Understanding microfinance in MENA – Wamda
A wall for commitments to financial inclusion. (Image
via Microcredit Summit Campaign)
“The Arab world has the lowest level of financial
inclusion”.
This was the statement made by Dr. Abdulrahman
Al Hamidi, director general and chairman of the Arab Monetary Fund
(AMF) at the opening of the 18th
Microcredit Summit in Abu Dhabi in
March.
He cited World Bank data stating that 16 to 17
million small businesses in the Arab region have no access to
financing and official financial services.
The theme of the summit ‘Frontier Innovations in
Financial Inclusion’, attracted 1,000 delegates from 60 countries.
Jointly organized by the Khalifa Fund for Enterprise
Development, the Arab Gulf Programme for Development
(AGFUND), and the Microcredit Summit Campaign, the
event was held March 14-17.
What is microcredit?
Microcredit is defined by
the Grameen Bank as small loans given to the very
poor for self-employment projects that generate
income, allowing them to care for themselves and their
families. For Larry Reed, founder of the
Microcredit
Summit Campaign, the goal of the summit was to
gather professionals and remind them how their work fits into a
larger global movement.
“One of the lessons we learn from microfinance
is that every person can be productive in some way,” Reed
explained. “And that everyone benefits when the poorest are able to
support themselves.”
With policymakers, bank managers and
microfinance experts in attendance, the Summit’s plenary sessions
tackled the challenges of technology and financial inclusion,
Islamic microfinance, scaling for social impact, and facilitating
financial inclusion of youth and women.
UAE as a unique ecosystem
Mouza Al Nasri, director of entrepreneurship
development at the Khalifa Fund, was one of the panelists on
‘Empowering Women Through Financial Inclusion’. Talking about the
UAE, a country home to a booming SME economy, Al Nasri said this
unique financial state in the UAE means there is still work to be
done on extending microfinance to others in the region.
“There are not many informal businesses here
like other countries,” she said. “It’s costly to start a business
here. You need to get a license….and there is a legal
framework.”
But, Al Nasri said there were also many
businesses which do not fall under this formal business category
and do not need huge loans. For them, the Khalifa Fund developed
a specifically-designed
microfinance initiative offering loans of 100,000 Emirati
dirhams to small businesses via debit card. H.E. Abdullah S. Al
Darmaki, CEO of Khalifa Fund said small and micro businesses
constitute more than 40 per cent of the total projects financed by
the Fund.
The evident political instability in the region
is another reason to push for microfinance, said Katia Hilal, chief
operation officer of RedCloud, a
technology firm offering financial at a low cost. Hilal was one of
the speakers at the Summit.
“There’s a whole generation that is lacking
education because they are simply living in a state of war,” Hilal
told Wamda. “In the next few years, microfinance will be the
solution to helping these people get through the situation and get
them back into the economy.“
Where microfinance can go
The Arab Gulf Program for Development (AGFUND)
is already playing a prominent role across the region in helping
stabilize countries through facilitating micro businesses and
microfinance.
In 2014, the AGFund supported
‘Access of Women to Microfinance and Support to Victims of
Violence’, bringing training and income opportunities for over
4,000 women affected by violence in Yemen.
The Summit also hosted the 2016 AGFund
International Prize for Pioneering Human Development Projects,
announcing Habitat for Humanity as the winner of the top prize,
receiving $200,000.
At the closing ceremony, the Summit
partners
announced a ‘Declaration on Economic
Empowerment and Social Inclusion’ to enable the success of
the
Universal Financial Access 2020 goal,
the
World Bank 2030 goals, and the
UN Global
Goals.
The Declaration recommended using technology to
build an accessible payment system as well as to developing
legislation to encourage banks and other financial institutions to
loan to micro enterprises. The statement also recommended extending
agricultural value chains to small scale farmers and building
partnerships that increase social inclusion for all, by way of
financial inclusion.
Professor Yunus, third from left, on the ‘Scaling for Social
Impact’ panel. (Image via Archana Menon)
Known as the father of microfinance, Grameen
Bank founder Muhammad Yunus
was the Summit’s keynote speaker and stressed that
microfinance was at the root of solving the most widespread issues
today.
“If you look at human problems – unemployment,
old age, poverty – each one of them is a global problem,” he said.
“Microcredit is a social business. It’s applied in Bangladesh,
Haiti, Brazil or Mexico [and] it also works in the richest
countries in the world like the United States. Microcredit has no
borders in dealing with human problems…it’s a non-dividend approach
to solving human problems.”
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