Preliminary Findings from the MENA Microfinance Institutions Survey

Presented at the workshop on Youth Financial Inclusion in the Arab World, Rabat, Feb 2013

Overview

• Only 13% of youth in MENA have access to formal financial services, the lowest of any region in the world (WB, 2012).

• Concerns about Arab youth economic and financial exclusion have gained urgency in the aftermath of the recent unrest.

• Silatech and CGAP, in cooperation with Sanabel, conducted a survey of microfinance institutions in the region to identify:

1. The provision of financial and non-financial services to youth;

2. The difficulties faced by MFIs in providing services to youth;

3. Assistance that MFIs need in order to expand services to youth.

• A total of 47 MFIs completed the survey as of Feb 2013.

Main country of operation

0

2

4

6

8

10

12

14

What year was your MFI established?

0

5

10

15

20

Pre-1990 1990-94 1995-99 2000-04 2005-11

• Most of the MFIs in the survey were established after 2000.

What services does your MFI offer?

0%

20%

40%

60%

80%

100%

Which of the following loan products does your MFI offer?

• Most of the MFIs target existing businesses.

0%

20%

40%

60%

80%

ExistingBusiness

BusinessStartup

Personal ExistingBusiness

BusinessStartup

Personal

As a Share of Active Clients As a Share of Loan Portfolio

Is the following criteria considered in the credit analysis?

0% 20% 40% 60% 80% 100%

Other criteria

Savings balanceEducational / training background

CollateralBusiness license

Viability of business planGroup guarantee / credibility

Character of the individualPersonal guarantor (cosignatory)

Credit historyNational identification

Repayment capacity

Required Secondary Irrelevant

Is the following criteria considered in the credit analysis?

0% 20% 40% 60% 80% 100%

Other criteria

Savings balanceEducational / training background

CollateralBusiness license

Viability of business planGroup guarantee / credibility

Character of the individualPersonal guarantor (cosignatory)

Credit historyNational identification

Repayment capacity

Required Secondary Irrelevant

Is the following criteria considered in the credit analysis? Details for ‘Other’

0%

2%

4%

6%

8%

10%

12%

Cash Flow Gender Businessowner

experience

Type ofproject

Field visit Age Financialstatement

Does your MFI provide financial / non-financial services dedicated to youth?

0% 10% 20% 30% 40% 50% 60% 70%

Other

Technology-based support

Market linkage solutions

Skills training

Business management training

Technical assistance (mentoring/ coaching)

Financial literacy training

Dedicated Non-Financial Services to Youth

Dedicated Financial Services to Youth

Currently offer directly Currently offer through partners

Youth are underserved vs. their share of the working age population

36% 27%

0% 10% 20% 30% 40% 50%

Tunisia

Egypt

Morocco

Palestine

Jordan

Iraq

Yemen

Lebanon

Average

Share of Youth(18-29) amongMFI clients

Share of Youth(18-29) in theworking agepopulation

Youth are underserved vs. their share of the MFIs loan portfolios

36% 18%

0% 10% 20% 30% 40% 50%

Morocco

Iraq

Lebanon

Egypt

Yemen

Jordan

Palestine

Average

Share of Youth(18-29) loans inportfolio

Share of Youth(18-29) in theworking agepopulation

Challenges in increasing share of youth in portfolio or developing dedicated products

-10%

10%

30%

50%

70%

90%

Lack of credithistory orcollateral

Few supportinstitutions totrain potential

borrowers

Identifyingyouth's demand

for suchproducts

Overcomingperceptions of

riskiness ofyouth lending

Ability toengage /

communicatewith youngborrowers

Appropriatelytrained andincentivized

staff

MFI opinions: Knowledge and Knowhow

0% 20% 40% 60% 80% 100%

Youth are uneducated aboutmanaging money

Youth have a higher default ratethan adults

Youth have a poor understandingabout how to run a business

Challenges in communicationbetween MFIs and youth exist

Youth are unaware of the financialservices offered

There is a lack of knowledge of theyouth market

Agree

Neutral

Disagree

MFI opinions: youth clients, challenges in communicating, regulation & competition

0% 20% 40% 60% 80% 100%

Increased competition with otherMFIs threaten our survival

Laws & regulatory frameworksputs a constraint on our business

Geographic factors make itdifficult for youth to reach us

Telecom issues make it difficult foryouth to communicate with us

Lack of sufficient demand forfinancial services by youth

In general, youth are notprioritized as potential clients

Agree

Neutral

Disagree

Types of support to increase youth share in portfolio or develop youth products?

0%

20%

40%

60%

80%

100%

Financial assistance(debt, equity,

guarantees, etc.)

Technicalassistance in

product design anddevelopment

Diagnostic andanalytical support

Market outreachand

communications

Conclusion

• Most MFIs provide “dedicated” financial services to youth and dedicated non-financial services (training, technical assistance).

• Youth are underserved as compared to their share of the working age population and average loan sizes are smaller than for adults.

• From MFIs’ perspective, the main reasons are young people’s lack of credit history and few institutions that offer training.

• Asked in more general terms, however, MFIs suggest the key issue is a lack of knowledge among MFIs about the youth market and lack of awareness among youth of financial services offered.

• This is followed by lack of knowledge among youth about how to run a business (even ahead of higher default risk).

Thank you!