2003 Benchmarking Arab Microfinance

This report analyzes the performance of microfinance institutions in the Arab world. Based on a pool of over 100 institutions around the world, the paper compares regional performance with that of global benchmarks and dissects institutional performance differences within the Arab world.

This paper finds that:

• While among the youngest institutions globally, Arab MFIs reach more and poorer clients with credit services than do MFIs from other regions;
• As a sector dominated by NGOs, Arab microfinance relies more heavily on donations and retained earnings to finance its growth;
• Arab MFIs, on the whole, have achieved profitability and financial sustainability;
• This profitability is driven by the lowest average total expenses of any region;
• On the whole, MFIs in the Arab world maintain excellent portfolio quality, retaining more revenue from lending, and decreasing potential costs due to default.

In comparing MFIs in the Arab world to those in other regions, the paper concludes that:

• Arab microfinance has shed its youthful image, having already achieved strong average regional outreach and sustainability levels;
• Challenges of growth still remain. Opportunities exist for better linkages to the local banking sectors and for institutional and product innovation.