Islamic Microfinance in Yemen: Challenges and Opportunities

This paper theoretically reviews the Islamic microfinance industry in Yemen and identifies the challenges and opportunities for the industry. It is based on secondary data collected from various sources such as books, websites, and official reports. The study covers the period from 1997 to 2013 and reveals that there is a promising demand for Islamic microfinance and at the same time there are some challenges facing its growth and development. The paper also provides suggestions to develop the microfinance sector in the country including:

• It is necessary to establish a special law for regulation of microfinance activities in the market;
• Operation cost and other charges of MFIs must be reduced to the lowest level;
• Traditional collateral system should be reduced to the minimum and the group lending guarantee should be maximized;
• Awareness and promotion about microfinance should be increased;
• Islamic MFIs must have a direct line of consultation and cooperation with international organization;
• There is a need of focusing more on the rural areas where majority of poor people of the country exist;
• Government should provide some support and grants to the new Islamic MFIs till they are sustainable.