Since the beginning of 2011, a revolutionary wave of demonstrations and protests have been taking place in the Arab world. There have been revolutions in Tunisia and Egypt where regimes have been changed; a civil war in Libya; civil uprisings in Bahrain, Syria, and Yemen; and major protests in other countries of the region. Economic decline, unemployment, and extreme poverty are among the numerous factors which led to the protests.

These events have created some challenges and opportunities for the microfinance sector and the financial inclusion agenda in the region.   Some of the common challenges include alterations in internal operations ranging from changed working hours in line with imposed curfews to complete shut-downs for a number of days.  Despite efforts to maintain the collection of installments as per schedule, portfolio at risk (PAR) for many MFIs in the region skyrocketed, in some cases leading to a dramatic decline or complete cessation of disbursements. This has led to an increase in expenses and a drop in both liquidity and revenues. 

In some cases, branches were raided, vandalized, or burned.  At least in one case, (Abyan Governorate, Yemen), where almost the whole area was evacuated for security reasons, the PAR went up from zero to almost 100% and revenues were quickly depleted, threatening the very existence of one of the high performing MFIs in Yemen.

Despite these challenges, the crisis has also shown true colors of many MFIs in the region.  Most Arab MFIs exhibited high levels of social commitment and responsibility to their staff, clients, and the community in times of need.  In one case, (Enda, Tunisia), the MFI went beyond serving its own clients and community to help and support refugees from neighboring Libya.

The importance of maintaining client loyalty through good relationships and continuous communications clearly stood out during the crisis, as clients safeguarded the branches and committed to repayment despite the crisis.  Sound human resource management was also reflected in staff loyalty and dedication to protect branches, and continue working during difficult conditions.

We began to see a greater focus from the temporary governments in Tunisia and Egypt on MSMEs as a tool for extending outreach to youth and poor populations.  In Tunisia, the government is currently working on a national microfinance strategy and a new microcredit law which will open the door for new players and investors.  In Egypt, the government has announced that one of the state-owned banks will be specialized in MSME lending over the coming period and has allocated resources for the development of these sectors.

–Mohammed Khaled and Ranya Abdel-Baki

Mohammed Khaled, Regional Representative for Middle East North Africa Region (MENA). Based in Ramallah Palestine, Mohammed works to deepen CGAP’s engagement in the MENA region, collaborating with regional partners on issues such as technology, policy, and funding for microfinance. Mohammed has over 25 years of experience in developing and managing innovative projects that empower women and the poor. Beginning as a practitioner in 1994, Mohammed has been playing different roles in the microfinance sector such as serving as the founding director and a senior trainer of Sanabel, the region’s microfinance association. He has also been working as a consultant and an advisor for several donors in the region including the Rockdale Foundation, Grameen Foundation/U.S. (later Grameen-Jameel), Agfund, and UNDP. A Palestinian national, Mohammed speaks Arabic and English.

Ranya Abdelbaki, an economist currently working at Sanabel–The Microfinance Network of Arab Countries, as the Executive Director since October 2009.  Prior to working at Sanabel, she has worked as a Credit Analyst for five years at National Société Générale Bank and as an Urban Economist & Development Specialist in an environmental consultancy firm. Ms. Abdel-Baki has done a number of consultancy assignments assessing the social impact and financial sustainability of development projects in Egypt.  She has worked with various local and international organization and government bodies including the Social Fund for Development, Ministry of Water Resources and Irrigation, Danish International Development Agency, and the World Bank. Ms. Abdel Baki holds a MSc. in Urban Economic Development from University College London.

Over the coming few weeks CGAP’s Microfinance Blog, in partnership with Sanabel and the Arabic Microfinance Gateway, is running a special series on the new challenges and opportunities that were created by the Arab Spring. Featuring voices from various countries including practitioners, donors, and regulators, the series will provide a platform to share lessons learned. We look forward to your comments and discussion.