PAPER WRAP-UP: The Microfinance Information Exchange (MIX) and Sanabel Microfinance Network of Arab Countries: Benchmarking Arab Microfinance 2006

Produced by Sanabel Microfinance Network of Arab Countries and the Microfinance Information Exchange (MIX), analyzing the performance of 37 Arab microfinance institutions from nine different Arab countries with additional outreach data from a regional survey of 97 Arab-region microfinance service providers, this document was written by Ranya Abdel-Baki, Transparancy Unit Head of Sanabel, and Hind Tazi, Lead Analyst from the Microfinance Information Exchange. Published in January 2008 as a 16-page article, the PDF file can be found here.

At the end of 2006, microfinance institutions in the Arab region had loan portfolios totaling USD 910 million reaching over 2.1 million clients. The Arab MFI sector had strong outreach with an average of 13,000 clients per institution and 162 borrowers being served per staff member.

Large scale, sustainable microfinance institutions had the highest outreach levels, serving 77 percent of regional borrowers, though they represented only half of the sampled institutions.

Outreach was concentrated in Morocco and Egypt with eight large scale institutions serving 80 percent of the region’s total market, with an average of 50,000 borrowers each.

With the largest population in the region and one of the highest poverty rates, Egypt has the highest potential Arab microfinance market. Despite this, the 27 Egyptian MFIs sampled served only 2 percent of the poor population ranking among the most underserved markets in the region alongside Yemen, whose 14 institutions only reached 1 percent of their poor.  

Morocco had the highest outreach levels with nearly 25 percent of their poor population benefiting from microfinance services. The country’s previously established Microcredit Associations Law provides a strong legal framework, allowing for rapid growth of Morocco’s microfinance sector.

In Palestine and Lebanon, conflict and war were significant obstacles

for MFI operations, causing a doubling of portfolio at risk over 30 days and a 50 percent increase in loan provisioning costs. Outreach dropped from 33,149 borrowers in 2005 to 30,932 in 2006 with a 3 percent drop in median growth.

MFIs in the Arab region were largely dependent on donations and retained earnings for the financing of their loan portfolios, with more than 50 percent of their assets funded by equity. Savings mobilization remained virtually nonexistent in the region because of legal constraints. Morocco was the only country able to raise significant amounts of capital through commercial financing, with their large scale institutions raising just over two dollars US in debt for every dollar in equity.

Overall, the Arab microfinance sector recorded 0.5 percent in losses in 2006 as a result of low revenues due to inefficiency of loan management in medium and small scale microfinance institutions. Large scale Arab MFIs were extremely profitable with a return on assets of 3.2 percent.

Though Arab MFIs experienced increased losses in 2006, there was an overall rise in client outreach and levels of transparency in the region.

By Melissa Duscha

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