World Bank urged to help restructure FIIP

The government has requested the World Bank (WB) for restructuring "Pakistan Financial Inclusion and Infrastructure Project" to complete the national payment system activities and reallocation of un-disbursed funds.

Official documents revealed that the Financial Inclusion and Infrastructure Project (FIIP) was conceptualized to support the implementation of Pakistan's National Financial Inclusion Strategy of the SBP.

The SBP developed the NFIS with the support of the World Bank through a Reimbursable Advisory Service in 2015. The govt requested WB support to help meet the objectives of the NFIS through the FIIP; which was approved by the WB Board on June 15, 2017.

The FIIP is a US$137 million operation. The Project Development Objective (PDO) is to contribute to increasing access and usage of digital payments and other financial services for households and businesses in Pakistan. As the project currently stands, all PDO level indicators have been achieved and the intermediate indicators have partially been achieved.

The rating for progress towards achievement of PDO is satisfactory, and moderately satisfactory for overall implementation progress. The ratings have remained constant over the last 24 months. The project financial management performance rating is moderately satisfactory, and the financial management risk is moderate. Furthermore, overall safeguards ratings have remained satisfactory.

Project implementation and outcomes have been impacted by Covid19 and changing government priorities. Procurements required for Component 1a (Improving Financial and Market Infrastructure to Facilitate the Uptake of DTAs) were subject to delays. Additionally, due the recent devastating floods, there is a focus on prioritizing existing funding flows to help rehabilitation efforts where possible.

It is in this context that the government has requested that the project closing date is extended to complete component 1(a) and that reallocations are made across components to support the flood relief efforts through ongoing activities in component 3(a) - Improving Access to Microfinance and to Financial Services for Micro Enterprises.

The government has requested an extension to complete the activities under component 1a (Improving Financial and Market Infrastructure to Facilitate the Uptake of DTAs). This activity entails the upgradation of the National Payments System (NPS) housed at SBP. Without an extension, the upgradation of the payment system will remain incomplete, and the National Payment Gateway will not reflect the evolution envisioned in the GoP's NPSS (National Payment System Strategy). NPSS was launched jointly by the Governor of SBP and the president of the World Bank in 2019.

While the project has achieved PDO level indicators and partially achieved intermediate indicators related to this component, this was due in great part to the increased uptake of electronic payments as part of the government's response to Covid-19. These gains are likely to reverse or remain static without the achievement of the pending intermediate indicators which monitor the establishment of the underlying payments infrastructure, thereby limiting the sustainability and development impact of the project.