Microfinance In Yemen

This paper discusses the provision of financial services to the poor, with a more detailed discussion about microfinance in Yemen. The paper argues that:

• The poor need to have access to formal financial services to increase their income and to get them out of poverty;
• Microfinance is one way of providing financial services to the poor;
• By offering the right products, microfinance can be sustainable, can grow and serve large numbers of people.

Discussing microfinance in Yemen, the paper states that:

• Yemen, one of the poorest Arab States, has made a decision to improve basic services, increase income of the poor and enhance job opportunities by supporting the small and micro enterprise (SME) sector;
• The first initiatives to provide microfinance in Yemen started in 1997, with the aid of the Social Fund for Development (SFD):
  • The concentration was on providing loans and savings services in both rural and urban areas,
  • SFD supported programs have served more than 15,000 clients.
• By the end of 2002:
  • There were 16 microfinance providers in Yemen, servicing about 7,000 clients,
  • They offer savings, insurance and other business support services.
• Microfinance in Yemen is faced with many challenges like lack of experience, weak intermediaries, economic instability, inadequate infrastructure, scattered population, cultural and regulatory barriers.

The paper concludes that, despite the challenges, microfinance could still grow in Yemen:

• A model, that would take into account the specific local characteristics, should be developed;
• Donors, government, intermediaries and clients should be strongly committed.