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

Nonprofit AKAM (Aga Khan Agency for Microfinance), a unit of AKDN (Aga Khan Development Network), continues its rapid expansion of microfinance operations with the recent establishment Syria’s first microfinance institution. Suitably named “First Microfinance Institution” (FMFI), the microlender is scheduled to begin operations in the coming weeks, providing financial services to individuals currently bypassed by mainstream banking, a market that constitutes 90 percent of the country’s population. FMFI’s financial services will include both microloans and deposit facilities, and will serve Syrians in six of the country’s fourteen provinces.

FMFI will commence 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.

FMFI’s founding organization, Aga Khan Agency for Microfinance (AKAM), has rapidly expanded its operations in the past year, establishing and retaining control of multiple microfinance institutions in countries previously devoid of any microfinance activity. In April 2008, it was reported that AKAM established the first microfinance institution in Ivory Coast. In March, MicroCapital published a report that AKAM brought Pakistan its first provider of microinsurance. Last May, MicroCapital reported AKAM assisted Indian banking giant Development Credit Bank Partners with the launch of a microfinance business unit.

Founded in 1957 by prominent Shia Muslim imam Aga Khan, AKDN is a group of affiliated nonprofit organizations “with mandates ranging from health and education to architecture, culture, microfinance, rural development, disaster reduction, the promotion of private-sector enterprise and the revitalization of historic cities”, according to ADKN’s website. AKDN’s microfinance arm, nonprofit AKAM, was founded in February 2005 and focuses on microfinance investment as well as microfinance institution building. In the MFIs that it creates, AKAM often retains majority ownership or operational control. According to its unaudited 2006 Annual Report, AKAM held USD 114.3 million in total assets (p.55), 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 (p.12).

For a complete profile of AKDN, please see MicroCapital’s “Who’s Who in Microfinance” feature on this organization.

By Ryan Benson, Research Assistant

Additional Resources:

MicroCapital Story: WHO’S WHO IN MICROFINANCE: Aga Khan Development Network (AKDN), Switzerland

MicroCapital Story: First Dedicated Microinsurance Agency in Pakistan Launched with $483k Investment from Aga Khan Agency for Microfinance (AKAM)

Press Release: Netherlands Development Finance Company (FMO) Enters Afghani Microfinance Arena With Loan of $9m in Local Currency to First MicroFinanceBank Afghanistan

News Wire: Aga Khan Network to Open Microfinance Institution in Côte d’Ivoire

MicroCapital Story: India’s Development Credit Bank (DCB)Partners with the Aga Khan Development Network’s (AKDN) Aga Khan Agency for Microfinance (AKAM)

Syria Today: Syria’s first microfinance institution is preparing to launch this summer and aims to provide a range of financial services to small businesses and individuals.

Mix Market: AKAM

Central Bank of Syria: Home

ADKN: Home