Microfinance in Lebanon

On March, 14th of 2013, Pi Slice and MicroWorld will launch the first online microcredit platform in MENA. To introduce you to the area, we decided to present an asset of microfinance in Middle-East countries. The first article of the series deals with microfinance Lebanon.

A market with slow growth

Microfinance helps providing financial services, small loans and insurance to poor and low-income households. The goals of microfinance in Lebanon, are to try enhancing and relieving poverty. So they encourage both men and women to form small businesses and exploit their talents and develop their skills. When they go forward with the microenterprise, they do things like, artisanal work, canning and spices.

Still, with all the progress known, the microfinance sector in Lebanon stays underdeveloped with only 37% of borrowers in years 2008-2009. Only 11,5% of the population in need is actually in the microfinance industry. Even if it has witnessed a slow growth over the years compared to other arabic countries in the Middle East, Lebanon has recently known a remarkable progress. The Economist Intelligence Unit has ranked Lebanon 38th worldwide amongst 55 other countries lately, when in 2010, it was ranked 49th in its microfinance index. In 2009, the budget for micro credit in Lebanon was around 62 million dollars for around 38,000 to 55,000 active clients. The country is known as the smallest market in the arab world.

An oligopolistic market

In Lebanon the microfinance market is primarily served by three large microfinance programs, the Al Majmoua, Access to Microfinance and Enhanced Enterprise Niches (AMEEN) and Al Qard Al Hassan. Many small programs were founded by individuals. Majority of the microfinance programs are structured by NGOs which are registered with the Ministry of Interior which supervises all non-political and non-profit making organisations. Ameen was the first program to be regulated as financial institution by the Central Bank as of September 2007. In addition, Ameen provides financial services in partnership with four lebanese banks which are, the Jammal Trust Bank, the Credit Libanais, the Lebanese Canadian Bank and the Fransabank. The vast majority of lebanese microentrepreneurs are restricted to credit. There is no perceivable microfinance law in Lebanon. Therefore those engaged in microfinance activities are monitored based on their registration type. Microcredit in the form of commerce continues to be the largest product offering.

What and for who?

Microcredit in the form of business loans has dominated the landscape in Lebanon. Both individual and group lending are offered to men and women. The active borrowers are women and rural borrowers. Microsavings does not exist due to regulatory structure and lack of interest on behalf of downscaling banks to provide tailored savings products to microentrepreneurs. Microinsurance have not yet been offered to their clients although based on political conflicts and 2006 war results, might be mitigated by a disability or life insurance product. Microcredit institutions respect certain norms and regulations and those who do not abide by those, do face certain problems.

Although progress has been altered by political conflicts, to help lebanenese, the Economic and Social Fund for Development (ESFD) was founded to encourage employment creation and the reduction of poverty. The ESFD funded by European Union (EU) has provided concessional loans at reduced interest rates. Microfinance providers are there to contribute in the development of Lebanon through microcredit.

Pi Slice by MicroWorld give a unique solution to develop microfinance in Lebanon. Its partner is Al Majmoua.

Source: Mix Market and Economist Intelligence Unit

This article is part of the special report: