Yemen

Latest Developments

(2009-03-01)  On Poverty Reduction: YemenToday: Micro- Finance Offers Helping Hand To Poor Entrepreneurs// By Faisal Darem

YemenToday:

Fattuma Hasan lives in one of the poorest areas in the city of Abyan. However, the difficulties of life did not discourage Fattuma as she searched for a glimpse of hope to change the course of her life. Her belief in the possibility of a better life was realized in 2004 when she was introduced to the Abyan Microfinance Program.

Seizing this excellent opportunity to improve her life and realize her dreams, Fattuma borrowed 15,000YR. With this money, she began manufacturing and selling incense and, having achieved success, she was encouraged to take out a second loan which she used to buy and sell clothes. This was followed by a third loan that she took out that she used to purchase beehives to make honey. Then she took out a forth loan that she used to open a shop that sells refrigerators as well as opening a cafeteria in the village school, and for the first time in her village, a pool bar. Fattuma managed to achieve all this because she worked hard to pay her installments on time.

Fattuma currently has three staff members, with workers and distributors on stand-by if needed. Fattuma is a role model for ambitious hard working women; with a capital starting at 15,000YR that today has reached 500,000YR. Her net monthly income is 30,000YR per month, and she is determined to expand her dreams because she believes that the march of a thousand miles begins with a single step.

“Microfinance is the supply of loans, savings, and other basic financial services to disadvantaged people living in poverty, whom like everyone else, need a diverse range of financial instruments to run their businesses, build assets, stabilize consumption, and shield themselves against risks,” said Osama Al Shami, Head of Small and Micro Enterprise Development (SMED) unit for the Social Fund for Development (SFD). In terms of the clients of microfinance, Al Shami stated that “the clients of microfinance are head of households spatially women, small farmers, and micro-entrepreneurs.” 

“Microfinance is a powerful tool to fight poverty because it enables poor people to have access to financial services,” Al Shami said. Microfinance enables them to earn more, build their assets, and cushion themselves against external shocks, as well as reduce their vulnerability to economic stress. In addition, it enables poor households to use microfinance to move from everyday survival to planning for the future; they invest in better nutrition, housing, health, and education.

According to Al Shami “Poor people, with access to savings, credit, insurance, and other financial services, are more resilient and better able to cope with the everyday crises they face.” Households are able to send more children to school for longer periods and to make greater investments in their children’s education. He clarified that “increasing earnings from financial services lead to better nutrition and better living conditions, which translates into a lower incidence of illness. Access to financial services allows clients to seek health care services when needed, rather than wait until an illness has reached crisis proportions.”

In terms of women’s empowerment, Al Shami confirmed that microfinance programs have generally targeted poor people spatially women. By providing access to financial services through women - making women responsible for loans, ensuring repayment through women, maintaining savings accounts for women, providing insurance coverage through women - microfinance programs send a strong message to households as well as to communities. Many qualitative and quantitative studies have documented how access to financial services has improved the status of women within the family and the community. Women have become more assertive and confident. In regions where women’s mobility is strictly regulated, women have become more visible and are better able to negotiate the public sphere, enabling them to better confront systemic gender inequities. Women own assets, including land and housing, and play a stronger role in decision making.

In terms of the benefits of microfinance to the economy, economists have considered SMEs as one of the tools to alleviate poverty and reduce unemployment, by developing the quality of administrative and marketing skills of entrepreneurs, reflecting the importance of SMEs in their ability to generate jobs with low capital cost, contributing to address the unemployment problem faced by most countries.

Al Shami expressed proudly the role of SMEs to the economy saying that “SMEs 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.”

In terms of the role the SFD has played in microfinance in Yemen, Al Shami stated that “the SFD works through Economic Development and Job Creation Program in order to provide microfinance services through intermediary entities such as NGOs, MFI and banks that aim at creating and sustaining job opportunities for small and micro entrepreneurs, as well as the development of financial and non financial services.”

Since its establishment, the SFD has realized the importance of small and micro enterprises (SMEs) as a fundamental element for sustainable economic growth, the creation of jobs and a reduction in unemployment levels, according to Al Shami.

For efficient contribution to combat poverty, Al Shami stated that “the SFD works to provide financial and non-financial services to Microfinance Institutions (MFIs) and organizational partners working in the SME sector, assisting them in their growth and development in every way possible in order to reach the poor.” SFD has established a number of MFIs, with the objective of providing sustainable services that target different segments of entrepreneurs. The number of active borrowers associated with the MFIs has reached more than 35,000 active borrowers, 80 percent of them are women. The cumulative number of dispersed loans has reached more than 216,000 during the past ten years.

Moreover, the SFD has recently signed a project document for the establishment of the MF network in Yemen in partnership with the United Nations Development Program (UNDP), as well as initiating the establishment of the first MF Bank, Al-Amal MF Bank, in partnership with the Arab Gulf Program for United Nations Development Organization (AGFUND) and the private sector, all the while encouraging any other initiatives, which can contribute to the development of the MF sector.

“The Al Amal Microfinance Bank was established by Law 23 in 2002 as the first Microfinance Bank in Yemen,” said Mohammed Al Lai, Executive Director of Al Amal Microfinance Bank. The initial capital was $5.5 million USD as follows: 45 percent for the SFD as represented by the Yemeni Government, 35 percent of shares for AGFUND and the rest, 20 percent for the private sector. Al Lai stated that Al Amal Bank seeks to provide poor clients engaged in productive activities (micro-entrepreneurs) with small loans to help them expand their business.

“No more than 4.2 percent of Yemenis benefit from the banking sector, and the work of commercial banks is focused in just five to six governorates, while around 77 percent of Yemenis live in the countryside,” Al Lai said. “Thus, those people are not privy to the coverage of banking services.” Therefore, the Al Amal Bank was established to provide those people with banking services. He pointed out that “We are particularly keen on emphasizing high quality credit to our clients.”

In terms of targeted beneficiaries of Al Amal Bank, Al Lai stressed that “our integrated network will cover the main cities, provinces and rural areas, with the possibility of building a varied partnership with local companies as part of our marketing strategy, which aims to reach 40,000 active clients by the end of 2011, and 100,000 by the end of 2013.”

In terms of the banking services provided by Al Amal Bank especially for women, Al Lai stated that “we will provide many banking services, which will target improving small productive activities such as: Collective Solidarity Credit, a type of credit offered to groups of women who know each other very well, live in the same area, and who will serve as guarantors for each other, so that the loan is based on mutual trust and committment to pay back the owed money.” Al Lai emphasized the importance of this product stating that “it counts for approximately 43 percent of our active clients, with loans projected in the range of $50-$500USD.” The second product, Individual Credit, is divided into four kinds of microfinance, including: Amal Individual, Masharia (projects), Sharakat (partnerships) and Estithmar (investment).

In terms of the importance of establishing the Al Amal Bank, Al Lai confirmed that around 97 percent of businesses in Yemen are small projects, located in either urban or rural areas. So, the bank was established to support small projects, such as calling centers, groceries, and restaurants as these projects depend on hiring a large number of employees. “When I give a dressmaker a loan of $250 to buy sewing machine, that means her capital is $500. So overall the productive activity will be increased.” Explaining that “Here, the Al Amal bank achieves its goal of converting a consuming family into a producing family.”

Through the first year, Al Amal Bank financed 1200 small projects. Al Lai continued saying that “Al Amal Bank seeks to develop small projects to create job opportunities to reduce poverty, and combat unemployment.”

“Small Enterprise Development Unit, which was established in 1990, was developed by the government in correlation with the Small Enterprise Development Fund (SEDF) according to a Republican decree, issued in 2002,” said Ahmed Saleh Hamzah, Operations Branches Manager at SEDF. The SEDF is concerned with the financing of productive commercial, industrial, and services enterprises. He clarified saying that those enterprises which need funds from SEDF must be owned by individuals. Hamzah pointed out that “the SEDF aims to combat unemployment and reduce poverty rate through financing of 8,800 enterprises at sum of 5,5 billion YR so far,” explaining that “these enterprises created 25,000 job opportunities which provided support for approximately 150,000 people because an average Yemeni family consists of 6 persons.”

The SEDF grants loans of 200,000YR to 2 million YR for new enterprises, 4 million YR for projects which need expansion and 8 million YR for the successful projects which had previously received loans from SEDF on the condition of generating new employment, as specified by Hamzah.

“Yemen has gotten many benefits from Egyptian and Moroccan experiments in the microfinance field,” Hamzah stated. “But, the Yemeni experience is distinguished due to collaboration with countries like Holland and Germany in terms of preparing feasibility studies of projects as well as the training of Yemenis.”

In terms of the challenges facing small enterprises in Yemen, Hamzah stressed that “there is not enough awareness of the importance of developing this sector either among citizens or governmental bodies.” “Unfortunately,” he continued, “the absence of privileges offered by the government is the most important challenge facing the small enterprises sector.”

Hamzah talked about the role of industrial zones in terms of the development of small enterprises by stating that “putting off the set up of industrial zones which provide incubators to improving small enterprises, forms a challenge.” In addition, small enterprises suffer from the fact that the majority of financial requests are not covered according, to Hamzah. He confirmed saying that “all funds and programs which are concerned with supporting and financing of small enterprises just cover 3 percent of small enterprises need in Yemen,” thus the financial gap in this sector is very large.

A decade ago, Ali Al Azani, who works on fixing damaged cars, was ambitious enough to set up his own business. He tried to do this without help from anyone. But because his own business lacked essential equipment, his production rate of fixing car didn’t exceed 4 cars a month which didn’t even allow him to cover the business spending. So Al Azani took out 2 loans from the SEDF, the first amounted to 300,000YR and the second reached 600,000YR in order to expand his business by buying the necessary equipment and improving the work conditions.

Step by step, Al Azani became famous in Sana’a for repairing cars. Today there are 8 workers at Al Azani Car Service who provide support to around 36 people. Al Azani has 8 sons, some of whom have been able to finish their education, and thus improve their own chances for a bright future. 

It is clear that in this country there is much potential. However, through microfinance projects, the people of Yemen are finally getting a chance to realize their full potential.

Last Modified on 2009-03-01