Small and Microfinance in Yemen

 

Small and Microfinance is known by providing various financial services (loans, savings, transfers, insurance; etc., to the groups that are unable to secure such services from the existing banking sector.

The most important attributes of sustain financing programs is that it considers beneficiaries of its services as clients who obtain services in lieu of specific fees and not as a recipient for an aid.  Therefore it seeks to develop its services to satisfy the needs of the client at the earliest possible.

The importance of providing small and micro financial services to the poor lies in need to fight rising unemployment in the country, and also, the need to increase the income of poor small and micro-entrepreneurs, who cannot access banks to obtain such services. Experience in this field has shown that poor people can manage financial resources responsibly to build-up their economic activities, and can accumulate capitals by saving part of their earnings to face future needs.

 

Small Finance Industry in Yemen

During it early stages of operation SFD conducted studies to see the possibility of encouraging banks to open a window for small enterprises to borrow; however, there was no positive response. In 2003 SFD began providing financial and technical assistance to the Small Enterprise Development Fund (SEDF), which is the only specialized institution in Yemen that finances small enterprises. The assistance was aimed at increasing its efficiency and the capacity to serve greater numbers of small entrepreneurs, and SEDF has so far, in this short period, achieved satisfactory results, and has been able to restructure and expand its activities achieving good growth and expansion indices.

SMED on its part, and with a mandate from the government, took charge in formulating The National Strategy for the Development of Small and Micro Enterprises. The Strategy aims mainly at fighting poverty, increase the income, and provide suitable and sustainable job opportunities to tens of thousands of Yemenis in sectors of both agriculture, and non-agricultural activities, in addition to increase the capacity of the national economy by strengthening the small and micro enterprise sector.

 

Microfinance industry in Yemen

The Significant of Small and Microfinance Lays and in the Fact that they both  generate opportunities for small and micro entrepreneurs  to obtain financial Support that helps them increase their income, create new  employment opportunities, and activate markets by recycling capitals. As such, Small and Microfinance is proven as one of the most followed Ways in the world to alleviate poverty and improve the Standard lf living of poor people, and it is encouraged and recommended by international development organizations.

 

There is two stage of Microfinance in Yemen and that is :

 Before SFD  intervention

SFD centered its efforts on three main programs, and the small and micro enterprise development program is one of them. Its main goal is to increase the income of poor families by improving employment and income generating opportunities through the establishment and development of local programs that provide financial and non-financial services to small and micro entrepreneurs.

 

The industry in Yemen faced a lot of Obstacles and Difficulties And the main Difficulties are:

·              Limited or non-existent MF awareness among the target group, private and public sector.

 

·              General lack of interest by large segments of the public and private sectors.

·        Difficult infrastructures and environment.

·              Weak local institutional capacity of MFIs and partner organizations.

·              Limited availability of local know-how, and qualified cadres.

·              Unhealthy MF practices by some players (charities and subsidies).

·              Limited supply of non-financial services (particularly rural/agricultural) that create demand for MF services.

 

After SFD  intervention

The phase preceding SFD’s intervention in the small and micro enterprise sector was characterized by a lack of financial culture among poor families, and their dependence on family help and charity, which do not create sustainable income.  Meanwhile, in other developing countries, such as Bangladesh, a borrowing and on-time-repayment culture (through moneylenders) was developed with interest rates in many cases reaching 100%. Therefore, the introduction of official MF programs like Grameen Bank into the market was an easy matter, and demand for its services was widespread, especially that its interest rate were much lower than those charged by moneylenders.

 

The lack of a finance culture, religious believes, lack of experience by the partner organizations of MFIs, the scarcity of qualified cadres, and the lack of awareness in society about the role of micro finance have all created difficulties and obstacles for the Social Fund for Development in building the pillars of this industry in its early stages. SFD faced this situation by gathering great resources in terms of international consultants and experts, as well as world-known experiences built on the best practices known in micro finance to establish sustainable programs and foundations. Also, SFD provided the MFIs with the capital needed for lending activities, as well as in-kind and cash grants to carry-on their activities. Special focus was given to building up the necessary local capacities, training courses at all levels targeted at small and micro finance programs were provided, financial, accounting, and managerial systems were designed and developed. Workshops were, also, organized to discuss ways to develop the small and micro finance industry, and experiences were exchanged with international and Arab financing programs and organizations.

 

Because of those difficulties faced SFD piloted several experiments and models by benefiting from world know experiences, and by adapting such experiments to the local context with the help of local organizations, such as: NGO’s, agricultural cooperatives, and unions. The micro finance schemes experimented were diversified in their lending methodologies, such as: individual and group lending, cash and Islamic lending in its diverse forms inspite of its high operational costs. Financial services included: loans, savings, insurance, and both men and women were targeted, and several models were experimented, among them, the ASA microfinance model as one of the most important experiences worldwide. Also, the village banking model was introduces, and small and micro finance programs covered different areas, both rural and urban, and reached with their services the poorest people in Yemen.

 

As part of the efforts made by SFD to develop the small and micro financial sector in Yemen field studies and surveys were carried out for the interventions to be built upon. Such studies proved the importance of business development services in the sectors of small and micro finance, as they not only improve the managing capacity of enterprises, but also, help increase the income and efficiency of those enterprises, in addition to generating employment opportunities. These factors, in turn, increase the need of enterprises to access financial sources and their ability to invest more efficiently. For all these reasons, SFD sought to include BDS in its range of activities and organized numerous vocational technical training courses, and brought experts specialized in BDS. For this purpose, the Social Fund established a dedicated and specialized national agency for the promotion of BDS that would provide all the support needed for the development of enterprises by studying ways to support them technically, by learning from similar experiences, and by encouraging innovations that would lead to the diversification and growth of enterprises.

 The significant of Microfinance in Yemen After 10 Years become  more and more popular  and its prove that it is successful way to increase income .

 

The Main Achievements in MF is:

 

·  Creation and development of the MF sector from  scratch.

 

·  Creation and continuous development of a basic infrastructure for the MF industry to grow (systems, cadres, resources).

 

·  Introduced the philosophy of best practices.

 

·  Provided support for business development services (BDS).

 

·  Attracted a number of donors and key  players.

 

·  Prepared, and currently carrying-out the National SME Development Strategy.