Al-Amal Microfinance Bank's Micro-Letters of Guarantee (Micro-LGs)

This paper describes the development of microfinance in Yemen and the role of Al-Amal Bank in the sector over the past 15 years, then introduces the concept of micro letters of guarantee, which Al-Amal Bank launched in 2020.

Due to the growth of the humanitarian and development work of international organizations in Yemen as a result of the war, SME owners have seen an opportunity to provide services and implement various projects for these organizations through competitive bidding. However, their financial needs for project implementation did not align with AMB's financing products in terms of loan amounts and long repayment periods. AMB was forced to offer short-term financing due to the liquidity crisis faced by the banking sector. 

Therefore, AMB launched in 2020 the Micro-LGs (micro letters of guarantee) service, thus becoming the first microfinance bank in Yemen and in the Middle East and North Africa region to issue Micro-LGs. The aim of this is to enable low-profile contractors, merchants and SME entrepreneurs to access LGs service for multiple purposes, such as preliminary guarantee, implementation guarantee, maintenance guarantee, and advance payment, among others