MICROCAPITAL STORY: Yemen’s Social Fund for Development (SFD) to Serve 100,000 Entrepreneurs Through Microfinance Programs

The Social Fund for Development (SFD), an agency established by the government of Yemen to implement social and economic development programs, announced a strategic plan to reach 100,000 micro and small entrepreneurs (MSEs) by 2012. The SFD is supporting microfinance programs in Yemen in the belief that MSEs will help to alleviate poverty and reduce unemployment in the country.

Yemen is the least developed country in the Middle East, with a GDP per capita of USD 2,400. Approximately 40 percent of the population of 23.8 million lives below the poverty line. According to a report released by the International Finance Corporation (IFC), there were 40,000 MSEs in Yemen in 2007, of which the majority were microenterprises (90.7 percent) and owned by men (98.5 percent). The report also found that only 3.5 percent of the population had an account with a formal financial institution, and only 29.9 percent of MSEs had used formal financial services of any kind.

The SFD was established in 1997 to support implementation of the government’s plans for social and economic development. The SFD is an administratively and financially autonomous agency governed by a Board of Directors chaired by Prime Minister Ali Muhammad Mujawar. The SFD has three main programs; 1) the Community Development Program increases access to basic social and economic infrastructure, 2) the Capacity Building Program helps build the capacity of local partners, including communities, nongovernmental organizations (NGOs), government agencies, consultants and contractors, and 3) the Small and Microenterprise Development Program provides microfinance services through intermediaries such as NGOs and develops financial and nonfinancial services for small entrepreneurs.

By the end of 2007 the SFD had committed USD 596 million to 6,914 projects. These projects have provided access to basic services for 14.4 million direct beneficiaries. SFD funding comes from many sources, including the Yemeni government, Arab Fund for Economic and Social Development, European Community, German Development Bank (KfW), International Fund for Agricultural Development (IFAD), Islamic Development Bank, Italy, Netherlands, OPEC Fund for International Development, Saudi Fund for Development, U.K. Department for International Development (DFID), United Nations Educational, Scientific, and Cultural Organization (UNESCO), United States and World Bank.

The SFD has been active in the development of the microfinance sector in Yemen, investing in the first “bank for the poor,” Bank Al-Amal, as documented in this MicroCapital story. In total, SFD has established or supported twelve MFIs in Yemen, which have reached over 35,000 borrowers and 23,000 savers.

The SFD’s Small and Micro-Enterprise Development (SMED) program, like much of the microfinance sector, targets women entrepreneurs. This follows the objectives of the Government of Yemen’s 2001 five-year National Programme Framework for Poverty Alleviation, “to promote the socio-economic integration of the poor, especially rural women, by providing microcredit and creating sustainable livelihood opportunities.” The Yemen Observer article announcing the SFD’s new strategic plan cited several “qualitative and quantitative studies” which have documented how access to financial services has improved the status of women within the family and the community in Yemen.

In terms of the benefits of microfinance for the economy, Osama al-Shami, Head of SMED unit for the SFD has said “[MSEs] have linkages with large enterprises that contribute to the increase and diversification of income, in addition to adding value within their local communities. The government gives great attention for the importance of SMEs in moving the economy and reducing poverty and unemployment in Yemen.”

While no information was provided on the exact amount of funding that will be allocated to the effort, the SFD’s new target to expand outreach in the microfinance sector will allow it to continue in its mission to reduce poverty and improve living conditions for the poor.

By Jaclyn Berfond

Additional Resources:

Yemen Observer: SFD targets 100,000 entrepreneurs by 2012

Social Development Fund: Annual Report 2007

Social Development Fund Newsletter: Edition No. 44

UNCDF: UNCDF in Yemen

International Finance Corporation: Assessment of MSE Financial Needs in Yemen

MicroCapital Story: Government of Yemen, Social Fund for Development (SFD) of Yemen, and Arab Gulf Program for United Nations Development Organizations (AGFUND) Invest USD 30 Million in Microfinance

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  1. […] MicroCapital Story, April 29, 2009, “Yemen’s Social Fund for Development (SFD) to Serve 100,000 Entrepreneurs Through Microfinance Programs,” https://www.microcapital.org/microcapital-story-yemen%E2%80%99s-social-fund-for-development-sfd-to-se… […]

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