MICROCAPITAL STORY: Yemen to Establish Microfinance Banks

The Central Bank of Yemen (CBY) is currently discussing drafting a law supporting the establishment of microfinance banks in the country, and encouraging existing banks to provide microcredit services under CBY’s control.

CBY has been supporting microfinance initiatives for the past ten years, with the government-established Social Development Fund(SDF) first launching microlending programs in 1998. The “Bank for the Poor”, Alamal Bank, was established in 2002under a law drafted specifically for the creation of a government-held microfinance institution.

Only a handful of microfinance institutions offer their services in Yemen’s rural areas. Currently, the National Microfinance Foundation (NMF), is the largest and fastest growing microfinance institution in Yemen, with a loan portfolio exceeding USD 1 million, and nearly eleven thousand active borrowers. The only other MFI reporting to the MIX Market is Al-Awael for Microfinace Co., with a loan portfolio of USD 223 thousand and less than three thousand active borrowers.

Yemen’s population is seventy percent rural, relying mostly on subsistence agriculture. Over forty percent of the country’s 20 million people live on or below the Yemeni poverty line. Crop yields are often poor due to soil erosion, deforestation and poor infrastructure, with an average farmer’s income of USD 45 per month.

According to a 2005 CGAP report, there are as few as 500,000 bank accounts in Yemen , serving only 2.5 percent of the country’s population. The rural population has virtually no access to financial services.

By Melissa Duscha

Additional Resources:

Central Bank of Yemen : http://www.centralbank.gov.ye/

CGAP Report: Microfinance in Yemen : http://cgap.org/portal/binary/com.epicentric.contentmanagement.servlet.ContentDeliveryServlet/Documents/diagnostic_Yemen.pdf

Microcapital.org:https://www.microcapital.org/?p=1268

The MIX Market: http://www.mixmarket.org/en/home_page.asp

Saba News: http://www.sabanews.net/en/news145263.htm

Union of Arab Banks: http://www.uabonline.org/event/event-details.php?eventid=75

Yemen National Microfinance Foundation: http://www.ynmf.org/index.php

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