PRETORIA (Reuters) - The Development Bank of Southern Africa (DBSA) increased its funding of infrastructure projects in the region by 20 percent to 3.7 billion rand in 2006/7, the bank said.

The DBSA, which lends money for development purposes, said disbursement grew by 20 percent year-on-year, with 80 percent going to water, sanitation and low income housing.

The DBSA is majority-owned by the South African government and funds projects that cannot attract funds from commercial banks to alleviate poverty.

Speaking at the results presentation, Finance minister Trevor Manuel said the DBSA was crucial to the South African economy, which has grown at a rapid pace in recent years but has been held back by, among others, ageing electricity and transport networks.

"While we celebrate these successes, we are mindful of the enormous task we still have ahead of us in eradicating poverty and reducing inequality," Manuel said.

"The rate of growth of five percent must push ahead. We need to make sure that more people can benefit (from economic growth)," Manuel said.

South Africa's economy grew by five percent in 2006, and the treasury expects it to grow by 4.9 percent in 2007 but millions still live in poverty.