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Introduction to Microfinance : A tool of Human Development and the case of Middle East and North Africa - MENA

The 33 rd ICSW Global Conference. Introduction to Microfinance : A tool of Human Development and the case of Middle East and North Africa - MENA Magdy M. Moussa, PlaNet Finance Middle East Tours, France 3 July 2008. Contents . Key Principles of Microfinance Microfinance Players

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Introduction to Microfinance : A tool of Human Development and the case of Middle East and North Africa - MENA

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  1. The 33rd ICSW Global Conference Introduction to Microfinance : A tool of Human Development and the case of Middle East and North Africa - MENA Magdy M. Moussa, PlaNet Finance Middle East Tours, France 3 July 2008

  2. Contents • Key Principles of Microfinance • Microfinance Players • Microfinance in the World Today • Demand on Microfinance in MENA

  3. Key Principles of Microfinance Microfinance is the provision of financial services to low-income people traditionally excluded from the formal financial sector. Over time, microfinance has come to include a broader range of services: credit, savings, insurance, remittances etc Client Characteristics: Low-income, Self-employed, Often household-based Microfinance clients are the poor and vulnerable non-poor who have a relatively stable source of income.

  4. Key Principles of Microfinance • The Poor need a variety of financial services, not just loans. • Microfinance is a powerful instrument against poverty • Microfinance means building financial systems that serve the poor • Financial sustainability is necessary to reach significant numbers of poor people • Microfinance is about building permanent local financial institutions • Microcredit is not always the answer • Interest rate ceilings can damage poor people’s access to financial services • The government role is as an enabler, not as a direct provider of financial services • Donor subsidies should compliment, not compete with private sector capital • The lack of institutional and human capacity is the main constraint • The importance of financial and outreach transparency GE

  5. NGO/MFIs Donors Commercial Banks Public and Development Banks Local institutions Often set-up with help of international agencies / NGOs Often not-for-profit 80 million people reached by MFIs in the world today Either work directly with clients by providing financial products designed to meet their needs Or work indirectly by refinancing microfinance institutions / providing technical assistance Increasingly important as governments become more involved in microfinance Either work directly with clients Or act as APEX institutions for the microfinance sector • Work to develop the sector through : • Financing institutions • Providing technical assistance • Working with governments on policy and regulation • Providing assistance to microentrepreneurs Microfinance Players Source: UNCDF, 2004

  6. Microfinance in the World Today Over 80 million people are now assisted by over 10,000 microfinance institutions. 54.8 million of these people are amongst the poorest populations. With their 274 million family members, this is the equivalent to the populations of Great Britain, France, Germany, Italy, Ireland and Sweden. US$ 21.6 billion is still needed to provide microfinance to 100 million of the world's poorest families.

  7. Demand on Microfinance in MENA Size Impact on Clients Clients’ Needs and Wants Market Penetration by Microfinance Institutions (MFIs) - Loan Products only The MFIs in the Arab/MENA region recorded the highest rate of growth in borrowers between 2005 and 2006, with a typical institution increasing its client base by 36% which is more than the industry median of 25% Sources: Sanabel updated 2007 Industry survey - UN estimates based on national census authorities - World Bank Development indicators 2006

  8. Demand on Microfinance in MENA Size Impact on Clients Clients’ Needs and Wants Source: PlaNet Finance Microfinance Impact Assessments for Morocco 2004, Jordan 2006 and Egypt 2007-2008

  9. Demand on Microfinance in MENA Size Impact on Clients Clients’ Needs and Wants Taking Egypt as an example (2007) • 51% desire Credit Insurance • 64% desire health insurance • 64% desire Retirement/pension fund • 28% desire Property Insurance • 36% desire Educational Loans • 37% desire Consumption Loans • 16% desire Money Transfers/Remittances Source: PlaNet Finance Microfinance Impact Assessments fo rEgypt 2007

  10. Thanks for your Attention Magdy M. Moussa PlaNet Finance Middle East Director mmoussa@planetfinance.org www.planetfinance.org

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