MICROCAPITAL STORY: Grameen-Jameel and Blue Orchard's Arab Microfinance Investment Symposium Concludes that Microfinance in Arab World Totals US $5.5 billion

The Arab microfinance industry, with an estimated total market of USD 5.5 billion in the Arab world, remains a largely untapped area, it was reported in multiple Arab-based newspapers following the 2008 Arab Microfinance Investment Symposium held on November 30, 2008. The Symposium had a total of fifteen speakers, including speakers from Grameen-Jameel, the International Finance Corporation (IFC), Blue Orchard Finance, and a variety of other organizations involved in microfinance, although the majority of the press focused on the presentation by Heather Henyon, the General Manager of Grameen-Jameel. The microfinance institutions (MFIs) on the MFI Panel included Jordan’s Tamweelcom, Egypt’s DBACD, Tunisia’s enda inter-arabe, and Pakistan’s Kashf Foundation. Additionally, more than 150 delegates from the UAE, Egypt, Lebanon, Jordan, Palestine, Morocco, Tunisia and Pakistan discussed the potential of the microfinance industry in the Arab region. The 2008 Arab Microfinance Investment Symposium was co-hosted by Grameen-Jameel, a social-oriented business based in Dubai, and BlueOrchard, a microfinance investment manager located in Geneva, Switzerland and was covered in this MicroCapital Event.

The statistics Henyon reports in her presentation, entitled ‘Microfinance Market and Trends in the Arab World’, provide details on the potential for microfinance institutions (MFIs) in Arab countries. Using statistics from the 2007 Sanabel Annual Industry Survey and the World Bank Global Monitoring Report 2007, Henyon calculated that the current 2.9 million borrowers in Arab countries make up less than four percent of the total demand for microfinance in Arab countries, and that the untapped market for microfinance is valued at USD 3.96 billion, only slightly less than the USD 5.29 billion that is calculated as the total microfinance market. While there 356 MFIs involved in the Arab microfinance market, only 46 MFIs report to the Mix Market in the Middle East and North Africa Region, including Sudan. Henyon also highlighted that the typical Arab MFI maintained a Gross Loan Portfolio (GLP) of USD 6.2 million, which is USD 1.4 million higher than the global average. The Arab region also maintained the global average of GLP to Assets ratio of 78 percent and the growth rate in GLP in 2007 over 2006 was 62 percent. Efficiency levels of MFIs in Arab countries were also in line with the global average of 19.5 percent.

Henyon suggested that the regulatory window in the area is opening, highlighting the recent progress made in Syria, Egypt and Morocco made projections for the future, and concluded with the projection that over the next 3 years the investment-ready MFIs at the Symposium will require over USD 500 million in financing to reach at least 4 million new borrowers.

Grameen-Jameel is a partnership between Grameen Foundation (GF) and the Abdul Latif Jameel Group launched in 2003 in order to strengthen the microfinance industry in the Middle East and North Africa (MENA). The purpose of the partnership is to increase the capacity of microfinance institutions (MFIs) in the region through financial support, technical assistance, training, and access to translated resources on best practice microfinance. As of the third quarter of 2008, the initiative had 324,087 new microfinance clients which is 32 percent their of 2011 target.

BlueOrchard is a commercial microfinance investment intermediary created in 2001 in Geneva, Switzerland. It is made up of two companies, BlueOrchard Finance S.A. and BlueOrchard Investments. Between these two companies it specializes in the commercial asset management of microfinance by sponsoring and/or servicing a number of special loan and debt securities. BlueOrchard is able to provide credits and equity to MFIs through its 160 partner MFIs in over 40 countries. In the first quarter of 2008, BlueOrchard Finance S.A reported assets of USD 750 million and BlueOrchard Investments had raised USD 35 million in equity. For more information, see Microcapital’s coverage of BlueOrchard’s investment deal with Morgan Stanley, its partnership with the Microfinance Bank of Azerbaijan and its contribution to the development of microfinance securitization.

The International Finance Corporation (IFC) is an intergovernmental organization launched in 1956. It is a member of the World Bank Group and its main objective is the promotion of private enterprise. The IFC finances private sector investment, mobilizes capital in the international financial markets, and provides advisory services to businesses and governments. For the fiscal year ending June 2008, IFC reported total assets of USD 49.5 billion.

By Lori Curtis, Research Assistant

Additional Resources:

AME Info: “Potential microfinance industry in Arab world estimated at $5.5 bn”

Blue Orchard Finance: “Home” “Speakers and Presentations” “2008 Fact Sheets”

Grameen-Jameel: “Home” “Overview”

Gulf News: “Microfinance still untapped in Arab World”

International Finance Corporation: “Home” “About Us”

MicroCapital Event: “2008 Arab Microfinance Investment Symposium”

MicroCapital Story: “Grameen Foundation USA and Abdul Latif Jameel Group of Saudi Arabia Launch the For-Profit Joint-Venture Grameen-Jameel Pan-Arab Microfinance Limited“