Microfinance in Yemen: Setting the Global Context

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Sanabel Fourth Annual Conference
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Microfinance Policy Statement Toward a More
Inclusive Financial System in Yemen Deena
Burjorjee International Consultant
Serving the Poor 10 Million Clients by 2010
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Current State of the Industry

• MFIs are quite small - majority of programs have
  less than 3,000 clients
• Profitability - mixed with most MFIs struggling
  to cover costs let alone becoming financially
  sustainable
• Portfolio Quality on the whole good with PAR of
  most MFIs within acceptable range i.e.
• Localized problems within specific programs bring
  the average down
• General adherence to good practice and industry
  standards
• Transparency a challenge for many MFIs who
  experience inconsistencies in the availability
  and accuracy of reporting data
• NGO model dependent on donor funding for ongoing
  support

Yemen Active Borrowers 31,000 (12/06)
Regional Active Borrowers 1.2 million (9/06)
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Challenges and Obstacles to Growth

• Limited capital and institutional base among NGOs
• Limited transparency
• Limited engagement by commercial banks
• Limited product diversification

Retail Level

• Aversion to formal financial services
• Limited resources for labor, skills and capital
  that restrict scale and quality of operations
• Weak financial and managerial skills that reduce
  competitiveness and limits evolution into higher
  value markets

Micrenterprise Level
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Challenges and Obstacles to Growth

• Lack of adequate legal and regulatory structures
• Non-bank financial institutions, specialized
  banks or microfinance companies

Policy Level

• Lack of adequate support services
• Training institutes, rating agencies, accounting
  and auditing services, credit bureaus, etc.

Infrastructure Level
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Origins of the Policy Process
Ministry of Planning and International
Cooperation (MoPIC) German Financial Cooperation
(KfW)

• Building upon the pioneering field interventions
  and policy work of the SFD
• Following up on the outcomes of the First
  National Roundtable for Microfinance facilitated
  by CGAP in June 2006
• Further articulating the National Small and Micro
  Enterprise Development Strategy (SMEDS) adopted
  by the GoY in 2005

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Objectives of this Process
To launch an national dialogue on the promotion
of a more inclusive financial sector in Yemen

• Outcome
• A dedicated national microfinance policy
  statement with broad based support
• A National Committee tasked with leading ongoing
  efforts in the sector

• Establish a common terminology for a sector
  development

• Build a shared vision for the microfinance sector
  in Yemen

• Identify opportunities and challenges for growth

• Explore the levels and types of support
  activities needed

• Identify appropriate roles of the various
  stakeholders operating in the sector

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Thank You