MICROCAPITAL STORY: Grameen-Jameel Issues a USD 2.7 Million Local-Currency Guarantee to Aga Khan Agency, First Microfinance Institution (FMFI) Syria

Grameen-Jameel, a social business established in 2007 that serves the Arab microfinance industry, has recently announced that it has issued local-currency guarantee worth USD 2.7 million to Aga Khan Agency the First Microfinance Institution (FMFI) Syria, part of the Aga Khan Agency for Microfinance (AKAM). The multi-million dollar credit facility focuses to improve the lives of 2,700 underprivileged Syrians through credit, deposits and other financial services. No additional information regarding how the fund will function is provided.

According to Zawya, a Middle East business information company, the Grameen-Jameel guarantee backs a commercial overdraft facility disbursed by Bank Audi Syria, the first commercial bank to lend to the microfinance sector in Syria. Furthermore, Zawya notes that Grameen-Jameel has roughly closed to date USD 20 million in partial credit guarantee transactions. The guarantees have been leveraged 2.2 times on average to raise USD 44 million in total commercial financing for its partner microfinance institutions.

The Aga Khan Agency for Microfinance (AKAM) was established in 2005 and is headquartered in Geneva, Switzerland. Its microfinance activities is administered by sister agencies within the Aga Khan Development Network (AKDN). The AKDN focuses on health, education, culture, rural development, institution-building and the promotion of economic development. It is dedicated to improving living conditions and opportunities for the poor. AKDN’s projects include large-scale rural development, health, education and civil society programs. According to MixMarket, AKAM’s unaudited 2006 Annual Report held USD 114.3 million in total assets, and had a debt-equity ratio of 102.62 percent (calculated). The aggregated loan portfolio of MFIs it has created or operates totaled USD 68.9 million.

In an August 2008 MicroCapital report, AKAM continued its rapid expansion of microfinance operations with the establishment Syria’s first microfinance institution. Suitably named “First Microfinance Institution” (FMFI), the microlender provides financial services to individuals currently bypassed by mainstream banking, a market that constitutes 90 percent of the country’s population. FMFI’s financial services includes both microloans and deposit facilities, and will serve Syrians in six of the country’s fourteen provinces.

FMFI commenced operations with USD 8.7 million in total assets. It is not clear from available information if the institution will operate as a commercial or nonprofit microlender, however, founding nonprofit AKDN will retain 99.9 percent equity stake, which may suggest a nonprofit operation.

FMFI received its license shortly after a November 2007 revision to Syria’s financial regulatory framework that allows for the creation of microfinance institutions. Under “Law No. 15?, MFIs will be supervised by the Central Bank of Syria, the same entity which regulates mainstream commercial banks. While microlending activity had existed prior to the revision, it was limited in scope and conducted only via a small group of international aid organizations including UNDP, Firdos and UNWEA. The new regulations that enable microlending to occur via registered MFIs may not only foster the growth of such institutions, it may also grant the sector a sense of legitimacy needed to attract private investment toward future commercial MFIs.

In addition to Syria, AKAM also provides services in Afghanistan. Through one of its nine operating agencies, the Aga Khan Agency for Microfinance (AKAM) provides microfinance services in the rehabilitation of historic neighborhoods in Kabul and Heart, Afghanistan. MicroCapital recently reported on a key product development priority for AKAM that began in 2007 with the development of the Housing Product Initiatives program in Afghanistan, via the First MicroFinance Bank (FMFB) of Afghanistan (with additional assistance from the International Finance Corporation (IFC), a member of the World Bank Group). The MixMarket reports (as of December 31, 2008) FMFB’s gross loan portfolio at USD 37.1 million, total assets of USD 100 million, return on assets of 1.46 percent, return on equity of 12.98 percent, debt to equity of 895 percent, and portfolio at risk > 30 at 1.61 percent. MicroCapital’s exclusive interview with managers of First Microfinance Bank (FMFB) of Afghanistan can be read here.

Grameen-Jameel is a social business established in 2007 as a joint venture between Grameen Foundation and Bab Rizq Jameel Limited, a subsidiary of Abdul Latif Jameel Group. According to a CSRwire press release, to date the organization has facilitated local currency financing of USD 44 million backed by USD 20 million in guarantees to its partners and has reached more than 350,000 new microfinance clients through its partners in Morocco, Tunisia, Egypt, Lebanon, Jordan, Palestine and Yemen. Grameen-Jameel is currently working with 11 MFI’s in 7 Arab countries to help them increase the breadth and depth of their outreach.

Additional notable microfinance funding by Grameen-Jameel include the company’s 2006 USD 10.6 million loan to Moroccan microfinance institution Fondation Zakoura, a Moroccan Microfinance Institution (MFI). The loan is being provided by Société Générale Marocain de Banques (SGMB), a privately-held Moroccan bank, and secured by USD 5 million (USD 2.5 million each) in guarantees from the Grameen Foundation Growth Guarantee Program and the Mohammed Jameel Guarantee Fund.

Lastly, MicroCapital has reported, that Grameen-Jameel Pan-Arab Microfinance Limited and Grameen Foundation (GF) have recently announced that enda Inter-Arabe of Tunisa (enda) has gone live on Mifos, the management information system for microfinance institutions. Mifos is an open source software program, meaning, among other things, the source code is accessible and the software is freely redistributable. The platform was developed by Grameen Foundation and launched in the Arab World by Grameen-Jameel. According to the press release in CSRwire, enda expects the investment in Mifos to assist it in managing its growth from the current 100,000-plus poor clients across Tunisia to its target of 300,000 by the end of 2012.

Grameen Foundation is a global 501(c)(3) non-profit organization based in Washington DC that works to replicate the Grameen Bank microfinance model around the world through a global network of partner microfinance institutions. Started in 1976 by Nobel Peace Prize Winner Professor Muhammad Yunus, Grameen Bank serves more than six million poor families with loans, savings, insurance and other services. The Mix Market reports that Grameen Foundation has established a global partner network of 55 microfinance institutions. According to the company’s most recent financial statements, as of March 31, 2008 GF had total assets of USD 25.0 million, total revenues of USD 21.9 million, and total expenses of USD 16.7 million. To read more MicroCapital stories about Mohammad Yunus and Grameen, click here.

According to the November 2008 Arab Microfinance Investment Symposium co-hosted by Grameen-Jameel, and BlueOrchard (a microfinance investment manager located in Geneva, Switzerland), microfinance in the Arab world totals USD 5.5 billion and remains a largely untapped area. For additional details on the 2008 Investment Symposium please read this MicroCapital Event.

By Zoran Stanisljevic

Additional Resources:

Zawya: A first for Syria – Grameen-Jameel Join Hands with Aga Khan Agency for Microfinance

MicroCapital Story: Meet a MicroBank: An Interview with Managers of First Microfinance Bank (FMFB) of Afghanistan, Member of Aga Khan Development Network (AKDN)

The Corporate Social Responsibility Newswire: Enda Inter-Arabe Goes Live on Mifos Information Management Platform

Grameen-Jameel: Home

ADKN: Home

Mix Market: AKAM, FMFB

MicroCapital Story: Enda Inter-Arabe Rolls Out Grameen Foundation’s Mifos Information Management Platform to 52 Branches with Assistance from Grameen-Jameel and ThoughtWorks

MicroCapital Story: Grameen-Jameel Loans USD 10.6 mn to Moroccan Microfinance Institution Fondation Zakoura

MicroCapital Story: Establishing Syria’s First MFI, Aga Khan Continues to Expand Its Global Microfinance Network

Central Bank of Syria: Home