Microfinance sector in Yemen in trouble
In 2010, microfinance was one of the strongest business sectors in Yemen, and Yemen ranked first in the microfinance industry among the Arab countries. But the recent uprising has negatively affected this vital sector that serves tens of thousands of poor Yemenis.
On Wednesday, the Yemen Microfinance Network (YMN) organized a workshop on the impact of the current situation on microfinance in Yemen. It brought together many different Yemeni microfinance institutions (MFIs) with the aim of finding possible solutions to the challenges that face this sector at this time.
YMN has showed its willingness to work together with its members to play an important role to reduce the difficulties facing the microfinance sector in Yemen.
According to a recent survey carried out by the YMN, about 88 percent of MFIs show that their operations have been impeded due to a number of factors such as power cuts, lack of fuel and difficulty of movement.
The survey shows that some clients refuse to repay loans because they want to keep some liquidity in a possibly worsening situation. About 50 percent of MFIs said that communication between staff at the institutions has been affected, and none of the MFIs said they had received any help to overcome the current situation.
According to the survey, about 55 percent of MFIs said that had not prepared a contingency plan, though the remainder said that they are dealing with the situation based on the contingency plans they had made.
Minister of Social Affairs and Labor, Amat Al-Razaq Hommad, said during the workshop that poor people have been affected most by the current crisis.
“The economic and security situation has been affected due to the political crisis. All of us were affected because of the current situation, but the poor are the most affected people,” said Hommad.
Mohammad Al-Lai, YMN chairman, pointed out that there are more than 60,000 projects funded by MFIs in Yemen, and about 300,000 people benefit from the loans and financing from these institutions.
“Yemeni MFIs have been highly damaged during the recent crisis and they have lost much of their financial potential,” he said. “It’s difficult for these institutions to collect the loans that exceed YR 5 billion (about USD 21.2 million).”
Khalil Al-Mikhlafi, research and development executive at the YMN, stated that microfinance in Yemen gives a great opportunity to poor Yemenis to prove themselves to be reliable workers. Al-Mikhlafi stressed the importance of providing poor people with economic chances to help start new businesses.
“We are proud that Yemen has a microfinance law that has contributed greatly to expanding the microfinance sector. There are growing demands for the services of microfinance institutions in Yemen,” said Al-Mikhlafi.
According to YMN, there are many reasons that have led to MFIs being badly affected by the current crises. They include: mass immigration of some clients from their livelihood areas, shortage of fuel and electricity, delay in repayments, looting and theft from some MFIs, significant financial losses due to high operational costs, inability of some MFIs to fulfill their obligations to donors, weak infrastructure and lack of contingency plans by some MFIs.