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Financial inclusion constitutes one of the most critical development challenges in the MENA. In the microfinance industry, commercial loan guarantees have emerged as a key strategy to integrate microfinance industries into local capital markets and achieve scale. We were asked to work with an Arab donor and a regional microfinance network to expand the capacity of microfinance institutions in 7 MENA countries.
We supported discussions with leading microfinance institutions, commercial lenders, and microfinance associations to identify leverage points to prioritize within a strategy to build a regional microfinance capacity development institution. The result was the development of a $5 million investment vehicle designed to help MFIs gain independence from donor funds, attract deposits, attain financial leverage, and gain the support of the GCC investment community.
Having successfully guided discussions between key players, we managed the grant to support institutional capacity development and attract co-investment to safeguard the sustainability of the project. We collaborated with implementing partners to position the network as a regional technical service provider fostering the development of a financially sustainable Arab microfinance sector by targeting advocacy campaigns aimed at legislative reform, financial sector inclusion, and mobilization of further investment into the sector.
The grant awarded to the network of implementing partners enabled capacity development assistance to 53 leading microfinance institutions in 11 countries, serving approximately 11 million borrowers. Furthermore, the donor-supported guarantee allowed 10 regional microfinance institutions to generate $20 million in loanable funds annually, reaching an incremental 200,000 borrowers per year.
In Arab countries where commercial lenders cannot accommodate the credit needs of SMEs and microenterprises due to less mature financial markets, this grant has become one of the region’s first policy experiments involving guarantees to increase open the door to home-grown microfinance institutions. The grant enabled leading Arab microfinance entities to leverage sustainable conventional debt for service growth and develop frameworks for self-sufficiency to address the financial inclusion issues.