope of activities clearly laid outin a comprehensive manual, the unitscrutinizes all operational aspects of PPAFand its partner organizations with the aimof identifying digressions from standardand agreed upon systems and procedures.

During the reporting period, the unitsuccessfully submitted twelve in-house auditreports to the Chief Executive, coveringdetailed information on various financialaspects including payments, receipts andgeneral vouching, bank accounts and theirreconcil iation statements, payroll,investments, petty cash, advances andsecur i t y depos i t s . Add i t iona l l y,comprehensive reviews were conducted ofall operational and support units withinPPAF. These reviews included, among otherthings, a scrutiny of existing fixed assetsmanagement systems, documentation, aswell as adherence to required proceduraland policy standards. The presence ofprovisioned physical assets was verified forall units, while gaps in procedural andrecord keeping arrangements wereidentified and suggestions were put forwardfor their redressal.

The unit conducted four quarterlyprocurement audits to ensure transparencyand adherence to standard operatingprocedures in the acquisition of all physical

assets. Additionally, a comprehensive reviewof PPAF’s Information Technology (IT)facilities was conducted with a focus ongaps in networking and the supportinginfrastructure to ensure a steady andcontinuous flow of information. A numberof suggestions were made to improve ITfacilities including the development of asuitable IT policy.

The unit reports to the Audit Committeeof PPAF’s Board of Directors, which meetson a quarterly basis to review/approveannual plans. In addition to incorporatinga schedule for conducting timely audits ofPPAF’s various units, the annual plan isdesigned to include a thorough scrutiny ofall PPAF POs to ensure financial andadministrative efficiency. Particular emphasisis laid on building staff capacities andadministrative structure of requisite quality.

During the reporting period, the unitsuccessfully conducted audit of all existingPOs, documenting procedural and structuralweaknesses in each case and reporting itsfindings to PPAF management on a regularbasis. All reports included practicalsuggestions for rectifying observed gapswith the objective of bringing about efficientand sustainable institutional frameworks.In many instances, the observations andsuggestions of IA staff produced resultswith positive implications for the long-termhealth of PPAF investments.

The unit’s success in achieving acomprehensive systems review of all PPAFunits, in addition to undertaking the auditof 65 POs.


Finance and Accounts

As a custodian of public funds, PPAF isconscious of the need for prudence andappropriate control in the management offinances. In pursuance of this objective, theFinance and Accounts (F&A) unit has beenassigned responsibility for executing andrecording all financial transactions in asystematic and transparent manner. TheF&A unit maintains the highest standardsof financial management. In the conductof its routine business, the unit strictlyfollows standard operating procedures laidout in a comprehensive operational manualdeveloped to ensure high standards offinancial management.

The unit further ensures compliance withthe regulations of Securities and ExchangeCommission of Pakistan and covenantsstipulated in agreements signed with allparties, including the Government ofPakistan and donors, i.e., World Bank, USAgency for International Development, USDepartment of Agriculture, InternationalFund for Agricultural Development, KfWDevelopment Bank (Germany) andCommittee Encouraging CorporatePhilanthropy.

As part of its responsibilities, the unit worksclosely with operational and support unitsto ensure adherence to the due processand to facilitate funding. The activities ofthe unit are carried out in an automatedcomputerized environment throughcustomized software dedicated to PPAFrequirements. A comprehensive manual forfinancial management has been developedto govern the unit’s work processes. Books

of accounts are kept in accordance withthe statutory requirements and agreementswith GoP and donors. All documentaryrecords and transactions are subject tostrict scrutiny by independent internal andexternal auditors, as well as by supervisionmissions from different donors.

In the conduct of its routine obligations,the unit has prioritized true presentationof facts and the timely issuing of all periodicfinancial statements for management,donors and stakeholders. The relevantinternal reports are submitted tomanagement on a monthly basis forfacilitating timely decisions on importantaspects of PPAF operations. External reportsto stakeholders include quarterly, half yearlyand nine monthly un-audited financialstatements and annual audited financialstatements. In addition, donors’ specificperiodic reports and audited financialstatements are submitted on timely basis.

Operations of PPAF for the year ended June30, 2008 were audited by its externalauditors M/s A. F. Ferguson & Co., CharteredAccountants. In the latter’s unqualifiedopinion, financial affairs of the companywere being conducted in accordance withapproved accounting standards andrequirements of Companies Ordinance1984, while financial statements preparedby the management present true and fairview of the company’s state of affairs. Theseopinions were based on the inspection andreview of company records and the fundsreleased to partner organizations.In addition to preparing financial statements



as per statutory requirement, the unit alsoprepared separate financial statements ofa) WB and IFAD Projects for the year endedJune, 30, 2008, b) KfW project for the halfyear ended December 31, 2007 and June30, 2008, and c) USAID funded EDF projectfor 15 months ended September 30, 2007.All the above financial statements wereaudited by external auditors. The annualaudited financial statements along withDirectors’ Report as well as donor specificaudited financial statements were submittedto the Audit Committee of the Board forits review. On the recommendations of theCommittee, the Board of Directors approvedthe above financial statements.

Disbursements to PPAF under the WB andIFAD projects were on the basis of FinancialMonitoring Reports (FMRs). This reportbased disbursement is allowed only toinstitutions with effective and strongfinancial management systems andprocedures. All FMRs and withdrawalapplications related to WB and IFAD projectswere submitted within the period allowedby donors. These were reviewed by otherdonors and found to be eligible forreimbursement or replenishment.Information and data submitted were incompliance with disclosure requirementsand formats.

The WB Supervision Mission reviewed PPAF’sFinancial Management System in September2007 and May 2008. The findings of theMission were as follows:

The financial management informationsystem continues to function effectively

allowing for the maintenance ofcomprehensive books of accounts.The submission of FMRs by PPAFremained accurate and timely. Themission randomly reviewed supportingdocumentation for withdrawalapplications and found the same inorder.Financial reporting requirements arepromptly and satisfactorily fulfilled,while quarterly FMRs and annualaudited financial statements aresubmitted to the Bank well within thedue dates.The Designated Accounts under all theoperations are running smoothly andreplenishment applications are beingsubmitted on regular basis.

On the directives of the Federal Ministerfor Finance, the Auditor General (AG) ofPakistan conducted a study to assess theeffectiveness and impact of PPAF. The AGTeam comprehensively reviewed the PPAFprogram, in addition to focusing on itsfinancial management and procurementsystems. The team was of the opinion thatsufficient controls exist in PPAF and allfinancial systems are operating effectively.

The AG team concluded that PPAF ismeeting its overall objectives in a satisfactorymanner and recommended to theGovernment of Pakistan to continue itssupport for PPAF. In view of the performancereport submitted by the Auditor General,the Ministry of Finance requested the WorldBank to appraise a follow-on project forfunding under Phase II I of PPAF.



During the reporting period, WB approvedfunding of US$ 75 million for the SocialMobilization Project. In addition, IFADapproved funding of US$ 35 million forthe Programme for Increasing SustainableMicrofinance (PRISM) Project. Legal andfinancing agreements for both projectshave been executed and the projects havebeen declared effective. The unit was activelyinvolved in finalizing legal and financialmodalities during negotiations for theseprojects.

As a result of the combined efforts of PPAFtax advisors and the unit, the Federal Boardof Revenue renewed PPAF’s status as awelfare institution. Consequently, there wasno tax liability for the year under review.

The F&A unit also plays an active part inthe monitoring of financial flows to partnerorganizations, ensuring adherence to legalcovenants. The unit receives auditedfinancial statements from all partnerorganizations within six months of the closeof their financial year in addition to thesubmission of management letters issuedby their respective external auditors. Theseare reviewed and necessary actions aretaken accordingly.

The head of the unit acts as CompanySecretary and ensures full compliance withthe mandatory secretarial responsibilitiesas envisaged by the Companies Ordinance,1984. Additionally, the unit complies withbest practices set out in the code ofcorporate governance. Adequate recordsevidencing statutory meetings and other

formal requirements are being thoroughlymaintained while reports to the Securitiesand Exchange Commission of Pakistan arebeing submitted well in time.

The unit draws its strength from a well-coordinated operational structure withclearly defined spheres of responsibilityamongst a qualified and dedicatedprofessional staff. The latter are facilitatedby customized software applications, finetuned to the specific requirements of theunit. Timely, accurate and transparentexecution of all activities and responsibilitieshas thus become a hallmark of the unit.


Directors’ Report

The Board of Directors of Pakistan PovertyAlleviation Fund (PPAF) is pleased to presentthe eighth Annual Report along withaudited financial statements of theCompany for the year ended June 30, 2008.

During the year under review, PPAFmaintained impressive progress with respectto each of its core components of creditand enterprise development; water andinfrastructure; education; health; andcapacity building services. The Companyaddressed the needs of the poor byfollowing an integrated approach foreffective delivery and impact. In areas ofPPAF sponsored interventions, the poorhave started reaping benefits of self-relianceand community driven development. Theyare experiencing increased opportunitiesfor income generation, reduced dependenceon external support and enhanced qualityof life. PPAF has been particularly successfulin its vision of institutionalizing andprofessionalizing its Partner Organizations(POs) which has helped in graduating anumber of smal l and emergingorganizations and taking them to scale aswell as empowering their communities.

In addition to carrying out its mainstreamprogrammes, PPAF continued its multi-pronged strategy for the restoration ofl i ve l ihoods, which has invo lvedreconstruct ion of housing units;rehabilitation of health and educationfacilities, community infrastructure schemesand training of individuals on a large scale

in 34 earthquake affected union councilsof North West Frontier Province and AzadJammu Kashmir. PPAF’s rehabilitation andreconstruction program was guided by twofundamental objectives (i) to assist peoplein rebuilding their lives by providing safeand seismically appropriate housing andrestoring basic infrastructure servicesthrough a community driven approach (ii)to build capacities of affectees with thepurpose of enabling them to take controlof their lives on a sustainable basis.

PPAF has established a demonstrated trackrecord of performance and effectiveness inusing financial resources. As a custodianof public resources, PPAF has put in placea rigorous and robust system of duediligence and transparency. It has provento be an efficient private sector arm of theGovernment in terms of service delivery,livelihoods and inclusion at the grassrootslevel. This platform of participatorydevelopment has also generated socialcapital and enhanced the level and qualityof interaction between poor communitiesand their local governments, while at thesame time being cost effective andsustainable. Several studies including a thirdparty evaluation has expressed a highdegree of satisfaction over the effectivenessof PPAF and recommended enhancementin provision of additional resources to theCompany.

PPAF performance and achievements havebeen regularly recognized by successive


Directors’ Report

Supervision Missions of the World Bank.The latest such supervision of the SecondProject was conducted in September 2007.The Mission reviewed the performance andassessed whether PPAF was meeting itsdevelopment objectives. The Mission ratedthe overall project progress as ‘HighlySatisfactory’ (highest rating). Overall findingsof the Mission affirmed that the SecondPPAF Project was on track, partnering withthe right institutions, and had surpassedmost of its targets set at appraisal.

projects were initiated and 252,000 staffand community members were trained. Inearthquake affected areas, PPAF providedfinancing to 120,000 households to buildearthquake resistant homes and alsoprovided training to over 100,000 individualsin seismic construction and related skills.

PPAF financial and non-financial servicesare estimated to have, on a cumulativebasis, benefited (directly or indirectly) over13 million individuals from its creditprogram and over 9 million individuals frominfrastructure, health and educationinterventions, across the country.

Operational and Financial OverviewThe operational and financial results of theCompany, during the year under review,remained satisfactory.

Total disbursements in respect of coreoperations increased to Rs. 11,026 million(US$ 161.43 m) in FY 2008 from Rs. 7,882million (US$ 115.40 m) in FY 2007, indicatingan increase of 40%. Disbursements of loan(microcredit and enterprise developmentfacilities) rose to Rs 9,075 million (US$132.86 m) from Rs 6,228 million (US$91.18 m); infrastructure disbursementswere Rs 1,332 million (US$ 19.50 m) ascompared to Rs 1,127 million (US$ 16.50m); capacity building disbursements wereRs 471 million (US$ 6.89 m) against Rs 451million (US$ 6.60 m) and disbursementsfor education and health were Rs 148million (US$ 2.16 m) as against Rs 76 million

By the end of June 2008, PPAF funding hadbeen disbursed in urban and rural areas of117 districts of the country (about 100,000community organizations / groups) through74 partner organizations of which 12 werefocusing exclusively on women. Oncumulative basis, PPAF financed 2,300,000microcredit loans, of which 1,035,000 (45%)were to women. 17,000 infrastructure

Afghanistan

India

China

Iran

PPAF Coverage

Arabian Sea

71

Directors’ Report

(US$ 1.11 m) during the preceding year(Table 10). In addition, Rs 5,671 million(US$ 83.03 m) was disbursed during theyear for relief, rehabil itation andreconstruction operations in earthquakeaffected areas.

By the end of FY 2008, cumulativedisbursements for core operations stoodat Rs 33,875 million (US$ 495.97 m). Creditand enterprise development, the largestcomponent of the PPAF, accounted for 76%of total disbursements followed bycommunity physical infrastructure (16%);capacity building assistance (7%); andhealth & education had a share of 1%(Figure 26).

In addition, cumulative disbursements forrelief, rehabilitation and reconstructionactivities were Rs 14,730 million (US$215.66 m).

PPAF interventions are being carried out inall parts of the country. Provincialdistribution of funding under themainstream programmes remainedconsistent with previous allocations: 56%of the resources deployed in Punjab, 27%in Sindh, 7% in NWFP, 6% in Balochistanand 4% in Northern Areas/AJK (Figure 27).

In line with the Subsidiary FinancingAgreement executed between Governmentof Pakistan and PPAF in respect of WorldBank financed First Project, the repaymentof principal loan amount has commenced


Figure 27: Provincial Distribution of Funds -Core Operations

(56%)Punjab

(27%)Sindh

(6%)Baluchistan

(7%)NWFP (4%)

Northern Area/AJK

Figure 26: Share of Funds Disbursed -Core Operations

(76%)MC

(16%)CPI

(7%)HID

(1%)H&E

Table 10: Disbursements – Core Operations Rs. million %

2008 2007 VarianceCredit and Enterprise 9,075 6,228 + 46Water and Infrastructure 1,332 1,127 + 18Capacity Building 471 451 + 04Health and Education 148 76 + 95Total 11,026 7,882 + 40


Directors’ Report

with effect from November 15, 2007.During the year under review, Rs 109.617million (US$ 1.60 m) was repaid to theGovernment of Pakistan.

PPAF has fully utilized the World Bank fundsallocated for microcredit component underSecond Project and is meeting its obligationsthrough its own reserves built up fromrepayments received from partnerorganizations. During the year under review,PPAF disbursed Rs 8,937 million (US$130.85 m) as loan from these reserves.

Total assets of the Company on June 30,2008 stood at Rs 18,923 million (US$277.05 m) against Rs 18,702 million (US$273.82 m) as at June 30, 2007. Amountof loans receivable from partnerorganizations as on June 30, 2008 wereRs 8,301 million (US$ 121.53 m) as againstRs 5,816 million (US$ 85.15 m) as at June30, 2007. PPAF continued to maintain100% recovery rate in respect of its lendingoperations.

The trend of consistent growth in incomecontinued this year in line with previousyears. Total income generated during theyear increased by 5% to Rs 1,314 million(US$ 19.23 m) from Rs 1,255 million (US$18.37 m) in FY 2007. Service charges onloan to partner organizations increased by55% due to high volume of creditdisbursements. Income on investments andsaving accounts reduced by 18% due todecrease in the level of investments as funds

were utilized for lending to the POs. Duringthe year, capacity building grant increasedby 14% due to the availability of financingfrom Government of Pakistan and donoragencies for PPAF operational support(Figure 28 & Table 11).

In order to support enhanced activity,general and administrative expenses forthe year increased by 38%. The mainincreases were in salaries/benefits, traveland consultancy expenses. The salaries,wages and other benefits increased due toannual increments to existing employeesto provide relief against higher cost of livingas well as hiring of additional staff formanaging expansion in core operationsand new activities under different donors’projects. In addition, a higher number ofengineers were inducted for managementof reconstruction activities in the earthquakeaffected areas. Travel cost increased due toextensive appraisal and monitoring visits inview of high disbursements and activities.The higher consultancy charges were dueto initiation of studies on rural supportprogrammes, cost of delivery, droughtmitigation, training of trainers as well asengaging consultants for supervision andmonitoring of the projects undertaken inearthquake affected areas.


Directors’ Report

Loan loss provision was made at 3% of thegross outstanding balances of loans topartner organizations. In addition, as aprecautionary measure, specific provisionfor loan losses was also made against loanswhich were considered troublesome. Thefinancial charges include commitment andservice charges on long term loan and bankcharges.

Sectoral and Programme Overview:Since commencement of operations in theyear 2000, PPAF has established itself asthe lead institution in the developmentsector. It is today one of the largest WorldBank supported institutions of its kind inthe world. A major role of PPAF in thenational framework of economicdevelopment and poverty reduction isfocused on financial services to the poor.The integrated approach focusing onprovision of credit, infrastructure, health,education and skill development addressedthe many facets of poverty and is gearedto reducing vulnerability, especially forwomen. Apart from these core activities,PPAF has been working with communitiessuffering from natural calamities anddisasters such as earthquake, drought andflood. In order to help communities invulnerable areas to develop preemptivesurvival strategies, a dedicated WaterManagement Center has been established.PPAF has effectively enhanced the retailcapacity in the country where the poorhave had very limited access to resources.

Figure 22: Annual HID Grant by CategoryFY 2007FY 2008

ServiceCharges on MC

Profit on invest/bank accounts

Amount ofGrants

Others

0

100

50

Table 11: Financial Results

(Rs. million)

2008 2007

Service charges on loans 504 326

Amortization of deferred grant 154 135

Income on invetments/saving accounts 653 792

Other income 3 2

Total income 1,314 1,255

General and administrative expenses 283 205

Loan loss provision 145 51

Financial charges 84 84

Contribution for USAID Program - 1

Total expenditure 512 341

Surplus for the year 802 914


Directors’ Report

It has raised the standards of civil societyorganizations to higher levels of socialresponsibility, economic discipline andinstitutional management.

PPAF has been the main catalyst forexponential growth in the microfinancesector with a market share of 50% of thetotal microcredit outstanding in the country.PPAF has played a crucial role in driving theindustry by increasing its absorptive capacityand fostering the entry of new players.Externally commissioned third partyevaluations suggest that on average lowincome households who borrowed fromPPAF funding are better off today that theywould have been if they had not borrowed.There is an overall improvement in theincome as well as personal and businessassets of PPAF borrowers.

PPAF has also piloted a series of initiatives,which aim to develop microenterprise/entrepreneurship, promote new retailcapacity, innovative financial products andattract dynamic and qualified professionalsto the sector. It is introducing componentsof credit enhancement and equity injectioninto high performing partner organizationswith a view to enhancing there bankabilityand attracting commercial finance. Theoverall focus of these initiatives is on marketbased pricing of products and services andbuilding financial sector l inkages. The infrastructure window (administeredthrough Water Management Center and

Community Physical Infrastructure unit) hasproven to be one of the most productiveinvestments providing high economicreturns. The most significant aspect of theseschemes is that they are identified,implemented and maintained by thebeneficiary communities. These schemeshave helped to provide access to basicservices at the village level with communityownership, cost effectiveness andsustainability. Besides providing socialbenefits, and improving the ruralenvironment, these projects have tangiblyimproved quality of life and providedemployment opportunities for localcommunities.

A pilot program in education and healthwas launched in 2005 in view of the highcorrelation between poverty and lack ofeducation and/or health. PPAF supportededucation programs provide all the basicfacilities necessary for a quality primaryschool. These schools are subject to regularmonitoring to ensure quality outcomes.PPAF and its POs lead the monitoring effortwhile communities are responsible for dayto day school affairs and identifying areasthat need improvement. Similarly, PPAFsupported health program provides a rangeof healthcare services. Community basedhealth committees, in coordination withimplementing POs, ensure participatoryfeedback for further improvements.

PPAF has designed a series of specialinstruments to address specific constraints


Directors’ Report

of the most vulnerable and marginalizedcommunities and households. Thesehouseholds constantly struggle withexogenous shocks such as drought, floodand earthquakes. To overcome extremewater scarcity for both drinking andirrigation purposes, PPAF has developed adrought mitigation and preparednessprogram for communities (especially inBalochistan and Sindh) which are prone tofrequent droughts. Under this program,PPAF through its POs, undertook a seriesof activities involving better watermanagement and conservation policies.PPAF has also initiated a special programfor the vulnerable coastal communities ofSindh province. This program focuses onrehabilitating rural livelihoods throughupgrad ing and deve lopment ofinfrastructure, provision of health andeducation services, capacity building andsocial mobilization. An innovative socialsafety net program has also been initiatedto target the ultra poor. The program hasbeen designed with the realization that thepoorest often get left behind in obtainingaccess to resources as they do not havenecessary skills or productive assets to beable to utilize microcredit efficiently. Theprogram is designed to provide training,income support and asset transfers topoorest households to help them graduateout of poverty.

PPAF interventions are encouraging thecommunities to invest in innovative schemesfor corporate management such as the

establishment of collective livestock farming,village banking and marketing enterprises.These ventures afford opportunities to ruralpoor for moving out of the vicious circleof poverty.

Reporting and DisclosureThe Management places high priority oncomplete, true and fair presentation andtimely issuance of periodic financial andnon-financial information to regulatoryauthorities, donors and other stakeholdersof the Company.

In addition to preparing financial statementsas per statutory requirements, the Companyalso prepares separate financial statementsfor different donors’ projects which areduly audited by its external auditors.

Board of DirectorsThe roles and responsibilities of the Boardof Directors are governed by TheMemorandum and Articles of Associationof the Company, the Companies Ordinance1984, the Code of Corporate Governanceand other applicable regulations. The Boardcomprises of one executive and nine Non-executive Directors, including the Chairmanand the Chief Executive/Managing Directoro f the Company w i th d i s t inc tresponsibilities. The Chairman representsthe Non-executive directorship of theCompany.

Functions of the Board include approvingoperational policies and procedures;


Directors’ Report

approving projects of different donors andsponsors; approving financial assistancefor partner organizations; reviewingquarterly progress; reviewing and approvingannual work plans; targets and budgets;approving the un-audited financialstatements; reviewing and approvingaudited financial statements alongwithDirectors’ and Auditors’ Reports prior totheir presentation to the General Body etc.The Board held an aggregate of fourmeetings during the year, which were alsoattended by the Chief Financial Officer/Company Secretary.

Board CommitteesThe Board places paramount importanceon good governance that has always beenviewed as the fundamental principle inenhancing the timeliness, accuracy,comprehensiveness and transparency offinancial and non financial information. Inorder to follow best practices, the Boardin January 2007, endorsed the Code ofCorporate Governance of listing regulationsby constituting Audit and Human Resourcecommittees.

Audit CommitteeThe Audit Committee comprises fourmembers including the Chairman from theNon-executive Directors of the Board. Thehead of Internal Audit unit acts as Secretary.The terms of reference of the AuditCommittee have been approved by theBoard. The Committee assists the Board inoverseeing Company’s financial control,

with particular emphasis on integrity ofinternal controls and financial reporting;qualification and independence ofCompany’s external auditors; andperformance of Company’s internal auditfunction and of its external auditors.

During the year, three meetings of theCommittee were held. The Committeereviewed system of internal controls, riskmanagement and audit process besidesrecommending for Board’s approval, annualwork plan of internal audit, appointmentof external auditors, annual work plans andbudgets for different donors’ projects,annual budget of the Company, un-auditedcondensed interim financial statementsalongwith Directors’ Reports, auditedfinancial statements alongwith Auditors’and Directors’ Reports, project specificaudited financial statements as per therequirements of the donors. The AuditCommittee meetings were also attendedby the Chief Financial Officer. TheCommittee also held separate meeting withthe external auditors.

Human Resource CommitteeThe Human Resource Committee comprisesthree members including the Chairmanfrom the Non-executive Directors of theBoard. The head of Human Resource unitacts as Secretary. The terms of reference ofthe Human Resource Committee have beenapproved by the Board. The Committeeassists the Board in overseeing theCompany’s human resource policies and


Directors’ Report

compliance with statutory and otherregulations and timely preparation of reliablefinancial and non-financial information forcirculation to the stakeholders.

Future OutlookThe Company aims to sustain itsperformance levels by consistently deliveringon commitments, and improving the qualityof its multifaceted interventions. In doingso, it will be guided by the requirementsof its stakeholders.

The Executive Directors of the World Bankon October 11, 2007 approved additionalfinancing of US$ 75 million for PPAF forthe Social Mobilization Project. The projectaims to mobilize about 5 million people in25 of the poorest districts of Pakistan andcreate viable community organizations overthe next three years thereby, laying thefoundation for the future expansion of PPAFpoverty reduction activities. It is estimatedthat over 5 million people in nearly onemillion households will be organized into50,000 community organizations. Manyof these will go on to take microfinanceloans and community productiveinfrastructure from the PPAF, through theexisting partner organization network, whileothers will federate into local serviceorganizations at the Union Councils level.A leadership cadre of 250,000 women andmen will be trained to develop local supportorganizations, for sustainable developmentbeyond the project period. Legal Agreementsfor this project were executed between

framework, with particular emphasis onensuring fair and transparent compensationpolicy; ensure continuous development andskill enhancement of employees.

During the year under review, the Committeeheld one meeting. The Committee reviewedand recommended for Board’s approval,annual increment for the employees, salaryadjustment and benefits for selectiveemployees and additional positions in theexisting establishment.

ManagementThe Company Management is supervisedby the Chief Executive/Managing Directorto implement policies and monitorprocedures adopted by the Board, carryout Board directives under delegatedauthorities to achieve objectives of theCompany and provide feed back on thestrategies formulated by the Board.

The Management ensures execution ofbusiness operations including adherenceto cardinal principles, appraising andmonitoring of partner organizations,recommending financing for partnerorganizations, preparation of annualbudgets/work plans and monitoringprogress thereof. Management is alsoresponsible for implementation of internalcontrol including segregation of duties,financial and accounting controls foraccuracy and completeness of accountingrecords, authorization, recording andaccurate processing of transactions,


Directors’ Report

Government of Pakistan, InternationalDevelopment Association/World Bank andPPAF. On completion of necessary formalities,the project was declared effective on February20, 2008.

The International Fund for AgriculturalDevelopment (IFAD) approved funding ofUS$ 35 million for the Programme forIncreasing Sustainable Microfinance(PRISM). The project focuses on provisionof microcredit to the poor on a selfsustaining basis and envisages developingaccess to banks/financial institutions forfuture growth and expansion. LegalAgreements for the Project were executedbetween Government of Pakistan, IFAD andPPAF. On completion of necessaryformalities, the project was declaredeffective on May 07, 2008.

As the Company has already committed100% of World Bank funds allocated underthe Second Project and all major deliverablesmet or exceeded, the Supervision Missionof the World Bank has recommended thatthere was clear justification for a WorldBank Third Project with PPAF. As part ofthis process, the Auditor General of Pakistan(AG), on the direction of the Ministry ofFinance, conducted a comprehensive reviewof the PPAF program, financial managementand procurement as well as desk/field reviewof three major partner organizations. TheAG team concluded that PPAF Project ismeeting its overall objectives in a satisfactorymanner and recommended that

Government should cont inue i tscommitment and support to the PPAF. Inview of the performance report of the AG,the Ministry of Finance had requested theWorld Bank to appraise PPAF for the ThirdProject.

The proposed Project will be designed toreduce poverty and empower the rural andurban poor by providing financial andphysical resources, information andopportunities for development. It will focusin particular on increased inclusion ofwomen in community organizations andtheir heightened participation in allcommunity and civic decision makingprocesses. This will be achieved through aparticipatory and integrated approach thatcombines building institutions of the poor,enhancing sustainable livelihoods throughskill enhancement, micro-credit, improvedaccess and linkages to markets; communitymanaged grants for social and productiveinfrastructure and the fostering of strongerlinks between organizations of the poorand local government bodies. The WorldBank would appraise PPAF for Third Projectby the end of year 2008.

AuditorsThe present auditors of the Company, M/sA. F. Ferguson and Company, CharteredAccountants, have completed theirassignment for the financial year endedJune 30, 2008 and shall retire at theconclusion of 12th Annual General Meeting.Being eligible, they have indicated their


willingness to continue in office as auditorsand the Board of Directors, on the proposalof the Audit Committee, recommends theirreappointment as auditors for the financialyear ending June 30, 2009.

ConclusionBeing a learning organization, PPAF hasconsciously striven to remain valid in itscontext by: (i) being demand driven; (ii)undertaking innovative measures to respondto needs of its clients (iii) remaining firm onprinciples and flexible on procedures; and(iv) by maintaining lean structures. PPAF hasbeen able to deepen the role of civil societyin economic development by partneringwith the right type of institutions, developingcapacities, building systems, creating a blendof professionalism and altruism with theobjective of strengthening society’s abilityto serve the poor on a long term basis.

ObituaryThe Board condoles the sad demise of Dr.A. R. Kemal, (Member, Board of Directorsand General Body), Dr. Mutawakkil Kazi,(Member, General Body), and Ms. ZariSarfraz, (Member, General Body) and praysto the ALMIGHTY ALLAH to bless thedeparted souls and grant them eternal peace- Ameen. The Board also acknowledges theirparticipation and invaluable contributiontowards the affairs of the Company.

AcknowledgementMay I express my gratitude for thecontinued support of my fellow Directors

whose consistent efforts and guidance indirecting the Company’s affairs contributedsignificantly towards achieving the financialand operational targets. The success wehave seen over the years is the product ofthe Board’s vision and commitmenttowards poverty alleviation. I look forwardto working in partnership with them tobenefit from their vision and valuedexperience which I am confident will goa long way in the future growth andprosperity of the Company.

The Board is grateful for the trust andfaith reposed by the Members of GeneralBody. Their support gives confidence andencouragement in achieving the targetsand strategies formulated by the Board.The Board would also like to commendthe partner organizations and theircommunities for their support whichcontributed to our present success.The Board would like to express itsprofound gratitude to the Government ofPakistan and World Bank whose faith andsupport over the years has nurtured amutually beneficial relationship which playsa pivotal role in the progress of theCompany. The Board also takes thisopportunity to thank its other donoragencies – International Fund forAgricultural Development; U.S. Departmentof Agriculture; KfW Development Bank(Germany); Committee EncouragingCorporate Philanthropy (USA); and U.S.Agency for International Development, fortheir support and guidance.

Directors’ Report


Directors’ Report

The Board is immensely proud of itsprofessional management team and all itsemployees. They have individually andcollectively, through a well coordinatedeffort, contributed to the outstandingresults achieved by the Company duringthe year. We are confident of our employees’abilities and hard work to attain ambitiouscorporate objectives.

With renewed dedication and commitment,PPAF will continue to be a responsive andagile institution fully aligned with thechanging dynamics of poverty alleviation.We will endeavor to ensure that this growthmomentum is sustained and expanded inthe years ahead.

Hussain DawoodAugust 05, 2008


Financial Highlights

2008 2007 2006 2005 2004 2003 2002

Outreach - Numbers (Cumulative)

Partner Organizations 74 70 68 56 42 38 29

Districts 117 111 108 97 95 84 60

Villages 31752 27,578 23,354 19,863 13,054 8,650 4,223

Loans (’000) 2,300 1,513 947 616 370 221 70

Villages 17,000 14,900 11,700 8,900 6,800 2,900 1,900

Disbursements - Rs. in million

Total Disbursements 16,697 15,806 6,246 4,064 2,436 1,777 1,189

Microcredit/enterprise development loans 9,075 6,228 3,705 3,106 1,462 1,314 655

Grants – Core Operations 1,951 1,654 1,372 958 974 463 5 3 4

Grants – Earthquake Rehabilitation & Reconstruction 5,671 7,924 1,169 - - - -

Balance Sheet - Rs. in million

Total assets 18,923 18,702 13,201 8,747 3,617 2,771 1,707

Microcredit/enterprise development loans receivable 7,982 5,642 3,996 2,598 1,081 1,201 6 9 5

Long term investment 1,000 1,000 800 900 700 405 505

Short term investment - spceific to projects 1,050 1,050 - - - - -

Equity and reserves 3,755 2,817 1,788 1,137 791 710 6 1 8

Long term loans 10,770 10,777 10,513 6,482 2,734 1,956 1,054

Operational Results - Rs. in million

Total income 1,314 1,255 763 305 222 230 145

General and admin expenses - core operations 200 159 108 87 71 63 43

General and admin expenses - rehabilitation & reconstruction 83 46 12 - - - -

Surplus before provisions for loan loss 947 965 572 152 133 149 94

Surplus after provisions for loan loss 802 914 501 196 81 92 59

Financial RatiosSurplus before loan loss 72% 77% 75% 50% 60% 65% 65%

Return on equity 25% 34% 32% 13% 17% 21% 15%

Repayment rate (microcredit) 100% 100% 100% 100% 100% 100% 100%

Total general and admin expenses/total disbursements 1.69 1.30% 1.92% 2.14% 2.91% 3.55% 3.62%

Income on loans/general and admin expenses on core operations 252% 205% 164% 101% 97% 89% 68%

Debt/equity 74:26 79 : 21 85 : 15 85 : 15 77 : 23 73 : 27 63 : 37

Current ratio 4:1 3 : 1 13 :1 7 : 1 31 : 1 17 : 1 26 : 1


Financial Statements

Acronyms - Pakistan Poverty Alleviation Fund · 2012-12-29 · Limited, Bank Al-Falah Limited,...

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