ISLAMABAD, March 26: The second phase of Pakistan Poverty Alleviation Fund (PPAF) was launched by Finance Minister Shaukat Aziz here on Friday with a credit of $238 million announced recently by the World Bank.

During this phase, he said at a meeting to mark the launching, it was envisaged to extend the reach of the PPAF programme to an additional five million people in Pakistan by enabling the poor and the disadvantaged to access the micro- credit, infrastructure, health, education, skill enhancement programmes and training.

Reiterating the government's commitment to the betterment of the people, the minister expressed the hope that the critics would review their opinion about its performance.

According to the details of phase-II described on behalf of PPAF, women as well as the poor people in drought-prone areas would especially be focused. The second project would follow the model of the first, channelling resources through partner organizations to the poor. Innovations over the initial design would be introduced in delivery of financial and non-financial services.

Although incorporated in February 1997, it was only in March 1998 that a permanent chief executive from the private sector was appointed by the board of directors, while approval for launching the project was received from the World Bank in June 1999.

The resource base of the PPAF initially comprised World Bank funding of $90 million, half of which was credit and the remaining in the shape of grant. In addition, the government provided an equity of $10 million which was to be invested in the government bonds and securities. The earnings from this investment were to meet operational costs of the PPAF establishment.

Providing micro-credit to the poor people with partner organizations operating as the middle man has been the main activity of PPAF programme. Thus while the number of partner organizations proliferated from only six to 37 during the first phase spanning the period 2001-03, the credit programme of PPAF expanded rapidly from Rs331 million to Rs2,337 million.

Correspondingly, the number of borrowed too ballooned from 40,000 at the end of June 2001 to 218,702 two years later. As the 'beneficiaries' were too poor to even harbour the idea of withholding repayment of loans irrespectively of the punitive rate of interest, the percentage of repayment to the partner organizations was approximately 98 per cent.

Under Community Physical Infrastructure programme, the number of projects for which credit was given to communities increased by 242 per cent to 6,524. Out of these, 39 per cent accounted for drinking water projects, while others pertained to irrigation, link roads, bridges/culverts, causeways, communication, sanitation and flood protection.

The intriguing part, however, is the justification for causing the country to incur a further debt burden of World Bank for phase-II when it is claimed that the net worth of PPAF had grown substantially in the first phase: from Rs559 million in June 2001 to Rs710 million in June 2003.

"Most remarkable of all," says the PPAF report, "PPAF had attained full operational sustainability by the end of June 2003."