pakistan poverty alleviation fund · auditors: ford rhodes sidat hyder & co. chartered...

Pakistan Poverty Alleviation Fund

AKIDA Al-Khalil Institutional Development AssociatesBME Benefit, Monitoring and EvaluationCED Credit and Enterprise DevelopmentCO Community OrganizationCPI Community Physical InfrastructureCSC Community Support ConcernCUP Community Uplift ProgrammeDAMEN Development Action for Mobilization and EmancipationDMPP Drought Mitigation Preparedness ProgramECPL Engro Chemicals Private LimitedEDF Enterprise Development FacilityEFL Engro Foods LtdERD Evaluation, Research and DevelopmentHID Human and Institutional DevelopmentHRDS Human Resource Development SocietyIA Internal AuditIAUP Integrated Area Development Program/ProjectIDA International Development AssociationNRSP National Rural Support ProgramOPD Organization for Participatory DevelopmentPO Partner OrganizationPPAF Pakistan Poverty Alleviation FundRCDS Rural Community Development SocietySAFWCO Sindh Agricultural and Forestry Workers Coordinating OrganizationSRSP Sindh Rural Support ProgramSSDP Social Sector Development ProgramSVDP Soon Valley Development ProgramSWWS Swabi Women Welfare SocietyTRDP Thardeep Rural Development programUSAID United States Agency for International DevelopmentUSDA United States Deparment for Agriculture

Acronyms

Contents

Boxes2.1 Engro-PPAF Milk Project 93.1 PPAF’s Integrated Area Upgrading Program 154.1 Community Health Centers 195.1 International Training Events (2004-2005) 236.1 Assessment of Outcomes/Impact of Community Training 266.2 Evaluation of Strategic Planning Process 276.3 Baseline Studies Initiated During FY 2005 277.1 “A Dream Realized” 31

Figures2.1 CED Financing Disbursed 62.2 Sectoral Distribution of CED Resources 63.1 CPI Financing Disbursed 123.2 Sectoral Distribution of CPI Projects 125.1 HID Financing Disbursed 2110.1 Financing Disbursed 3910.2 Share of Funds Disbursed 3910.3 Provincial Distribution of PPAF Resources 4010.4 Total Income 40

Chairman’s MessageChief Executive’s Statement

PPAF Overview ..................................................................2Credit and Enterprise Development .................................4Community Physical Infrastructure.................................10Health and Education......................................................16Human and Institutional Development..........................20Evaluation, Research and Development..........................24Media and Communication ............................................28Human Resource, Administration and Procurement .....32Finance and Accounts .....................................................34Directors’ Report .............................................................37Six Years Financial Summary...........................................45Financial Statements & Auditors’ Report.......................46

Board of Directors and General Body Members

Chairman - Board of Directors & General Body:

Hussain Dawood Chairman, The Dawood Group.

Members - Board of Directors:

Mueen Afzal Former Chairman, Union Bank Limited, PakistanNawid Ahsan Secretary, Ministry of Finance, Government of Pakistan.Maliha H Hussein Independent Consultant.Ahmed Jawad Additional Secretary, Economic Affairs Division, Government of Pakistan.Kaiser H Naseem Former President, Small and Medium Enterprise Bank.Syed Ayub Qutub Executive Director, Pakistan Institute of Environment Development & Research.Aijaz Ahmed Qureshi General Manager Transition, Sindh Irrigation & Drainage Authority.Fareeha Zafar Director, Society for the Advancement of Education.Kamal Hyat Chief Executive, Pakistan Poverty Alleviation Fund.

Members - General Body:

Rafiud Deen Ahmad Senior Partner, Orr, Dignam & Co.Rashid Bajwa Chief Executive Officer, National Rural Support Programme.Javed Burki Former Secretary, Government of Pakistan.Akmal Hussain Managing Director, Sayyed Enginners ltd.Ashraf Muhammad Hayat Joint Secretary, Ministry of Communication and Railways, Government of Pakistan.Ainullah Khan Kakarr Former Civil Servant.Shoaib Sultan Khan Chairman, National Rural Support Programme.Sono Khangharani Executive Director, Thardeep Rural Development ProgrammeHamayun Murad Managing Director, Orix Leasing Pakistan ltd.Aisha Ghaus Pasha Deputy Director, Social Policy and Development Center.Mutawakkil Qazi Member, Federal Public Service Commission.Muhammad Ismail Qureshi Secretary, Ministry of Food, Agriculture & Livestock, Government of Pakistan.Fazlullah Qureshi Member, National Electric Power Regulatory Authority.Sadiqa Salahuddin Executive Director, Indus Resource Center.Zari Sarfraz Industrialist/Agriculturist/Social Worker.M Suleman Shaikh Honorary Chief Executive, Sindh Rural Support Organization.Mohammad Tahseen Executive Director, South Asia Partnership.Jahangir Tareen Federal Minister for Industries & Productions & New Initiatives, Government of Pakistan.

All Members of Board of Directors except Kamal Hyat are also Members of General Body

Company Secretary: Iltifat Rasul KhanAuditors: Ford Rhodes Sidat Hyder & Co. Chartered AccountantsLegal Advisors: Azam Chaudhry Law AssociatesRegistered Office: House No. 1, Street 20

Sector F-7/2, Islamabad, Pakistan

Chairman’s MessageLast year my message ended on a note of caution.I was referring to the extraordinary expansionof PPAF interventions as compared to formeryears. I am pleased to say that the growth hasbeen wel l handled. Due di l igence ,professionalism, and a focus on impact continueto be the hallmarks of the programme.

In my view the mission is as much aboutincreasing incomes as it is about changingmindsets. This entails a renewed effort ofbuilding appropriate capacities within the partnerorganizations and their communities. Once thisis done, challenges of the future can besuccessfully negotiated.

The continued relationship with partnerorganizations on a transparent and equitable basisis the key to a long term sustainable relationship.I am pleased to see the progress that has been madein this regard, and would like to see a furtherstrengthening of these bonds in the coming years.

A significant achievement of the institution hasbeen the success in building the capacities ofsmaller partner organizations. As theseorganizations expand their operations, therewill be a viable network of civil societyorganizations serving vulnerable people andcommunities in the remotest parts of the country.As a result of the excellent track record of PPAF,there is now substantial support for PPAF fromall stakeholders. This is a good indicator of thecredibility that the institution has been able toachieve within a relatively short span of time. Itis now important for PPAF to share its

experiences and successes with a wider audienceat national and international levels.

The management team needs to be congratulatedfor their professional approach and dedicationin meeting targets set for the year ending June2005. I would like to thank the Board ofDirectors, and members of the General Bodyfor their valuable inputs and time. The supportreceived by the Government of Pakistan andWorld Bank has been exemplary, and I take thisopportunity to thank them for their facilitation.

We are now well poised to take the PPAFprogramme well beyond the confines oftraditional community driven projects. We hopeto achieve this by broadening and deepeningthe scope of interventions. For this to happenwe need to look at the bigger picture and providenecessary linkages between micro, mezzo, andmacro economies.

That is the way ahead, and although thechallenge is formidable I believe that throughteamwork, it is substantially achievable.

Hussain Dawood

This year's annual report is testimony to theevolution of the PPAF as an apex institutionof considerable note. The promising start of theearly years has been fully realized, and theprogress made in the current year has been mostgratifying and remarkable.

The steadfast belief in the inherent strength andpotential of rural communities to act as agentsof change remains the central philosophicalunderpinning of the program. Once this isunder-stood it is no longer possible to restrictthe activities and domain of vulnerable peoplewithin the narrow confines of traditional "micro"technologies. It becomes necessary for them tobe linked with mainstream "mezzo' and 'macro'development initiatives.

It is in this spirit that a few major initiatives,such as the integrated village developmentprojects, drought mitigation and preparednessplans, enterprise development facility for the"missing middle", and linkage of communitieswith a corporate sector entity for milk productionand marketing facility were developed. Thedetails of these innovative interventions arefound in this report.

A key factor in continuing success of the PPAFhas been the exemplary facilitative role playedby all the stakeholders. The Government of Pakistanneeds special mention in this respect. The WorldBank has been extraordinarily supportive. Mr.Hussain Dawood, Chairman of the PPAF, hasprovided an expansive vision, which is very ablybacked and fine tuned by members of the board.

PPAF’s image is a true reflection of the workcarried out by partner organizations. We areindebted to them for sharing their experiencesin the field, and carrying our joint message ofempowerment and hope to the remotest partsof the country. By all standards their contributionhas been outstanding.

The PPAF management team has been a pleasureto work with, and their contribution to thedevelopment of PPAF as a sustainable andcredible institution cannot be understated. Theirresolve, professional competency, and dedicationhave been a major factor in placing the PPAFas a lead institution for poverty alleviation inthe country.

I would also like to thank the many eminentpeople who have visited PPAF during the year.By listening to them we have gained much andthis has provided us added information andwisdom to do things better. We continue tolook forward to engaging with them and othersin the future.

It is clear that as long as we continue to listento the voices of the people we will continue to grow.

We will listen, and therefore we shall grow.

Kamal Hyat

Chief Executive’s Statement

he Pakistan Poverty AlleviationFund (PPAF) draws its rationalefrom the growing success and

viability of the participatory developmentparadigm, which seeks to counter povertyby mobilizing communities at grassrootslevel. As an apex institution, PPAF worksthrough partner organizations with theaim of strengthening their institutionalcapacities and expanding their outreach.In this way, it plays a pivotal intermediaryrole between donors and communities thatensures transparency, efficiency andsustainability.

In the five years of its operational life,PPAF has disbursed Rupees 10.12 billionto communities spread over 96 districts ofPakistan. The exponential increase in thevolume of funds disbursed through itspartner organizations ref lects bothorganizational efficiency and donorconfidence. At the same time, it calls forrigorous self-evaluation and maintenanceof systems for regular monitoring of PPAF’sgrowing activities.

While poverty alleviation strategies basedon microcredit delivery at grassroots levelremains the largest operating window ofPPAF, its collaborative efforts in realizingcommunity infrastructure projects andhuman resource development schemeshave also gained momentum over time.

In FY 2004-5, PPAF’s Credit and EnterpriseDevelopment unit recorded the largestgrowth in terms of funds disbursed. Theunit’s annual disbursement figure ofRupees 3106.36 million represented a riseof approximately 47 percent over the lastfinancial year. Similarly, Human andInstitutional Development unit recordeda 54 percent increase over the same period.On the other hand, Community andPhysical Infrastructure unit experienced adownturn in its yearly spending over thelast year due to unusually bad weatherconditions, particularly in the NorthernAreas, which hampered a large number ofinfrastructure schemes.

PPAF operations reflect an increasinglyequitable gender balance as manifest inthe growing number of female beneficiaries:women accounted for 36 percent of loandisbursements under CED and 40 percentof trainings held under HID in FY2004-5. Additionally, women comprisedan estimated 47 percent of all direct andindirect beneficiaries of PPAF’s CPIinterventions. By the end of the financialyear, 10 out of PPAF’s 56 partnero r g a n i z a t i o n s w e r e c a t e r i n g ,predominantly, to females.

The growth in PPAF’s outreach andresources has increased its sense ofresponsibility. Not only is PPAF mindful

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Pakistan Poverty Alleviation Fund — Annual Report 20052

PPAF Overview

PPAF Overview

of the burgeoning expectations of partnerorganiza t ions and par t ic ipat ingcommunities, it is also conscious of thegrowing trust reposed in it by donors. PPAFis continually refining its capacities andstructures to regularly monitor and evaluateits own performance, in addition to thatof its POs. Lessons learnt in this contextcontinue to feed the institutions’ learningcurve and reform its operational practices.The Benefit Monitoring and Evaluationsystem complements the tools and systemsbeing put in place by the Evaluation,Research and Development Unit. Whereasthese tools provide a feedback mechanismcritical to evaluation and monitoring ofPPAF interventions, they simultaneouslycontribute to the development of in-houseresearch capabilities. Together, suchprocesses will consolidate the successesachieved in previous years, while laying thefoundations of a better future. An aggressiveplan was put in place during the year underreview to ensure that this happens.

Simultaneously, plans for up-scaling PPAF’scapacity have been operationalized forbetter service delivery in the social sector.The initiation of PPAF’s Social SectorDevelopment unit, which will addressproblems of Health and Education, iscommensurate with institution’s growingawareness of the need to adopt a holisticapproach to pover ty al leviation.

Poverty alleviation and eradication inPakistan is a monumental task .Independent studies have concluded thatPPAF is making a difference. By end ofJune 2005, PPAF funded micro-creditschemes had reached around 616000borrowers in approximately 18500 villagesof the country. In the process, over 49000new community organizations have beenorganized as a direct result of PPAF fundsand support. Also, around 5700 physicalinfrastructure schemes have beencompleted with PPAF finances until June30, 2005.

The benefits of PPAF interventions havetouched around 8 million people, and itis evident from a study of the report thatthe forward momentum generated in FY2003-4 has contributed in many ways tothe afore-mentioned successes.

Pakistan Poverty Alleviation Fund — Annual Report 2005 3

PPAF Overview

he Credi t and Enterpr i seDevelopment unit has functionalresponsibility for managing the

microcredit component of PPAF. The unithas focused on identification of credibleand c apable POs through a transparentand rigorous process. The objective is toselect institutions which can, with supportand assistance of PPAF, become efficientintermediaries for cost effective and, in thelong run, sustainable delivery of financialservices to the poor.

As an apex national institution, PPAF hasconsistently maintained a diversified andhealthy portfolio with special considerationto gender and equitable distribution offunds across the country. Under thismandate, the CED unit provides fundingto legally established entities in non-governmental as well as private sector. Thequantum of financing to each organizationis determined by rationale of the proposalsubmitted, strength of its track record, aswell as absorption and debt service capacity.By far the most significant aspect offinancing has been development ofappropriate credit synergies and riskmanagement frameworks.

By end FY 2005, credit has been disbursedin urban and rural areas of 78 districtscovering all provinces, regions and areasof Pakistan through 37 par tnerorganizations.

The emphasis on performance basedlending played an important role in assuringquality of programs and outcomes. As aresult of these efforts, the credit programhas expanded from rupees 1,462 million in FY 2004 to rupees 3,106 million inFY 2005, indicating an increase of 112percent (figure 2.1).

Corresponding with this expansion ofcredit, the number of borrowers (duringthe year) has risen from 148,735 in FY2004 to 244,342 by the end of FY 2005indicating an increase of 64 percent. Theaverage loan size has also i ncreased torupees 13,000 from 9,307 rupees duringthe financial year.

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Credit and Enterprise Development

The number ofborrowers hasrisen from148,735 in FY2004 to 244,342by the end of FY2005 indicatingan increase of 64percent.



he Credit and Enterprise Developmentunit has functional responsibility formanaging the microcredit component ofPPAF. The unit has focused onidentification of credible and c apable POsthrough a transparent and rigorous process.The objective is to select institutions whichcan, with support and assistance of PPAF,become efficient intermediaries for costeffective and, in the long run, sustainabledelivery of financial services to the poor.

As an apex national institution, PPAF hasconsistently maintained a diversified andhealthy portfolio with special considerationto gender and equitable distribution offunds across the country. Under thismandate, the CED unit provides fundingto legally established entities in non-governmental as well as private sector. Thequantum of financing to each organizationis determined by rationale of the proposal

332

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(Fig. 2.1)CED Financing Disbursed,FY 2001, 2002, 2003, 2004 and 2005

(Rs. in million)

(Fig. 2.2)Sectoral Distribution of CED ResourcesFY 2001, 2002, 2003, 2004 and 2005

Agriculture/Cropping, 42%

EnterpriseCommerce andTrading, 18%

Livestock,40%



submitted, strength of its track record, aswell as absorption and debt service capacity.By far the most significant aspect offinancing has been development ofappropriate credit synergies and riskmanagement frameworks.

By end FY 2005, credit has been disbursedin urban and rural areas of 78 districtscovering all provinces, regions and areasof Pakistan through 37 par tnerorganizations.

The emphasis on performance basedlending played an important role inassuring quality of programs and outcomes.As a result of these efforts, the creditprogram has expanded from rupees 1,462million in FY 2004 to rupees 3,106million in FY 2005, indicating an increaseof 112 percent (figure 2.1).

Corresponding with this expansion ofcredit, the number of borrowers (duringthe year) has risen from 148,735 in FY2004 to 244,342 by the end of FY 2005indicating an increase of 64 percent. Theaverage loan size has also i ncreased torupees 13,000 from 9,307 rupees duringthe financial year.

A diversified portfolio of micro-credit andEnterprise Development Facility (EDF)lending was maintained in terms of sectoral

distribution. Based on borrowers financedduring FY 2005, income-generatingactivities in agriculture accounted forapproximately 42 percent of financing topartner organizations, followed by livestockand commerce and trading withapproximately 40 percent and 18 percentshare respectively. (Figure 2.2).

The unit continues to deliver onbringing enhanced professionalism andtransparency to POs, streamlining theapproval process and formulating;

Well-defined and coherent business/strategic plans for microcredit activitiesWell-structured implementation plansfor systematic expansion in outreachand coverageMutually accepted and approvedper formance parameter s anddeliverables

One of PPAF’s major contributions hasbeen to broaden the base of microcreditsector by investing in smaller organizationsthat meet PPAF’s eligibility criteria and arewilling to expand their outreach to remoteparts of the country. On this front, ourexperience over the year has been veryenriching and has enabled PPAF to capturecomplexities and diversity of the area inwhich it operates. This necessarily entailshigher investment in Institution Building

Forming alliancesand partnershipswith the corporatesector to reach outto the poor underthe broadermandate of PPAF.



and Human Resource Development.

The Enterprise Development Facility incollaboration with USAID has contributedtowards a remarkable credit off-takethrough four major participating partnerorganizations. The goals of the EDF project,in line with overall objectives of USAID’sEconomic Growth Strategy, are to:

Box 2.1 - Engro - PPAF Milk Project

Livestock development remains one of the most important income generationactivities in rural Pakistan. Realizing the need to forge effective public-privatepartnerships in the sector, PPAF took the crucial initiative of working with EngroChemical Pakistan Limited (ECPL), the Government of Pakistan, and threepartner organizations to increase income of poor through effective interventionsin milk production. A Memorandum of Understanding was signed in June 2005wherein ECPL agreed to establish milk collection centers for its new dairy plant.PPAF, in line with its traditional lines of credit, took on the task of providingcredit for livestock acquisition and technical assistance for better livestockmanagement. Three partner organizations — NRSP, SAFWCO, and TaraqeeFoundation — agreed to mobilize communities, identify potential beneficiariesand provide support services at the grassroots. The government of Pakistan isextending cooperation for successful implementation of the project.

Engro Food Ltd, ECPL’s subsidiary, has established milk collection centers andstarted collecting milk from villages in southern Punjab and Sindh, includingfive villages where PPAF POs are actively working. EFL is in the process of settingup a milk powder and milk packaging plant in Sukkur (Sindh). Production isexpected to commence in February 2006. The Engro-PPAF project seeks to ensuresustainable livelihoods, through securing continuous demand at a competitiveprice, for communities dependent on livestock. Further, it will train communitiesin better livestock management techniques and educate them in introducingquality controls. In the event, the project will contribute to development of thedairy industry in Pakistan and establish better contacts between communitiesand private sector.




Community Physical Infrastructure

h e C o m m u n i t y P hy s i c a lInfrastructure unit works throughcommunity based organizations to

ensure development of physicalinfrastructure at the grassroots level. Thepoor, living both in urban and ruralcommunities, qualify for this support. Thesupport is not only restricted to providingfunds, but also includes technicalsupervision of infrastructure projects. Thecore thrust of activity is to provide potablewater to communities, improve localcommunication networks, provide irrigationfacilities, and conserve land for cultivation,while adequately safeguarding theenvironment.

During the financial year, CPI unit organizeda workshop to Launch USDA fundedPoverty Alleviation Program held at theauditorium of National Library, Islamabadon March 30, 2005. Dr. Salman Shah,Advisor to Prime Minister for Finance,Revenue and Economic Affairs was the chiefguest of the Launch. PPAF has received firsttranch of Rupees 400 million out of a totalof Rupees 1500 million receivable over thenext four years. The program objective is toalleviate poverty, reduce vulnerability andimprove food security through sustainableagriculture development within a period of10 years through;

Integrated water efficient irrigationsystems and agricultural enhancement

mechanismsEffective management of successivedrought cyclesNatural resource conservation andefficient food processing throughhydro-power generation

Under this program, CPI unit has signedagreements with 10 selected partnerorganizations during this reporting yearand planned to implement 7 DroughtMitigation and Preparedness Projects, 52projects under Technological InnovationsProgram, and 125 Integrated WaterEfficient Irrigation Projects over a periodof two years. These projects are envisionedto benefit around 380,000 individuals inapproximately 560 villages of Pakistan.

The community physical infrastructureunit has disbursed Rupees 575.38 millionout of Rupees 850 million of targets

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approved by the Board of Directors. Thetotal number of projects initiated during2004-2005 was 2,162. Broadly, the projectswere classified into Drinking Water Supply,Link Roads, Bridges, Culverts, Irrigation,Sanitation and others (flood protectiondams, causeways and retaining walls).Distribution of projects by type, showedthat 43 percent projects were of drinkingwater supply, 29 percent was to improvelocal irrigation facilities, 14 percent projectswere to provide sanitation facilities, 13percent projects to improve local levelcommunication network and 1 percent fellin other categories, including those relatedto the generation of hydroelectric powerand its distribution. (Figure 3.2)

The disbursements rose sharply in FY 2004as PPAF-I was closing and POs were advisedto complete disbursement targets as pertheir implementation plans. Thedisbursements naturally dropped in FY2005 as a number of new projects wereinitiated as part of PPAF-II. Also theperformance of CPI unit was hamperedduring this financial year due to limitedavailability of finances resulting from lateoperationalisation of PPAF phase II, aswell as from unusually bad weatherconditions, especially in the NorthernAreas, preventing the timely completionof a number of CPI schemes. (fig. 3.3).

(Fig. 3.1)CPI Financing Disbursed,FY 2001, 2002, 2003, 2004 and 2005

(Fig. 3.2)Sectoral Distribution of CPI ProjectsFY 2001 - FY 2005

Communication, 13%

Drinking water supply,43%

Others (Landconversation works etc.),

1%

Land/flood protection andsanitation, 14%

Irrigation, link roads,bridges/culverts,causeways, 29%

(Rs. in million)

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During the financial year, four IAUPs wereinitiated with two partner organizations -CUP and HRDS - with a package includingcommunity physical infrastructure,drinking water supply, household latrines,environmentally safe wastewater disposaland street surfacing. These pave the wayfor interventions in microcredit, healthand education. IAUP projects have beeninitiated in four different villages i.e. Seriand Sereeh located near Islamabad CapitalTerritory and two projects in Dera GhaziKhan. More than 70 percent of the workhas been completed. (Box 3.1).

The 1997-2002 drought swept throughPakistan, severely affecting almost 50percent of its districts. To address thiscalamity, PPAF has launched a nationwideprogram of drought mitigation andpreparedness, focusing on the less endowedand poverty stricken regions of the country.

PPAF has launcheda nationwide programof drought mitigationand preparednessfocussing on the lessendowed and povertystricken regions of thecountry.

Although not meeting its disbursementtargets for reasons explained above, theCPI unit surpassed most of its yearlyoutreach targets. It comfortably met thetarget of initiating programmes in ninenew districts. Additionally, the unitovershot its community group formationtargets and beneficiary households’ annualtargets by 21 percent and 23 percentrespectively. However, project completiontargets were under achieved by 32 percent.

In order to address the issue of poverty,PPAF successfully completed as a pilotproject, an Integrated Area DevelopmentProject (IAUP) in Dhoke Tabarak Shaheed,located about 25 Km from Islamabad. TheProject has generated a significantdemonstration effect with an ever-increasingdemand of i ts repl icat ion fromcommunities. To address this demand,over 120 integrated projects have beenapproved by PPAF Board of Directors. Theapproved projects are envisioned to beimplemented during the next three years.

A one day consultative/strategy formulationworkshop was organized with 12 majorPOs from all over Pakistan to share theobjectives, scope and size of IAUP. Theworkshop concluded with a comprehensivestrategy paper covering all aspects rangingfrom distribution of projects among POsto their regional / provincial distribution.



Two DMPPs were initiated in the lastfinancial year, one in Dadu district in Sindhand the other in Khushab district in Punjab.Twenty-four sub-projects of DMPP,Katcho-Pilot Project Dadu and 20 sub-projects pertaining to DMPP-Soon Valley,Khushab, have been completed during thisfinancial year.



Box 3.1 - PPAF’s Integrated Area Upgrading Program

The IAUP strategy paper envisions achieving ‘accelerated poverty reduction andsustainable development through community participation involving concentratedinvestment at growth centers in lagging areas.’ In pursuit of this goal, the paperoutlines five fundamental objectives of IAUP:

To achieve synergies of investmentTo decelerate migration from urban to rural areasTo increase access to opportunities for rural poorTo lift economy of the rural peripheryTo improve quality of life of low income communities

The Integrated Area Upgrading Program (IAUP) is a multi-intervention strategycatering to a variety of basic needs of communities that have little or no accessto health and education facilities, microcredit, and basic infrastructure. A typicalIAUP incorporates safe drinking water supply, low cost sanitation, wastewatertreatment and safe disposal, street surfacing and lighting, health care andeducational facilities, solid waste management, and microfinance. Usually, PPAFfinances most of these interventions with partner organizations and communitiesgenerating funds for those not covered by the former.

Following the success of Dhok Tabarak Shaheed Pilot project, over 120 similarintegrated projects have been approved under PPAF-11. These constitute 25percent of CPI’s portfolio and approximately 69 percent of the size of its newinitiatives program. A total of 12 POs selected on the basis of their experience,outreach, capability, and demonstrated interest in integrated area upgrading, willguide the IAUP in the initial stage, while another 6 will be inducted over a twoyear period.


Health and Education

he Social Sector DevelopmentProgram (SSDP) has been initiatedas a separate unit to ensure quality

service delivery in the important spheresof Education and Health. The main taskof the unit will be to build the capacitiesof partner organizations, enabling them toprovide quality health and educationalservices at community level. The socialsector interventions will complement theongoing work of PPAF with its partnerorganizations and add a crucial dimensionin the fight against poverty.

Years of action research in Europe, Latin-America and South-East-Asia has provedthat unless and until communities areempowered through equitable access toquality education and health and involveddemocratically in their well-being, truechange at the community level will nothappen. At the same time, health andeducation interventions need to besupplemented by other developmentinterventions, like microcredit andcommunity infrastructure, for geometricgains. The importance and inverselyproportional relationship of health andeducation to poverty cannot be over-emphasized and much has beendocumented on this particular area of work.

In PPAF, Health and Education is arelatively new unit. This intervention was

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not initially included in the program design.However, during the first phase of PPAF,social sector development was identifiedand recognized as a prime need of thecommunity for effective poverty alleviation.This intervention was designed after anintensive consultative process with allstakeholders.

In 2003, a consultative workshop was heldwith partner organizations to review thecurrent status of development activitiesand identify gaps in service provision. Inlight of recommendations of theconsultative workshop, ERD unitdeveloped a concept note on establishinga health and education unit for addressingpoverty in a holistic manner. After that,one consultant each for Health andEducation, under supervision of the ERDunit, was hired to review the state of health



A separate Healthand Education unitfor overseeing SSDPwas established inearly 2005 formanaging SSDPinterventions with afocus on qualityprimary health careand formal primaryeducation.

and education intervention by selectedPPAF partner organizations. This wasfollowed by detailed information collectionand scope of interventions in health andeducation from 47 POs who had experiencein these areas. Based on this data, a totalof 12 (5 for education and 7 for health)POs were short-listed for consideration tolaunch the pilot SSDP. A separate Healthand Education unit for overseeing SSDPwas established in early 2005 for managingSSDP interventions with a focus on qualityprimary health care and formal primaryeducation.

Now an independent Health andEducation unit is fully operational withthe strength of one General Manager andtwo Management Executives. The unit hasrecently signed agreements with 7 POs forinterventions in the field of health andeducation. (Box 4.1).

The unit plans to work towards developinga clearly stated, realistic and doable healthand education program by first quarter ofthe next calendar year i.e. 2006. To respondto increasing work at the community leveland human resources required at POs andPPAF, the unit also envisages adequateresponsive staffing and capacity building.



Box 4.1 - Community Health Centers

Through SAWFCO, PPAF has facilitated the establishment of two CommunityHealth Centres (CHC) in district Sanghar for providing basic curative servicesto communities.

Both CHC’s have been equipped with modern facilities, e.g. generators, oxygencylinders, refrigerators, nabulizers, auto-claves, glucometers, centrifuge machinesand laboratories for basic tests. In terms of professional manpower, each CHCcomprises of a MBBS doctor, LHV for maternity cases, a qualified pharmacistand other staff.

In addition to providing quality health services to 25000 residents of Mao Chora,CHC situated in the village caters to the needs of another 15000 people in 41adjoining villages. Similarly, the CHC in Village Sher Khan Leghari is alsoproviding services to 25 additional villages within a 4 kilometre radius.The communities have benefited in terms of better, timely and more accessiblehealth services, where none existed before. Also, Village volunteers are involvedin awareness campaigns on issues like HIV/AIDS etc., where such issues hadlong been considered taboo and neglected to the detriment of overall good ofthe community.

Overtime the CHC’s would become self sufficient through generating their ownfunds by introducing a nominal fee structure. This would also facilitate them inexpanding their services. As a pioneer, PPAF takes strength from the fact thatmore and more NGO’s have started thinking in terms of introducing similarfacilities in Pakistan’s backward districts.


Human and Institutional Development

he Human and InstitutionalDevelopment (HID) unit isresponsible for building capacities

of PPAF partner organizations to managetheir microcredit and community physicalinfrastructure projects effectively.Recognizing the catalytic role of individualsand institutions, the focus of the unit ison professional development of humanresources and institutional strengthening.

In support of credit and/ or infrastructure,financial and non-financial services areprovided to support incremental expansionin outreach, with a view to attaining long-term sustainability in the provision andmanagement of poverty related services.

During this financial year, the HID unitattained certification and became the firstoutfit in non-profit sector to be certifiedunder ISO 9001:2000 in December 2004.This achievement will help the unit tobring in standardization and improvedocumentation as well as focus clientsatisfaction services to InternationalStandards, and assurance of provision abouttheir quality, safety and reliability.

In comparison to the previous year,disbursements of the unit increased fromRupees 207 million to rupees 382.36million by the end of FY 2005. The unit,in support to micro credit and communityphysical infrastructure, increased itsfinancial assistance to 230 field offices of

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POs as compared to 209 offices at the endof FY 2004. Similarly, the number oftraining beneficiaries increased from 31,509to 33,881 (community training) and 1,245to 1,542 (staff training) in the reportingyear with 40 percent female participation.

For streamlining effective implementationof plans, the unit has been conductingstrategic planning exercises with POs sinceFY 2002. Results and outcomes made theprocess of strategic planning exercisesmandatory for appraisal as well as renewalof partnerships with POs. Strategicplanning exercises of 35 POs wereconducted during FY 2005.

With the objective of enhancing capacityof PPAF and PO staff, HID unit undertookdifferent training programmes inpartnership with renowned institutionsl ike Management Deve lopmentFoundation (MDF) - South Asia,Consultative Group of Alleviation of

(Fig. 5.1)HID Financing Disbursed,FY 2001, 2002, 2003, 2004 and 2005

(Rs. in million)

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400

FY 2001 FY 2002 FY 2003 FY 2004 FY 2005

Poverty-Washington, USA and Schuitema-South Africa to Pakistan. In collaborationwith these institutions, the HID unitorganized 4 training events in fields ofLeadership Care and Growth, InstitutionalD e v e l o p m e n t / O r g a n i z a t i o n a lStrengthening, Planning and Managementand Product Development. (Box 5.1).

Apart from organizing trainings for PPAFpar tner organizations’ staf f andcommunities, HID also organized aninternship program for fresh graduates,providing them with an invaluable learningand training opportunity by way ofattachment with different POs. Duringthis financial year, the HID unit concludedthe third and fourth batch of internshipswith participation of 14 fresh graduates,while the fifth one is in process.

However, the trained interns were notsatisfying extended need of expanding POsas turn over was high and trainedprofessional staff was not readily available.To address this problem a “Junior ProfessionalProgram” was launched. Under thisprogram, local fresh university graduateswere trained for POs. So far, personalitytests and interviews have been conductedfor RCDS, DAMEN, CSC and SAFWCO.Training will be carried out in July 2005.

Besides these activities, the HID unit playeda key role in organizing an InternationalConference on Microfinance -“Innovating

and Mainstreaming”- held on December13-14, 2004 at the Convention Center,Islamabad. The conference was organizedin connection with celebrating 2005 as UNInternational Year of Micro Credit. Theconference was attended by representativesfrom Bangladesh, India, Kenya, Bolivia,Sri Lanka, Nepal, Switzerland, Canada,Indonesia, Philippine, United States ofAmerica, United Arab Emirates and UnitedKingdom. Renowned international andnational microfinance practitioners suchas Prof. Muhammad Younus (ManagingDirector, Grameen Bank, Bangladesh), Dr.Salehuddin (Managing Director, PKSF),W.A. Wijewardena (Deputy Governor,Bank of Sri Lanka), Dr. D.S.K. Rao(Regional Consultant for Asia Pacific, MicroCredit Summit Campaign), Jayshree Vyas(Managing Director, SEWA Bank), andJim Roth (Chief Technical Advisor, ILO-GTZ Micro) were the speakers.

The HID unit playeda key role inorganizing andinternationalconference onMicrofinance“Innovating andMainstreaming.”





Box 5.1 - International Training Events (2004-2005)

The HID unit of PPAF organizes several training programs for developmentprofessionals in the country. In this regard linkages have been established withleading training institutions of the world to bring home international knowledgeand best practices.

Trainings are designed for PPAF and partner organizations’ staff in various fieldsrelated to microfinance, institutional development and risk mitigation. Thesetrainings have made strong contribution in enhancing skills of participants andto make them familiar with international perspectives.

Consultative Group to Assist the Poor (CGAP):An institute of the World Bank, CGAP provides training and assistance toprofessionals related to the field of microfinance. During FY 2004-2005, fourtraining courses were arranged in collaboration with CGAP.

A five day workshop on Operation Risk ManagementTraining on Product DevelopmentA four day workshop on Operational Risk ManagementFive day workshop on Product Development or Operation Risk management

Management for Development Foundation (MDF)This is a renowned international institute which contributes effectively in projectmanagement skills for the development sector. In the year 2004-2005, PPAF invitedtrainers from MDF to impart three trainings:

An eleven day training on Project Planning and ManagementWorkshop on Project Planning and ManagementWorkshop in Institutional Development/Organizational Strengthening

Leadership TrainingAn institution’s success depends heavily on the performance of its professional,their performance levels can be enhanced by providing the right kind of guidanceand mentoring support. This was discussed in details, in two training workshops,“Leadership-Care and Growth Model”, facilitated by internationally renownedtrainer Mr. Etsko Schuitema.

uring the year, Monitoring,Evaluation and Research unit wasrestructured into Evaluation,

Research and Development unit. Thisinitiative is a ref lection of PPAF’scommitment to establish a meaningful,research-based operation for providing realtime accountability for program and policydirection. A senior economist is hired asadvisor to the unit.

The main strategic objectives were chalkedout in following terms;

Establish poverty focused, results based,evaluative mechanisms, tools andstandardsDevelop in-house research andoutreach competencies includingoutsourcing to credible national andinternational institutions

During FY 2004-2005, the ERD unitprepared and circulated Quarterly ProgressReports to donors such as the World Bankand USAID. The quarterly progress reportswere also circulated to the Board ofDirectors, and were regularly discussed atboard meetings for assessing the progressbeing made for achieving the yearly targetsset by the Board of Directors.

During the period under review, ERD teammembers participated in 14 strategicplanning and review exercises organizedby PPAF HID unit. During these visits,monitoring and evaluation systems of theorganizations were thoroughly reviewed

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and in light of these findings, the ERDunit recommended to establish independentMonitoring and Evaluation setups in two partnerorganizations i.e. SAFWCO and SWWS.

The ERD unit also organized a series ofregional trainings for all partnerorganization to strengthen their Monitoringand Evaluation systems. An outsideconsultant, well versed in monitoring andevaluation methodologies, was hired toconduct three regional trainings ontechniques and tools of baseline survey,through qualitative and quantitativeapproaches. Fifty-five Monitoring andEvaluation focal persons, from PPAFpartner organizations, participated in thesetrainings held at Karachi, Peshawar andLahore.

ERD unit handled all the correspondenceregarding “Expression of Interests” receivedfrom civil society organizations from variousparts of the country. During the yearapplications of 184 organizations were


Evaluation, Research and Development

ERD Unit is areflection of PPAF’scommitment toestablish a meaningfulresearch baseoperation for providingreal timeaccountability forprogram and policydirection.

received for partnership consideration.Impact assessment and evaluation of on-going PPAF interventions remains a vitalcomponent of ERD activities. Such studiesare usually outsourced for seekingindependent opinion. Two major studiesinvolving microcredit and physicalinfrastructure projects of the two largestrural support programs are in progress

Community trainingscarried out by POsthrough PPAF supportin fields ofmanagemententerprise developmentand vocational skillswere evaluated.

Box 6.1 - Assessment of Outcomes/Impact of Community Training

SEMIOTICS, an independent consulting firm, carried out the assessment ofcommunity trainings imparted by POs to target communities. Three sets ofquestionnaires were used to gather responses on three broad training categories i.e.management, enterprise development and vocational skills. Altogether 925 respondentsacross Pakistan were surveyed. Besides, 76 case studies and case-lets were incorporatedinto the study. Another 74 counterfactuals were also included as an additional levelagainst which to assess change in the lives of target communities as a result of PPAFsupported trainings in the given period.

In terms of gender, sample for the study comprised of 400 male and 525 femalerespondents. Of the 525 female respondents, 126 were female-headed households.In terms of training, Enterprise/ Skills/Vocational training had a much largerproportion of female respondents (285 females, 50 males). In case of Natural ResourceManagement, male respondents far exceeded female respondents (51 females, 99males). In case of Management, male respondents exceeded female respondents bya small margin (189 females, 211 males).

According to broad findings of the study, training could play an important role inenhancing the earning capacity of the trainee. The three main recommendations ofthe study are as follows:

Trainings need to keep pace with fast changing demands of the market andshould be periodically reviewed.There is a need to develop strong linkage between skills and marketing in orderto maximize outcome.There should be standardized modules and manuals for each category ofcommunity training.

The findings will be shared with partners for guidance and lesson learning.



under World Bank supervision. In addition,community trainings carried out by POs throughPPAF support in fields of management,enterprise development and vocational skillswere also evaluated. Similarly, the StrategicPlanning Process, conducted by PPAF teamwith its partners, also underwent evaluation.Both studies were completed in FY 2005. Theevaluation of training programs sought to assess



Box 6.2 - Evaluation of Strategic Planning Process

AKIDA, an independent consultant firm, carried out an evaluation of theStrategic Planning Process conducted by HID during 2001-2002 with the followingselected POs:

Thardeep Rural Development Program (TRDP), TharparkarOrganization for Participatory Development (OPD), GujranwalaDevelopment Action for Mobilization and Emancipation (DAMEN), LahoreTaraquee Foundation, QuettaSarhad Rural Support Program (SRSP), PeshawarThe objective of this study was to have independent access to the views of POs

about usefulness of SPP. The study revealed that such exercises benefited POs byenabling them to carry out a thorough organizational analysis on a periodic basis.The major recommendation of the study is to prepare an SPP facilitation manualto bring uniformity at the POs level.

Box 6.3 - Baseline Studies Initiated During FY 2005

ConsultanciesBaseline Study of PPAF microcreditFinancing (Follow on for Assessment ofoutcomes)Start Date: August 2004Completion Date: October 2005

Baseline study for PPAF’s EnterpriseDevelopment FacilityStart Date: August 2004Completion Date: February 2006

PurposeThe purpose of the study was to conducta short term assessment of outcomes ofPPAF microcredit financing atindividual/household level.The objectives of the assessment were toascertain the causality between PPAF micro-credit loans and increased economic welfareof the recipients.The purpose is to collect baseline data forassessing the short term/medium termimpact of PPAF enterprise developmentfacility at individual/household level.

Similarly, an evaluation of strategicplanning exercises conducted by HIDduring the first PPAF project wasoutsourced. The objective of this study wasto have independent access to the views ofPOs about usefulness of the process. (Box

6.2). Additionally baseline studies for PPAFmicrocredit and enterprise developmentfacilities which had been outsourced toGallup in August 2004 were completed inOctober 2005 and February 2006respectively. (Box 6.3).

ocial change is by no means an easytask to achieve. Successful socialchange requires dexterity, raising

consciousness and mobilizing publicopinion. Keeping in mind these very issues,PPAF has endeavored to integrate thisaspect of its work with its otherinterventions. In recognition of the needfor mainstreaming these activities, adedicated Media and Communication unitwas established during FY 2001. Reportingto the CEO, the unit focuses on effectiveutilization of print and electronic mediafor dissemination of information on natureand role of PPAF and poverty related issues.

During the financial year 2004-2005, theunit underwent some restructuring and aGeneral Manager was brought on boardto oversee its functions. The range andscope of PPAF interventions has increasedmanifold over the past four years andemphasis is now being placed on buildingpublic image of PPAF. Regular coverageand exposure of PPAF in electronic andprint media has been ensured.

With a view to showcase the achievementsof PPAF beneficiaries as well as theirconstraints, some interesting case studieswere published this year. These studies areconducted with the purpose of raisinglevel of consciousness, and makingstakeholders aware about development

S

activities in Pakistan and as to how theseare empowering vulnerable communitiesand helping them to improve their lives.(Box 7.1).

Another regular activity of the media unitis printing of quarterly newsletter‘Povertyline’, which is intended to serve asa vehicle for exchange of ideas. As an apexinstitution working with civil societypartners for alleviation of poverty, PPAFdisseminates regular updates on itsoperational activities and invites feedback.“Povertyline” is visualized as a forum forthe conduct of informed debate anddiscussion to qualitatively raise the levelof our understanding of issues and possiblesolutions.

A series of Interactive Theater performanceswere organized at rural and urban locationsin all the provinces, with collaboration of

Successful socialchange requiresdexterity, raisingconsciousness andmobilizing publicopinion, which is notas simple as it mayseem.


Media and Communication



PPAF’s partner organizations. Drawingupon amateur talent from within thecommunities, these performances exploreintra-household and intra-communityrelationships and situations. Gender relatedthemes such as mobility, education,economic opportunity, violence and socialstatus were being addressed, with activeparticipation of women. The interactivetheater activity has gained momentumwithin partner organizations over the year,and many of them are conducting thetheatre activity without PPAF assistance.The partner organizations are using theateractivity, not only as a tool for socialmobilization but also to create awarenesson various issues like sanitation, healthand education.

PPAF worked with a specialist privateproduction house to document outcomesand capture diversity and depth of PPAFinterventions and operations in an effectivemanner. The documentary film thusproduced –“A Dream Realized”- highlightsthe many facets of PPAF's developmentinitiatives. It has attempted to visuallycapture images of individuals who havemade a difference to their lives withassistance from PPAF and its partnerorganizations. The film has been shot onlocation in all provinces and regions ofPakistan. It also vividly cataloguesgeographical and ecological diversity of the

country. After intensive post production,this film is ready for distribution. (Box7.1).

Media and Communication has also playeda key role in organizing two major events:

An international conference onmicrofinance titled “Innovating andMainstreaming” andThe Launching Ceremony of a nation-wide drought mitigation andpreparedness program financed byUSDA.

The challenging task of the unit in thecoming years will be to proactively engagewith all other units of PPAF and ensuringthat important developments and eventsare disseminated on national andinternational fora.

The documentary film“A Dream Realized”highlights the manyfacets of PPAF’sdevelopmentinitiatives.



Box 7.1 - “A Dream Realized”PPAF media team worked closely with a specialist private production companyand helped to conceptualized a film with main focus on capturing the lives ofcommunities at grassroot level, and make their voices be heard on various issuesand situations. The main highlight of the documentary is that it lends a voiceto the beneficiaries.

The documentary was filmed on locations in all four provinces of Pakistan sothat diversity of the cultural landscape could also be recorded along with theimpact that various PPAF interventions like microcredit, physical infrastructureand capacity building, have made on lives of individuals and communities atlarge.

he Human Resource andAdministration unit is primarilyresponsible for taking care of PPAF’s

human capital and developing their potentialto the highest levels. In order to achieve theabove, the HR unit is implementing effectiverecruitments so that HR base of PPAF cancarry out its objectives.

The unit is also responsible for arrangingtrainings to enhance the capabilities andcapacities of PPAF management teamaccording to requirements. During the yearsixteen executives of PPAF working atdifferent levels attended training coursesin related areas of their functions such asManagement, Monitoring and Evaluation,Finance and Accounts, Training ofTrainers, Development communicationetc. at national training institutions likePakistan Institute of Management, BritishCouncil, Lahore University of ManagementSciences, NGO Resource Centre, PakistanInstitute of Development Economics, etc.

In order to increase efficiency andtransparency in procurement of goods andservices, the unit strictly follows PPAF’srequirement and donor guidelines as perestablished procurement procedures. Hiringof outsource services is an importantfunction of the unit. This is done on needbasis for time-bound activities with thepurpose of getting indepth views regardingspecific activities like baseline or impact

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Human Resource and Administration

assessments. During the year, 28consultancy contracts and 61 cases of goods’procurements were processed by the unit.The nature of these consultancies includedoutcome/impact assessments, baselinestudies and Knowledge, Attitude andPractices (KAP) etc. Apart form this, theunit is also responsible to ensure smoothfunctioning of procurements at POs levelby providing guidance, training andmonitoring of their procurementprocedures. Approximately 40 POs wereprovided with guidance by the HR Unitin areas of national competitive bidding,national shopping and other generalprocurement issues.

In addition to the above, the unit alsolooks after day-to-day administrative workof the institution, including housekeeping, intra-city transport, boarding /lodging arrangements for field visits, logisticarrangements for internal and externalmeetings etc.


Finance and Accounts

s a custodian of public funds, PPAFis conscious of the need forprudence and appropriate control

in the management of finances. Inpursuance of this objective, the Financeand Accounts (F&A) unit has been assignedresponsibility for executing and recordingall financial transactions in a systematicand transparent manner. The unit ensurescompliance with regulations of Securitiesand Exchange Commission of Pakistanand the covenants stipulated in theAgreements with the Government ofPakistan (GoP) and donors.

The F&A unit works closely with otheroperational and support units of PPAF inorder to ensure adherence to due processand facilitate funding. The activities of theunit are carried out in an automatedcomputerized environment throughcustomized software dedicated to PPAFrequirements. A comprehensive manualfor financial management has beendeveloped which governs work processesof the unit. Books of accounts are beingkept in accordance with the statutoryrequirements and agreements with GoPand donors. The records are subject toboth internal and external audit as well asreview of World Bank Mission.

The unit generates internal and externalreports for management, donors andstakeholders. The relevant internal reports

A are submitted to Chief Executive on amonthly basis to facilitate timely decisionson the important aspects of PPAFoperations. External reports to World Bankand stakeholders include quarterly, halfyearly and nine monthly un-auditedaccounts, annual audited accounts onstatutory and World Bank formats,quarterly Financial Monitoring Reports(FMRs) and Ratio Analysis Statement.

During the FY 2005, operations of PPAFwere audited by external auditors Messer’sFord Rhodes Sidat Hyder and Co.,Chartered Accountants. The externalauditors furnished unqualified opinionsthat financial affairs of the company werebeing conducted in accordance withapproved accounting standards andrequirements of Companies Ordinance1984. Maintenance of books and recordingof entries was found to be in order. Theseopinions were based on the inspection andreview of records of the company and thefunds released to partner organizations.Field visits form an integral part of theaudit exercise.

Similarly, withdrawal applicationssubmitted to the World Bank were foundto be eligible for reimbursement orreplenishment. Information and datasubmitted were also in compliance withdisclosure requirements and formats as


Finance and Accounts

well as International Accounting Standards.Disbursements to PPAF under the secondproject were made on the basis of FMRs.

In February 2005, the World Bankconducted Supervision Mission of PPAFand noted that financial managementarrangements for the project continue tobe satisfactory; effective controls were inplace; the project was being disbursed onthe basis of FMRs; and the audited financialstatements and quarterly FMRs weresubmitted to the World Bank in time.

The unit looks after the corporate affairsof PPAF. The Head of the unit also acts asCompany Secretary and ensures fullcompliance with the mandatory secretarialresponsibilities obligations as envisaged bythe Companies Ordinance, 1984. Adequaterecords evidencing statutory meetings andother formal requirements are beingmaintained while reports to the Securitiesand Exchange Commission of Pakistan aresubmitted well in time.

The F&A unit also assists operational unitsin financial evaluation of POs. Further, itplays an active part in monitoring thefinancial flows to POs and ensures thatthey are observing the legal covenants.

Reporting directly to the Chief Executive,the internal audit function provides an

independent channel for monitoring ofactivities. They are guided in their work byan approved “Internal Audit Manual”which provides guidelines for their rangeof activity.

he Board of Directors of PakistanPoverty Alleviation Fund is pleasedto present the fifth Annual Report

along with the audited financial statementsof the Company for the year ended June30, 2005.

The first US$ 90 million InternationalDevelopment Association/World Bank(IDA/WB) project concluded on December31, 2004. PPAF achieved and surpassed allthe major targets and forecasts set atappraisal. The World Bank Mission thatvisited PPAF in January 2005 observed thefollowing with respect to the first project:

“The successful completion of the firstproject was a major milestone inGovernment/PPAF/World Bank effortsto reach out to the poor. The successreflected strong borrower ownership, highquality and professionally well manageddelivery institution, good monitoring andcontinuous feedback from beneficiaries.”

The “Operations Evaluation Department”of World Bank, Washington D.C. reviewedthe Implementation Completion Reportof the first project and rated PPAFperformance as ‘Highly Satisfactory’. Thisis the highest rating of WB and awardedto very few institutions.

Owing to the exponential growth and

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Directors Report

unprecedented success achieved under thefirst project, the Government of Pakistan(GoP) and WB approved the second followon project, on a fast track, well before thescheduled time. Under the second project(2004-2008), US$ 238 million has beenallocated to PPAF. The GoP committedRupeess 500 million as its equitycontribution. Fifty six percent of theIDA/WB funds were dedicated for microcredit and enterprise development whilethe balance forty four percent forcommunity based small scale infrastructure,social sector development projects, andcapacity building / institutional assistanceto the Partner Organizations (POs) andthe PPAF.

The second project became effective onApril 15, 2004, however, the inordinatedelay in opening of bank account (nearlyeight months) prevented any disbursementsfrom WB taking place. In spite of thisdelay, PPAF continued its operations -appraising new proposals, monitoringexisting agreements, and even disbursedfunds from its own resources. There wasno major interruption in PPAF’s operationsand a smooth and seamless transition wasachieved.

During the financial year under review(2004-05), PPAF continued to meets itsdevelopment objectives of reducing


Directors Report

incidence of poverty in the country throughprovision of resources and services to thepoor, particularly women. An integratedapproach focusing on provision of microcredit, community infrastructure and skilldevelopment addressed the many facets ofpoverty and was effective in reducingvu lne rab i l i t y o f d i s advan t agedcommunities. Assistance of PPAF enabledPOs to achieve exponential growth andexpand outreach.

The World Bank first supervision of thesecond project to assess PPAF in terms ofmeeting its development objectives andutilization of IDA funds, concluded thatthe PPAF’s progress was satisfactory andthe project was in line with GoP initiativesto alleviate poverty in Pakistan.

By the end of June 2005, PPAF fundinghad been equitably disbursed in urban andrural areas of 96 districts of the countrythrough 56 POs of which 10 were cateringpredominantly to women. At the sametime, number of individuals who availedcredit rose to 616,424 of which 271,121 (44percent) were women borrowers. 8,954infrastructure projects were initiated and10,500 community organizations formed,benefiting 619,176 households. In addition114,835 POs staff and community memberswere trained, including 40 percent women.

PPAF financial and non-financial servicesCED, 69%

CPI, 21%

HID, 10%

(Fig. 10.2)Share of Funds Disbursed

(Fig. 10.1)Financing DisbursedRs. in million

208382

766575

1462

3106

0

500

1000

1500

2000

2500

3000

3500

HID CPI CED

FY 2005FY 2004


Directors Report

have been estimated to be benefiting over8.5 million individuals, directly orindirectly, across the country.

Operational and Financial Results:The overall operational and financial resultsof the company during the year underreview remained satisfactory.

Total disbursements increased from Rupees2,436 million in FY 2004 to Rupees 4,063million in FY 2005, indicating an increaseof 67 percent. Disbursements of credit rosefrom Rupees 1,462 million in the precedingyear to Rupees 3,106 million in the currentyear. However there was a small pause inthe infrastructure work due to which itsdisbursements, which were Rupees 766million in FY 2004, had settled to Rupees575 million in FY 2005. On the otherhand capacity building support to POsshowed an upward trend, increasing fromRupees 208 million in FY 2004 to Rupees382 million in FY 2005 [fig. 10.1]. By theconclusion of FY 2005, cumulativedisbursements crossed Rupees 10 billionmark and were Rupees 10.121 billion.Credit and enterprise development, thelargest component of the PPAF, accountedfor 68 percent of total disbursementsfol lowed by community physicalinfrastructure (21 percent). The capacitybuilding assistance provided in support ofcredit and infrastructure financing had ashare of 11 percent [fig. 10.2].

(Fig. 10.4)

Total Income

Rs. in million

(Fig. 10.3)

Provincial Distribution of PPAF Resources

7

38

171

88

313

130

66

FY 2005FY 2004

0

20

40

60

80

100

120

140

160

180

CB GrantUSAID

CB Grant-GoP (WB)

Profit on Inv/Saving A/c

Servicecharges on

MC

Punjab(46%)

Sindh(29%)

NWFP(10%)

Balochistan(10%) Northern Areas and AJK

(5%)


Directors Report

Provincial distribution of funds remainedmore or less consistent with previousallocations. 46 percent going to Punjab,29 percent to Sindh, 10 percent each toNWFP and Balochistan and 5 percent tothe Northern Areas and AJK [fig. 10.3].

Total equity crossed one billion mark andwas Rupees 1.137 billion on June 30, 2005as against Rupees 791 million on June 30,2004 - an increase of 44 percent.

The total amount of endowment fundincreased by Rupees 150 million due toreceipt of first installment of GoPcontribution out of the total commitmentof Rupees 500 million for the secondproject.

During the year, PPAF received grant fundof Rupees 400 million in respect of USDepartment of Agriculture (USDA) projectfrom GoP, out of total funding of Rupees1,521 million. The workshop to launchthis project was held on March 30, 2005at Islamabad. Dr. Salman Shah, Advisorto the Prime Minister on Finance,Economics Affairs, Revenue and Statistics,inaugurated the workshop.

As a result of the vigorous efforts of themanagement team and detai ledscrutinization by the Central Board ofRevenue, PPAF was granted the status of

welfare institution under clause 58(3) ofpart I of Second Schedule to the IncomeTax Ordinance, 2001 vide SRO443(I)/2005 dated May 19, 2005. As aconsequence of this, the potential incometax exposure for the years ended June 30,2003 and June 30, 2004 has been reduced.This has resulted in a substantial saving(Rupees 59.7 million), whereas, for thecurrent year, there was no tax liability.

Total Company’s net assets (total assets lesscurrent liabilities) on June 30, 2005 stoodat Rupees 8,689 million against Rupees3,496 million as at June 30, 2004 – anincrease of 148 percent. Similarly loansreceivable from partner organizations wereRupees 2,679 million as against Rupees1,118 million as at June 30, 2004. Duringthe FY 2005, PPAF continued to maintain100 percent recovery rate in respect of itslending operations.

Total income generated during the yearwas Rupees 305 million compared toRupees 222 million last year – an increaseof 37 percent [fig. 10.4]. Income on loanto partner organizations increased by 33percent due to high credit disbursements.Prof it on investments and termdeposit/saving accounts increased by 32percent due to increase in the level ofinvestments and improved profit rates.During the year, capacity building grantfrom GoP increased by 192 percent due to

the availability of financing for operationalexpenses of PPAF under the second project.Similarly, United States Agency forInternational Development (USAID) grantfor operational support marked an increaseof 133 percent as PPAF undertookincreased level of enterprise developmentinterventions during the year.

The general and administrative expensesfor the period increased by 28 percent dueto rapid expansion in nature and scale ofexisting activities as well as newinterventions under USDA and secondWorld Bank projects.

Future Prospects:The Government of Pakistan andinternational development agenciescontinued to repose their confidence inthe Company to enhance the quantumand quality of PPAF programmes.

The International Fund for AgriculturalDevelopment has approached PPAF forundertaking an innovation and outreachprogramme. The programme would focuson PPAF’s micro finance operations andenable the Company to extend its outreachto rural areas of the country in terms ofcredit and enterprise through developmentof new products and services.

The USAID is considering to enhance theexisting Enterprise Development Facility.


Directors Report

The proposed project while retaining focuson micro credit/enterprise, will allowinterventions in health, education andinfrastructure to augment provision offinancial services.

The European Union has expressed interestin partnering with PPAF to develop andcapacitate small/emerging organizationsto become potential partner organizationsof PPAF.

A Memorandum of Understanding (MoU)has been signed between PPAF, EngroChemical Pakistan Limited and PPAF POsto launch a pilot project in livestock anddairy development. The project envisagesprovision of credit and non-credit financingto poor communities to invest in qualitybreeds of milch animals, scientificmanagement of livestock, provision ofveterinary services together with guaranteedoff-take of milk at competitive prices.

The PPAF and United NationsDevelopment Programme have signed athree year MoU to form an alliance atnational scale in order to complement eachother’s activities and address the poverty-environment nexus.

Today PPAF is well poised to achieve ahigh level of market penetration, assistpartner organizations to build their


Directors Report

capacities, and actively develop linkageswith the corporate sector through new andinnovative models of enterprisedevelopment. This would enable the poorto access, and benefit from, the widerprivate sector markets and opportunitiesof value addition.

With the large expansion in its scope ofoperations, PPAF would continue to beprudent while managing the highexpectations being placed on it. PPAFintends to proactively pursue an agendathat allows it to meet the challenges thatlie ahead. This will include reaching outto increasing number of poor, going beyondtargets and statistics and emphasizingoutcomes achieved in terms of realeconomic and social empowerment. Thisreflects a corporate philosophy that accordspriority to development and retention ofa vibrant customer base for effective deliveryof financial and non-financial services.

Auditors:The external auditors of the Company,Messer’s Ford Rhodes Sidat Hyder andCompany, Chartered Accountants, havecompleted their assignment for the financialyear ended June 30, 2005 and shall retireat the conclusion of 9th Annual GeneralMeeting. Being eligible for re-appointment,they have offered their services as Auditors

of the Company for the financial year 2006.Conclusion:The role and responsibilities of the Boardof Directors are becoming ever moredemanding. I am pleased to thank thedirectors for their commitment andinvaluable contribution in providingeffective oversight to PPAF.

The Board acknowledges support andguidance extended by the General Bodyover the years. We are deeply grateful toour partner organizations and theircommunities which toiled hard totransform plans into reality.

The Board places on record its profoundgratitude to the Government of Pakistanand World Bank for their generous andcontinuous facilitation and assistance,especially in amicably resolving theprocedural impediments related to fundsflow for the second project.

The Board would also like to extend itsappreciation to all the employees whoexhibited a high degree of professionalismand dedication in pursuit of the objectivesof the Company.

With the active support and commitmentof all key stakeholders, PPAF hassuccessfully completed project one andsmoothly initiated the follow-on project.All indicators now point to the

establishment of a sustainable and wellfunctioning system of delivery of servicesto the poor. By virtue of its performance,PPAF has gained a high level of trust andconfidence with government, donoragencies and civil society. Through thesepartnerships, PPAF will continue to developand strengthen a range of specific as wellas broad based initiatives focused onunderpriv i leged individuals andcommunities.

Hussain DawoodChairman

IslamabadAugust 18, 2005


Directors Report


Six Years’ Financial Summary

2005 2004 2003 2002 2001 2000

Operational Results

Total Disbursements 4,064 2,436 1,777 1,189 598 59

Total Income (including other income) 305 222 230 145 73 28

Surplus before provisions for taxation and loan loss 152 133 149 94 47 3

Surplus after provisions for taxation and loan loss 196 81 92 59 44 3

Balance Sheet

Total assets (less current liabilities) 8,689 3,496 2,703 1,656 931 472

Micro credit loans receivables 2,598 1,081 1,201 695 285 36

Total investments 4,401 2,287 1,465 833 588 211

Equity and reserves 1,137 791 710 618 559 216

Long term and deferred liability 7,552 2,705 1,993 1,038 372 256

Financial Ratios

Surplus before tax and loan loss ratio 50% 60% 65% 65% 64% 11%

Return on assets 3% 3% 4% 4% 6% 1%

Return on equity 20% 11% 14% 10% 11% 2%

Repayment rate (micro credit) 100% 100% 100% 100% 100% 100%

General and admin. expenses/average total assets 1% 2% 3% 3% 3% 5%

Income on loans/General and admin. expenses 101% 97% 89% 68% 46% 2%

Debt/equity 85:15 77:23 73:27 63:37 41:59 38:62

Current ratio 125:1 23:1 32:1 18:1 80:1 35:1

(Rupees in millions)

PAKISTAN POVERTY ALLEVIATION FUNDHouse 1, Street 20, F-7/2, Islamabad, Pakistan.

Tel: 92-51-2653304, 2653305, 2653597, 2653598, 2652731, 2652734 | Fax: 92-51-2652246UAN: 111-000-102 | Email: [email protected] | Website: www.ppaf.org.pk

pakistan poverty alleviation fund · auditors: ford rhodes sidat hyder & co. chartered...

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