Serving the Very Small Enterprise (VSE) Segment by Microfinance Institutions in the Arab World
Over the last few years, some microfinance institutions (MFIs) in the Arab World have started to upscale and target the very small enterprises (VSE) segment. Some MFIs recognized the market opportunity and intentionally expanded to serve the segment. But most have done so more organically, looking to retain clients whose business needs can no longer be met through micro-loans. However, these shifts are still in the nascent stage, and though some successes have been observed across the region, the results remain mixed.
This report is based on: i) a survey conducted in May-June 2015 by IFC and Sanabel to better understand the efforts of MFIs in Arab countries to target the VSE segment and respond to their needs; ii) IFC’s experience providing advisory services to MFIs in the MENA region to help them expand their loan offerings and target the VSE segment; iii) a series of regional IFC workshops on lending to VSEs; and finally iv) a 2014 IFC study on MFI lending to VSEs in Latin America.
The objectives of this report are to:
- Attempt to define the VSE segment;
- Review the microfinance sector’s efforts to serve the VSE segment, based on survey results;
- Assess the scale of these efforts;
- Identify key challenges;
- Assess the levels of MFI interest in serving this segment;
- Draw some lessons from the experiences thus far and offers some guidance for next steps.
