MICROCAPITAL STORY: Arab Development Summit Commits US$2 billion to Microfinance Through Arab Fund for Economic and Social Development (AFESD)

Arab states have agreed to form a USD 2 billion fund to extend credit and help reduce unemployment in the region. While reports on an inability to make a decision on the situation in Gaza dominate the press discussing the first Arab Economic, Social and Development Summit in Kuwait City, this is one of the only material agreements that has emerged from the Summit. The funds will be managed by the Arab Fund for Economic and Social Development (AFESD) and will include a microfinance programme. Amr Moussa, secretary-general of the Arab League, was quoted as saying that economic issues had to move forward in the face of political differences between the states, while Kuwait’s foreign minister, Mohammed Al Sabah, stated that it had been proved that economic activity was the best way to control poverty. No specific details on how the funds will be used were provided, except that the total amount will be used to support small and medium enterprisers and boost investments in the Arab world, and that a Grameen Bank-model of microfinance will be used.

The meeting was the first Arab Economic, Social and Development Summit held to gather Arab leaders to work on promoting unified Arab action in the economic, social and development sectors. Twenty-two member states of the Arab league were represented, including 17 heads of state. Additionally, United Nations Secretary-General Ban Ki-moon was also present. The summit was supposed to have selected from more than 400 projects and proposals the secretariat had received, with the Gaza situation at the top of the agenda.

The Arab Fund for Economic and Social Development (AFESD) is an autonomous regional Pan-Arab development finance organization which was established by the adoption of an agreement in 1968 and was declared effective in 1971. The AFESD began operations in 1974. The function of the organization is to assist the economic and social development of Arab countries using three methods. The first is to finance development projects, preferably pan-Arab development projects, the second is to encourage the investment of funds in Arab projects and the third is to provide technical assistance services for Arab development. As of 2006, its total assets stood at KD 2.5 billion (USD 8.5 billion), including its total loans of KD 1.8 billion (USD 6.19 billion).

By Lori Curtis, Research Assistant

Additional Resources:

Arab Fund for Economic and Social Development: “Home” “About Us

Arab Times: “Gaza divide clouds Arab economic summit

Financial Times: “Arab states to form $2bn business fund

Xinhua News Agency: “Moussa: Arab League to coordinate funds for Gaza reconstruction” “Backgrounder: Basic facts about 1st Arab Economic, Development and Social Summit

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