We helped the World Bank design a central fund to support resilience of Pakistan’s microfinance sector

Context

The World Bank’s Resilient and Accessible Microfinance (RAM) project aims to enhance access to microcredit and support the resilience of the microfinance sector in Pakistan.

As part of the RAM project, the World Bank is setting up a Climate Risk Fund (CRF), which will provide contingent liquidity to the microfinance sector post qualifying climate shocks, with an initial focus on flood.

Action

Working with JBA and Pula, Global Parametrics (GP) is designing parametric triggers for (1) disbursement from the Fund to microfinance institutions; and (2) top-up of the Fund from insurance backstop. GP’s activities include:

• Reviewing exposure data and modelled flood loss for microfinance providers

• Developing parametric index and trigger mechanism for liquidity and capital support from the CRF to microfinance providers

• Reviewing CRF portfolio-level risk profile and developing parametric insurance backstop for the CRF

• Assessing basis risk for the proposed indices and triggers

JBA is leading the flood risk modelling workstream that analyses flood risk to the microfinance sector and the stochastic risk profile of the CRF. Pula provides in-country relationship management and stakeholder engagement support.