• Nadine Chehade, PlaNet Finance





“In 2006, the Lebanese microfinance sector recovered from the war within 3 months”

It is in Beirut that the agency Planet Rating, which specialises in rating microfinance institutions, has set up its regional office. Nadine Chehade, who manages Planet Rating MENA, gives us her viewpoint on the sector.

In 2006, Israel launched an offensive in Lebanon against Hezbollah: How did microfinance bear the shock?
The war led to a drop in repayments: even when they were not directly affected, a lot of borrowers chose to wait and keep hold of their money. For Lebanese Microfinance Institutions (MFIs) this meant an increase in their “risk portfolio” between July and September 2006 (the Israeli offensive took place during the summer of 2006). Also some clients were directly affected with shops being demolished and houses destroyed. The two main MFIs (Ameen and Al Majmoua) received emergency aid from international NGOs and the European Union. They were able to supply their clients with material to rebuild or to re-establish stocks. A few months later, repayments were pretty much back to normal.

What is the Role of the Banks in Lebanese Microfinance?
Several banks are partners with the microfinance institution Ameen, which for a long time insisted that its clients open a bank account in order to obtain microcredit. But now Ameen offers loans directly, since microfinance doesn’t always interest the Lebanese banks. When the Central Bank authorised them to deduct loans to MFIs from their statutory reserves, only a very small number of loan agreements resulted. And yet the banks are very liquid!

Is Islamic Microfinance Very Present in Lebanon?
Al-Qard Al-Hassan (AQAH), the microfinance NGO affiliated to Hezbollah probably has about 70 000 clients. The other MFIs are occasionally confronted with clients who refuse a loan with interest (Islamic law forbids interest). So that no one is excluded Al Majmoua had the idea of developing Murabaha, which is the main Islamic lending service, but this was not followed up. Today, with the exception of AQAH, Islamic microfinance is not very developed in Lebanon.

What are the Non-Financial Services Offered by the Lebanese MFIs?
Most of the Lebanese MFIs have NGO status and offer a variety of non-financial services. Some, like the Makhzoumi Foundation, offer medical care, others focus on agricultural projects or certain categories of the population. Al Majmoua organises training workshops as well as awareness sessions for women. Ameen, on the other hand, limits itself to financial services and small businesses, aiming mainly at providing banking facilities for its clients.

Are the Regulations Inadequate?
As in many countries the Lebanese Central Bank regulates financial institutions, not NGOs. Despite requests from the principal Lebanese MFIs or international organisations to bring the regulations up to date, there are no clear specific laws regarding microfinance but plans are being studied. However it should be noted that the Central Office of Credit Risk has evolved in preparation for including small sized loans, thus enabling Ameen and Emkan, who have decided to become financial institutions, to be able to take advantage of this. Today one of the main challenges would be to include Al Majmoua, the largest MFI with NGO status, in the Central Office of Credit Risk, with a view to fighting excessive debt.

This article is part of the special report: