Jordan Microfinance Institutions' Financial Viability to ... - EuroJournals

European Journal of Economics, Finance and Administrative Sciences
ISSN 1450-2275 Issue 42 (2011)
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http://www.eurojournals.com/EJEFAS.htm
Jordan Microfinance Institutions’ Financial
Viability to Achieve Microcredit Outreach
Eyad Malkawi
Dean of Faculty of Economics & Administrative Sciences
Jarash Private University, Jarash, Jordan
P. O. Box: 26150 Jarash, Jordan
E-mail: eyad63jo@yahoo.com
Radi Al Atoom
Director of Research and Policies Dept
Economic & Social Council, Amman, Jordan
P.O. Box: 914035 Amman 11194 Jordan
E-mail: radiatoum@esc.jo and, atoumradi@yahoo.com
Abstract
This paper focuses on analyzing the Jordanian eight specialized MFIs’ financial viabilities,
and its breadth of microcredit. The main objectives of the study were to investigate whether
Jordan’s MFIs can maximize its outreach of Microfinance to cover more areas, especially
remote areas, poverty enclaves and high rate of unemployment areas.
Two phases of analyses were conducted, comparisons between Jordan’s MFIs at the
Arab level, and comparative analysis among national MFIs. An industry norm is utilized
for this comparison, in addition to the criteria initiated by SANABEL concerning outreach
KPIs linked to return and risk KPIs that were used to fulfill the analytical comparisons.
It was found that, Jordan MFIs are performing well in comparison to Arab MFIs.
However, Its MFIs are rating the first among Arabs in allocating per capita money to
microcredit and, outreach concerns to serve women, It rates in the middle of Arabs in its
MFIs financial viability. These results assures that, Jordan MFIs have a high potential to
play more role in the Jordanian Microfinance sector, and to improve its financial policies to
widen its outreach to cover theinsatiable areas so as to fulfill the shortages of Microfinance
demand, and match the national challenges facing its socio-economic status; the poverty
and unemployment.
Keywords: Microfinance Institutions (MFIs), Key Performance Indicators (KPIs),
Cooperative Group to Assist the Poor (CGAP), Financial Viability,
Microcredit Outreach, Industry Norm.
1. Introduction
Jordan is considered the first country among MENA countries that experienced Microcredit, a corner
stone of lending operations has been started since 1937 by the Near East Foundation NEF; an
American NGO. NEF provides, mainly, technical assistants to Jordan entities, government and NGOs,
in addition to financial supports from donor agencies throughout the world. Through its efforts, NEF
help support the establishment of the core business of Microfinance in Jordan, especially, its wide

122 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
experience of Credit Schemes at the local communities in cooperation with grass root voluntary
societies (Al Atoom, 1998, P 8).
In fact, the financial credit in Jordan is initiated by the Outman Bank during the Outman rule on
Arab countries that focused its operations on agricultural credits; which was lately renamed the
Agricultural Credit Corporation (ACC) in 1959. Aftermath, Arab Bank established its branch in 1930,
followed by UNRWA in 1957, and Industrial Development Bank in 1964, and many other agencies
were followed (Ibid, P 8).
In 1996, the World Bank published the “Social Productivity from Concept to Action” report
that has proposed the initiation of the four components topromote Jordan’s social productivity, of
which Microfinance was one of the four major components to work on. Thereby, five microfinance
companies were established; one private entity and four non-profit entities(World Bank, 1998, P23).
2. Literature and of Related Studies’ Review
2.1. The Theme of Microfinance: A Theoretical Perspective
Microfinance is a concept that postulates the credit to micro and small business; it also includes
savings; cash transfers; and insurance to poor and low-income people. Strictly speaking, it comes into a
wide concern for the developing countries after continual increase of poverty and unemployment, and
lack of income equality.
In order to be more effective and maintain community’s local development, microfinance
institutions (MFIs) should provide both financial and non-financial services. Non-financial services
envelop a well define of the target groups and target areas; target groups are the poor and/ or the
unemployed, and the target areas are the areas that have the potential to establish a micro and small
projects according to the local community needs’ assessment. Therefore, non-financial services
envelop: business awareness, market surveys, training target groups on “how to start their own
business”, providing feasibility studies, assisting in establishing their projects, providing them with
business counseling, and assisting in marketing activities, consequently.
The Consultative Group to Assist the Poor (CGAP) highlights eleven principles that are
essential for building financial systems for the poor, of which the most important are: their need of a
variety of financial products; ability to raise income; build their assets; integrate country’s mainstream
financial systems; reach large number of poor people; can attract domestic deposits to be recycled into
loans; governments have to enable others to develop financial services, and not to provide them
directly; and Microfinance works best when it measures its performance, also when MFI produces
accurate data on financial performance, as well as social performance (Brandsma&Bourjorjee, 2004, P
9).
2.2. Review of Microfinance Studies in Jordan
Microfinance in Jordan has studied fewtimes; it was firstly demonstrated through the World Bank WB
in 2001 aimed at evaluating Development and Employment Fund DEF. The WB reviewed the small
scale financing in Jordan via governmental organizations focusing on DEF activities, and
recommending liquidating its assets and leaves the market to non governmental organizations NGOs
(Brandsma, WB, 2001).
In 2007, Planet Finance in cooperation with the Ministry of Planning & International
Cooperation MOPIC and French Development Agency studied the activities of seven Jordanian MFIs,
through a field surveyto a sample of 1314 MFIs’ beneficiaries, the study finding was mainly concerned
with the beneficiaries’ characteristics, loans’ conditions, projects’ formalities, income of projects’
owners, and the social impact of loans on the beneficiaries (Planet Finance, 2007).
Recently, in 2011, there was a policy paper study published by the Economic & Social Council
aimed at investigating the status of microfinance sector, and the policies that activate the role of MFIs

123 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
in achieving the socio-economic national goals for Jordan, especially in combating unemployment. The
main recommendation of the study is that the government and the private sector, under their corporate
social responsibility, should promote to establish more non-profit MFIs as an active tool to combat
poverty and unemployment(Economic and Social Council, 2011, P 2).
Furthermore, International and Arab network entities always publish evaluative and comparable
reports on Arab microfinance and international ones. SANABEL as an Arab specialized network
usually publish Arab MFIs experience in financing microenterprises data and reports.
Strictly speaking, no study touched the MFIs’ financial viability in comparison to their
outreach, either at the state level, or at entity level.
3. The Study Methodology
3.1. The Study Objective
The study aims to investigate the ability and the credibility of Jordanian Microfinance Institutions’
(MFIs) to achieve lending outreach and width performance.
3.2. Why the Study
It’s widely believed that, microfinance is an appropriate tool for local development. Therefore,
microfinance programs have to be developed for the poor and, local communities as an overarching
objective, not as an end in itself. To do so, MFIs should have an outreach ability and mechanism to
cover poor and remote areas in need to promote the unemployed people to establish and develop
income- generating projects.
3.3. Data and Time-Frame
The study utilizes 2009 data, as the last available data for comparisons. Thereby, it will benefit the data
and comparable key performance indicators (KPIs) of Arab Microfinance Network (SANABLE) and
MixMarket international published information.
4.4. The Context and Population of the Study
The study, to achieve its objectives, will comparably analyze the financial performance of eight
Jordanian MFIs utilizing seven main financial return KPIs and, six main liquidity and risk KPIs
compared to 15 outreach KPIs that are accredited and published by the Arab Microfinance Newsletter
(SANABLE) and MixMarket. However, due to the fact that Jordan’s MFIs are not legally tolerated to
have deposits, the study utilized eight outreach KPIs out of the 15 mentioned. Thereby, in total, the
study comparably analyzes 21 financial KPIs.
4. The Study Findings
4.1. An Overview of Microfinance in the World
In the world, there are 1885 specialized MFIs, with a portfolio of 64.8 b. US $ by the end of 2009, and
roughly 90.8 m. active borrowers with an average loan balance of $ 523 per
borrower(www.themix.org/mfi/country/Jordan&www.mixmarket.org).
Among Arab population of 370 m., 26% of which are estimated to be living on less than US $ 2
per day. However, microfinance in the Arab region is continued to be highly profitable in 2009, it
recorded the highest median return on assets ROA at 3.4%(SANABEL & Mix, 2010, P6).
Arab Microfinance sector is the second youngest microfinance sector in the world. It continues
to grow with high rates; 10 Arab states have 55 specialized MFIs, including Iraq. In general, Arab
Microfinance is characterized by its mature MFIs; using two lending methodologies, namely solidarity

124 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
group lending and individual lending; the MFIs are not regulated as financial intermediaries by the
financial authorities; they, recently, began to offer a variety of additional loan products including
consumer loans; many of them offers micro- insurance, especially in Jordan and Egypt; and some
experiencing mobile credit units (SANABEL & Mix, 2010, Op., Cit., PP 1-5).
Active borrowers in the Arab world constitute only 2.7% of the worlds’ active borrowers, and
2.9% of its number of specialized MFIs, and also constitute 1.8% of the worlds’ loan portfolio, as has
depicted from Table No. (1).
Although, Arab MFIs are growing and tried to regulate microfinance sector, most Arab MFIs
are unable to offer saving services, also another barrier is the lack of establishing a Credit Bureaus yet
(SANABEL & Mix, 2010, Op., Cit., P6).
The study conducted its analysis through two stages; at first through KPIs comparison of Jordan
among Arab countries’ MFIs, and secondly at the stage of Jordanian eight specialized’ MFIs.
4.2. Microfinance at the Arab Level
Measuring and analyzing the comparative performance of Microfinance in the Arab world
report,identified the outreach indicators in 15 key performance indicators (KPIs), of which seven KPIs
are considering deposit figures to MFIs, and due to the fact that Jordanian MFIs have no deposit
services, the study only considers eight KPIs to represent the outreach performance. The report also
determines eight macro-financial performance KPIs to be considered as a match of the breadth of
microcredit outreach (Mix, SANABEL and, CGAP, 2010, P 16).
In Arab countries, demand on microloans is still high; an outreach gap was estimated to 53 m.
borrowers who are eligible to access microfinance in 2008. However, in Jordan it is estimated to be
205,444 borrowers and of 167.2 m. $ portfolio gap (Seep, Citi foundation, and SANABEL, P 9).
Access to finance is hindered, in some Arab countries, by the denomination of public sector
banks or funds that directs credit to certain, also many specialized MFIs are perceived to finance less
risky clients and high return business. In addition to other obstacles such as: contract enforcement;
property registration; poor investor rights protection; bureaucratic procedures; and high minimum
capital requirement for business start-ups. Therefore, Microfinance sector in the Arab region remains
shallow with low levels of access to finance (Seep, Citi foundation, and SANABEL, Op., cit., P 12).
At the first phase, the comparative data of the KPIs are crystallized in the following Tables No.
(2,3 & 4).Although Jordan comes to rate the third among 10 Arab countries in terms of the number of
institutions; active borrowers; and loan portfolio size in 2009, it actually comes as the first Arab
country when compared its loan portfolio per capita, and rating the second when comparing its active
borrowers to inhabitants, as can be driven from Table No. (1).
Jordan’s borrowers per capita are amounted to 2.7%; which is more than doubled of the Arab
figure of only 1% vs. to 1.6% to world average.On the other hand, Jordan achieved high rank in the
allocation of microfinance money to inhabitants; Jordan per capita loan portfolio was amounted to 22.8
$ in 2009. Whereas, loan portfolio per capita was amounted to 11.4 $ to the world, and only 4.6 $ to
the Arabs, on the average.
Table No. 1: Active Borrowers and Loan Portfolio in Arab Countries in 2009
Country No. of MFIs
No. of Active
Borrowers
Loan
Portfolio
(LP) US $
Borrowers/
Pop %
LP/Cap US $
Average
Loan
Balance US
$
Egypt (76) 13 1,100,541 216,688,450 1.5 2.9 197
Morocco (31.7) 10 915,839 609,943,100 2.9 19.2 666
Jordan(5.9) 8 159,081 134,262,829 2.7 22.8 844
Tunisia (10.7) 1 123,041 41,355,997 1.1 3.9 336
Palestine (5.2) 8 34,057 89,202,509 0.8 17.2 2619
Lebanon (4.2) 3 31,671 29,274,281 0.8 7.0 924

125 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
Table No. 1: Active Borrowers and Loan Portfolio in Arab Countries in 2009 - continued
Yemen (24) 6 28,714 3,593,486 0.1 15.0 125
Syria (21.9) 2 21,327 18,181,266 0.1 1.0 852
Sudan (42) 3 20,155 3,867,094 0.05 9.2 192
Iraq (31) 1 13,161 21,911,871 0.04 70.7 1665
Total Arab (252.6) 55 2,447,587 1,168,280,883 1.0 4.6 477
The World (5670) 1885 90,800,000
64,800,000,00
1.6 11.4 523
Arab % 2.9 2.7 1.8
Source: 1. SANABEL and Mix, Arab Microfinance Analysis & Benchmarking Report 2010.
2. www.themix.org/mfi/country/Jordan&www.mixmarket.org.
4.1.1. Outreach KPIs
Jordan exercising well achievement for all outreach indicators; it always exercising above Arab
industry norm’ index for the 8 th outreach KPIs, and rounds about the double against Arab norms for the
gross loan portfolio and; average outstanding balance indicators of an index of 1.6, and more than half
of that norm for average balance per borrower, and average outstanding balance to GNI per capita of
an index of 1.3 plus.
On the other hand, Jordan exercising quarter more than Arab norm for active borrowers, female
percentage, average balance per borrower to GNI per capita indicators, of roughly an index of 1.3.
Thereby, we can conclude from outreach indicators that Jordan was rounded between the second and
third rank among Arab countries as driven from Table No. (2).
Female Borrowers: Jordan became into the second among Arab MFIs for female lending, 79%
of total number of loans are streamlined to females,comparing to an Arab average norm of 63.8% to
females, and having an index of 1.24.
Average Balance per Borrower: Jordan average loan portfolio to the active borrower is
amounted to 844 $, and rated as the second among Arabs, Jordan’s indexed to 1.6 and Lebanon to 1.8
comparing to average balance of 527$ as Arab average. Also reference to the average balance per
borrower to per capita GNI, Jordan and Morocco ranked at the second constituting an index of 1.3
versus 7.0 to Palestine.
Average Outstanding Balance AOB: Jordan ranked the third among Arabs’ gross loan
portfolio to loans outstanding, it amounted to 8387 $ with an index of 1.6 compared to 5266$ to the
Arabs average. Palestine and morocco are higher than Jordan of an index of 4.6 and 2.1 respectively.
On the other hand, Jordan rated the third for the AOB per capita indicator, having an index of 1.3
compared to 6.5 and 2.2 to Palestine and Egypt respectively.
Table No. 2: Microfinance Outreach Key Performance Indicators KPIs in 2009
Outreach KPI Tunis Morocco Egypt Jordan Palestine Yemen Lebanon
Industry
Norm
No. of Active Borrowers 123,041 915,839
1,100,5
41
159,081 34,057 28,714 31,671 129,507
% of Females 63 56.6 69.9 79 54.8 96 41.4 63.8
Female % Index ~ 0.99 0.89 1.10 1.24 0.86 1.51 0.65 1.00
No. of Loans Outstanding 10219 55693 38873 16009 3669 3564 13244 12958
Gross Loan Portfolio
m.US $
41.356 609.943 216.688 136.988 89.203 3.593 29.274 68.234
Average Balance per
Borrower (ABB) $ *
336 666 197 844 2619 125 924 527
ABB Index ~ 0.6 1.3 0.4 1.6 5.0 0.2 1.8 1.0
ABB / GNI per capita %
*
8.3 23.4 8.0 22.4 124.4 11.3 10.9 17.7
ABB / GNI per capita
Index ~
0.5 1.3 0.5 1.3 7.0 0.6 0.6 1.0
0

126 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
Table No. 2: Microfinance Outreach Key Performance Indicators KPIs in 2009 - continued
Average Outstanding
Balance (AOB) $ *
4047 10952 5574 8387 24312 1008 2210 5266
Average Outstanding
Balance (AOB) Index ~
0.8 2.1 1.1 1.6 4.6 0.2 0.4 1.0
AOB/GNI per capita % * 99 385 228 223 1155 91 26 176.4
AOB/GNI per capita
Index ~
0.6 2.2 1.3 1.3 6.5 0.5 0.1 1.0
GNP per Capita 4070 2848 2450 3766 2105 1108 8467 2985
GNP per Capita Index ~ 1.4 0.95 0.82 1.26 0.71 0.37 2.84 1.00
^ ~
An Industry Norm is the Geometric Average of the Indicators. * Calculated by the researchers. Calculatedcomparing to
the Industry Norm.
Source: SANABEL & Mix, 2010 Arab Microfinance Analysis & Benchmarking Report.
4.2.2. Financial Performance & Revenue Indicators
The financial performances of the Arab KPIs are drawn by Table No. 3 as follows:
Return on Assets ROA: Jordan MFIs’ROA is 7% compared to Arabs norm of 2.1%, only
Egypt MFIs are higher, and the lowest country is Morocco of 0.2%. Also, for Return on Equity ROE,
Jordan rated the third toexercise 14.7%after Yemen and, Egypt of 32.3% and 21.4% respectively.
Operational Self-Sufficiency: Financial revenue to financial expenses and losses on loans is
shown to be highest among Arab countries for Egypt MFIs; it achieved 168.2% followed by Lebanon
and Jordan of a rate of 134.8% and 133.3% respectively. Thereby, the Financial Self-Sufficiencyof
Jordan MFIs is shown to be in the middle among Arab countries.
Financial Revenue / Assets: Yemen experienced the highest rate of 29.8%, and Jordan came at
the second rate to achieve 25.7%, and the lowest is Palestine MFIs among Arabs.
Profit Margin:Jordan ranked the third among Arabs; its net operating income to financial
revenue was amounted to 25.1%. Whereas, Egypt was the highest, its profit matches 41%, followed by
Lebanon of 25.8%. On the contrary, Morocco exercised a loss of 7.4%.
Finally, Real Yield on Gross Loan Portfolio: yield on gross portfolio excluding Inflation rate
toone bar plus Inflation rate is shown to be the highest for Jordanian MFIs, it amounts to 36.2%,
followed by Yemen and Lebanon of 31% and 28.3% respectively.
Table No. 3: Microfinance Financial Returns Key Performance Indicators KPIs in 2009
Financial KPI
(Returns)
Return
on Assets
Return on
Equity
Operation
al Self
Sufficienc
y
Financial
Self
Sufficienc
y
Financial
Revenue /
Assets
Profit
Margin
Real Yield
on Gross
Loan
Portfolio
Tunis 1.5% 7.3% 108.8% 100.0% 23.1% 8.3% 21.3%
Morocco 0.2% 0.5% 100.9% 93.5% 20.4% -7.4% 27.4%
Egypt 8.0% 21.4% 168.2% 168.2% 22.0% 41.0% 16.9%
Jordan 7.0% 14.7% 133.3% 133.3% 25.7% 25.0% 36.2%
Palestine 1.6% 4.1% 125.4% 112.2% 14.5% 16.5% 11.4%
Yemen 2.1% 32.3% 107.3% 107.3% 29.8% 6.7% 31.1%
Lebanon 3.4% 10.9% 134.8% 134.8% 17.7% 25.8% 28.3%
Arab Industry Norm
2.12% 7.73% 123.83% 119.11% 21.37% 16.55% 23.16%
^
Source: 1) SANABEL & Mix, 2010 Arab Microfinance Analysis & Benchmarking Report, 2) Mixmarket.org.
^ Industry Norm is mainly calculated as the Geometric Average due to a wide dispersion of KPIs, but for the cases of zero
or minus figures, an Average (Mean) is utilized.
4.2.3. Risk& Liquidity Indicators
Portfolio at Risk (PAR): For the indicator of theoutstanding portfolio overdue more than 30& 90 days
plus renegotiated portfolio to loan portfolio, Jordan ranked the third best among the Arab MFIs, it’s

127 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
PAR is amounted to 1% - 1.3%. Yemen and Egypt MFIs are in less risk, and the most risky MFIs are
Morocco and Palestine, as can be driven from Table No. 4.
Write-off Ratio: Yemenand Egypt MFIs are experienced the lowest value of loans written–off
to average loan portfolio among Arabs, and Jordan and Tunis came at the third rank among Arab MFIs.
Also, for the Loan Loss Rate; which is the write-offs excluding loans recovered to loan portfolio,
Yemen, Palestineand Egypt MFIs are experienced the lowest value, then Jordan came to be the fourth
among Arabs.
Risk Coverage:Jordan is experiencing the first country for the impairment loss allowance to
PAR more than 30 days, it was amounted to 195.9%, then Egypt followed by 153.5%, and Yemen for
105%.
Finally, Non-Earning Liquid Assets to Total Assets:the cash at banks to total assets is shown
to be the highest to Egypt’s MFIs of 31.2%, and Yemen of 20.7%. Unfortunately, Jordan came at the
lowest rank among Arabs of 7.9%.
Table No. 4: Microfinance Financial Risks' Key Performance Indicators KPIs in 2009
Risk & Liquidity KPIs
Portfolio @
Risk >30 Days
Portfolio @
Risk >90 Days
Write-Off
Ratio
Loan Loss
Rate
Risk
Coverage
Non-Earning
Liquid
Assets/ Total
Assets
Tunis 4.7% 2.9% 0.6% 0.3% 79.6% 13.5%
Morocco 6.4% 4.5% 7.3% 6.6% 59.9% 16.5%
Egypt 1.2% 0.8% 0.0% 0.0% 153.5% 31.2%
Jordan 1.3% 1.0% 0.6% 0.6% 195.9% 7.9%
Palestine 7.5% 4.4% 0.7% 0.0% 56.2% 12.1%
Yemen 0.9% 0.3% 0.0% 0.0% 105.1% 20.7%
Lebanon 2.3% 0.9% 0.7% 0.7% 61.1% 13.4%
Arab Industry Norm ^ 2.56 1.43 1.41 1.17 91.02 15.16
Source: 1) SANABEL & Mix, 2010 Arab Microfinance Analysis & Benchmarking Report, 2) Mixmarket.org.
^ Industry Norm is mainly calculated as the Geometric Average due to a wide dispersion of KPIs, but for the cases of zero
or minus figures, an Average (Mean) is utilized.
4.3. Microfinance at Jordan Level
In general, the financial viability of Jordan’s MFIs enables them to widening their outreach activities.
As can be driven from Table No. 5, the eight Jordanian MFIs have 85 offices throughout the country
with 854 personnel; this means 71 employees, on the average, are serving each governorate in Jordan,
noting that Jordan has 12 governorates; this KPI indicates to MFIs outreach. As mentioned earlier,
Jordan MFIs are not tolerated to collect savings either from their clients (borrowers), or from others.
Thereby, deposits are zero to all MFIs.
Development & Employment Fund DEF is shown to have around half of the microfinance
market in Jordan; it has 42.5% of the MFIs total assets, 59.6% of total equities, and 43.6% of gross
loans portfolio. On the other hand, its liabilities are minimal; total borrowing is amounted to 11.4% of
the market, debt/equity is 0.12 and, total write off is zero; this is due to the government support and
donations, and also its Law No. 33 of the year 1992 that protects its funds from write offs; due to the
Law of State Funds applied. Thereby, DEF has the capability to extend its operations all over the
remote areas and poverty enclaves; it can and should maximize its outreach to combat poverty and
unemployment. Especially, it’s cleared that its impairment loss allowances come in the middle of
Jordan MFIs, and also its borrowings is the least among them, in comparison to AlWatani bank and
FINCA’s borrowings of 51.4% and 88.1% of their total assets respectively.

128 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
Table No. 5: Jordan’s Microfinance Financial Key Performance Indicators KPs
Table No. (5): Jordan's Microfinance Financial Key Performance Indicators KPIs
Financial Indicators KPIs
Development
& Employment
Fund DEF
Al Watani
Bank
Ahlia
Microfinance
Comp. AMC
FINCA
Middle East
Microfinanc
e Comp.
MEMC
Micro Fund
for Women
MFW
TAMWEELC
OM
UNRWA
Offices 13 10 9 7 13 20 13 — 12.1
Personnel 103 132 73 71 94 206 175 — 122.0
Industry
Norm
Total assets 64,285,458 15,343,013 5,941,435 5,085,486 18,450,131 18,483,549 15,362,696 8,213,675 18,895,680
Total equity 57,388,699 6,964,356 5,213,089 161,972 9,572,269 9,569,782 7,275,339 86,724 12,029,029
Net loan portfolio 56,084,076 13,398,631 3,989,531 3,441,497 17,044,179 16,581,494 13,053,118 6,370,459 16,245,373
Gross loan portfolio 59,751,679 13,646,082 5,132,590 3,626,058 17,484,699 17,100,338 13,218,348 7,028,211 17,123,501
Impairment loss allowance 3,667,603 233,024 648,910 38,870 267,782 518,844 165,230 657,752 774,752
Liabilities and equity 64,285,458 15,343,013 5,941,435 5,085,486 19,216,939 18,483,549 15,362,696 8,213,675 18,991,531
Total liabilities 6,896,759 8,378,656 728,346 4,923,514 9,986,675 8,913,768 8,087,356 8,126,951 7,005,253
Deposits 0 0 0 0 0 0 0 0 -
Total borrowings 4,907,717 7,890,962 610,328 4,480,986 8,754,294 8,182,761 8,041,630 0 5,358,585
Write offs 0 476,027 0 530 1,845 256,720 150,592 — 126,531
Debt to equity ratio 0.12 1.2 0.14 30.4 1.04 0.93 1.11 93.71 16.1
Source: www.themix.org/mfi/country/Jordan&www.mixmarket.org
4.3.1. Outreach KPIs
Jordanian specialized MFIs are well exercising the microcredit sector in Jordan market. Three groups
of financial indicators: outreach; returns and; risk KPIs, are clearly shown byTable No. 6 .
Gross Loan Portfolio: Jordan MFIs have a total portfolio of 136.99 m. $ in 2009, of which
Development & Employment Fund DEF has 59.75 m. $, which amounted to 43.6% of total portfolio in
the market. DEF as an independent government entity capitalized that much of money due to the
donations and gifts from the government and, gifts from international agencies via government support
too.
Middle East Microfinance Company MEMC showed the highest Loans Portfolio to Assets
among Jordan MFIs, 94.8% of its assets are dedicated to loans, DEF and Microfund for Women MFW
were shown very high assets allocated to loans for a 93% and 92.5% respectively. Other MFIs:
AlWatani Bank, Ahlia Microfinance Company AMC, TAMWEELCOM, and UNRWA were allocated
85.6% - 88.9% of their assets to loans. However, FINCA is proven to have the lowest allocation of its
assets to loans of only 71.3%; this is because the losses incurred due to its new establishment in 2007,
thereby it needs more time to recover its pre-operating expenses and stabilize in the market.
Number of Active Borrowers: in fact, number of active borrowers for each MFI depends on
the loan duration and the amount of loans dispersed. Although, its nominal figure reflects the MFIs
outreach, the actual indicator that reflects the depth of outreach is by comparing it with loan duration
and borrowers’ extension accumulation of the same loan; many Jordanian MFIs consider relending to
the same borrower as another active borrower, which makes the big difference. On the average, MFIs
have 21637 active borrowers per each; as driven by the industry norm.
Women Borrowers: Jordan MFIs focuses its operations to be in favor of females, FINCA,
MFW and TAMWEELCOM are roughly fully lending to women 97.6% , 96.5% and 96.2% of their
clients respectively, Alwatani Bank 90%, and the others MEMC by 64.5%, DEF by 58.4%, and AMC
by 48.5% of their lending to females.
Loans Outstanding: almost this indicator reflects number of active borrowers for all MFI in
Jordan except for MEMC; because it calculates the renewal of a loan as another loan. In general, each
Jordanian MFI had 22070 outstanding loans in 2009, on the average; this means that every employee
supervises 181 loans outstanding in the year.
Average Loan Balance per Borrower: DEF shows to be highest for this KPI, this is due to
thefact that, DEF loan size is much higher than other MFIs, it ranges from 500 $ to 20,000 $. Whereas,
most other MFIs loan size rages from 100 $-7000 $, only MEMC and Ahli companies have 20,000 $
loan ceiling; this is why they are rated at the second and third. These facts reflected in the Average

129 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
Loan Balance per Borrower/ GNI per capita, which amounted to 78.8%, 52.4% and47.8% to DEF,
MEMC and AMC respectively.
Average Outstanding Balance: on the average, average loan outstanding balance is 1130 $ in
2009 for Jordan MFIs, DEF is the biggest, then followed by AMC and MEMC for the beforementined
reasons. This figure also reflected the Average Outstanding Balance/GNI per capita, which showed
that, the loans dispersed by MFIs to borrowers in Jordan are amounted to 30% of the per capita
income. In sum, these loans are so small, because they are targeting microenterprises.
4.3.2. Return KPIs
Return on Assets ROA: ROA is shown to be high to UNRWA, MFW, AlWatani, TAMWEELCOM,
and MEMC, it ranges from 7%-9.4%. However, it’s lower to DEF and AMC with 3.1% and 4.1% only.
FINCA was exercised losses. Also, for Return on Equity ROE, DEF and AMC are the lowest and
below the Jordan’s average norm. However, UNRWA is too high due to its very low equities.
Operational Self-Sufficiency: Financial revenue to financial expenses and losses on loans is
shown to be above the average norm for seven MFIs, DEF is shown to be the highest, while FINCA is
the lowest.
Financial Revenue / Assets: UNRWA, MFW are proven the highest financial revenue to
assets and, DEF is performing the lowest ; due to its large amount of assets and its less concern of
attaining profits, rather than mobilizing its money to cover remote areas. This is also affected the
Profit Margin. DEF is shown the highest profit margin of 39% not because of its net income, but due
to its low financial revenue, and its zero cost to a large amount of its capital. MEMC is proven to be
the highest. Fortunately, all Jordanian MFIs, except AMC and FINCA are above Jordan’s industry
norm.
Real Yield on Gross Loan Portfolio: this rate is shown to be the highest for UNRWA to an
amount of 39.1%, followed by TAMWEELCOM, MFW and FINCA with 39% and 37%, and
AlWatani bank with 35.3%, then AMC and MEMC with 29.7%, and 24.3% respectively. Whereas,
DEF is exercising the lowest rate of 9.3% only.
Table No. 6: Jordan’s Microfinance Financial Key Performance Indicators KPs
Table No. (6): Jordan's Microfinance Financial Key Performance Indicators KPIs
Financial Indicators KPIs
Development
&
Employment
Fund DEF
Al Watani
Bank
Ahlia
Microfinanc
e Comp.
AMC
FINCA
Middle East
Microfinanc
e Comp.
MEMCO
Micro Fund
for
Women
MFW
TAMWEEL
COM
UNRWA
Number of active borrowers 20,133 23,687 2,853 8,832 8,853 48,160 38,941 — 21,637
Percent of women borrowers 58.42% 90.00% 48.51% 97.64% 64.55% 96.45% 96.16% — 0.79
Number of loans outstanding 20,133 23,687 2,853 8,832 11,885 48,160 38,941 — 22,070
Gross loan portfolio in m.$ 59.752 13.646
Outreach KPIs
Gross loan portfolio to total assets 92.95% 88.94% 86.39% 71.30% 94.77% 92.52% 86.04% 85.57% 0.9
Average loan balance per borrower 2,968 576 1,799 411 1,975 355 339 — 1,203
Average loan balance per borrower / GNI per capita 78.80% 15.30% 47.77% 10.90% 52.44% 8.92% 8.53% — 0.32
Average outstanding balance 2,968 576 1,799 411 1,471 355 339 — 1,131
Average outstanding balance / GNI per capita 78.80% 15.30% 47.77% 10.90% 39.06% 8.92% 8.53% — 0.30
Return KPIs
Return on assets 3.08% 7.72% 4.08% -11.43% 7.05% 8.97% 7.53% 9.41% 0.05
Return on equity 3.38% 19.20% 4.78% -184.63% 14.16% 17.69% 18.45% 9855.20% 12.19
Operational self sufficiency 164.37% 132.65% 119.70% 69.25% 147.33% 133.89% 129.54% 134.12% 1.29
Financial revenue/ assets 7.87% 31.36% 24.78% 25.73% 21.94% 35.46% 33.04% 36.98% 0.27
Profit margin 39.16% 24.61% 16.46% -44.41% 32.13% 25.31% 22.80% 25.44% 0.18
Yield on gross portfolio (real) 9.26% 35.26% 29.68% 37.14% 24.33% 37.17% 39.17% 43.06% 0.32
Liquidity & Risk KPis
Portfolio at risk > 30 days 2.27% 1.49% 15.95% 0.54% 0.41% 1.11% 0.65% — 0.03
Portfolio at risk > 90 days 2.27% 1.37% 14.58% 0.49% 0.33% 0.61% 0.26% — 0.03
Write-off ratio — 3.29% — 0.02% 0.01% 1.58% 1.08% — 0.01
Loan loss rate — 3.20% -0.33% 0.02% -0.24% 1.58% 1.08% -1.12% 0.01
Risk coverage 270.28% 114.91% 79.28% 199.75% 374.93% 274.53% 191.98% — 2.15
Non-earning liquid assets as a % of total assets 2.95% 7.06% 29.07% 0.02% 9.04% 5.77% 7.10% 18.33% 0.10
Source: www.themix.org/mfi/country/Jordan&www.mixmarket.org
5.133
3.626
17.485
17.100
13.218
7.028
Industry
Norm
17.124

130 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
4.3.3. Risk & Liquidity Indicators
Portfolio at Risk (PAR): theoutstanding portfolio overdue for more than 30 & 90 days is proven to be
too small for almost all Jordan MFIs, the industry average amounts to 3%, only AMC is shown to be
around 15%; this is due to the fact that its operations are more likely similar to banks, it’s actually
established and operating under the privilege of Jordan Ahli Bank, whereas, all other agencies, except
DEF, are non-profit MFIs and have their own management board.
Write-off Ratio: as mentioned before, DEF has no write offs. Also, AMC’s write off is zero,
and FINCA and MEMC are approaching zero. AlWatani Bank is shown to be the highest write off to
match 3.2%. On the other hand,Loan Loss Rate; which is the write-offs excluding loans recovered to
loan portfolio, is proving to be thepostive trend for Jordans’ MFIs; its industry average is 1%.
Risk Coverage: MEMC is shown to be the best among Jordan MFIs that covered risk for a rate
of 374.9%, followed by MFW, and DEF of 274.5% and 270.3% respectively. AMC is exercised the
lowest risk coverage of only 79.3% versus the industry norm of 215%.
Finally,Non-Earning Liquid Assets to Total Assets: this indicator shows a wide dispersion
between Jordan MFIs, due to the variety of MFIs cash at banks relative to their assets shown. On the
average, the industry norm is 10%, while it was 29% for AMC and 18.3% for UNRWA, and decrease
to 3% for DEF and 5-9% for the other MFIs, except FINCA which exercised down rate to 0.02% only.
In sum, this reflects the MFI desire to have the least reserved liquid assets; non-operating money or
assets, and to fully exploit their assets, especially cash assets.
5. Conclusions and Recommendations
5.1. The Main Conclusions
The study has proved that Jordanian MFIs have ranked at the 2 nd. best ROA and ROE among Arab
MFIs, the 3 rd. operational and financial self-sufficiency, the 2 nd. financial revenue to assets, the 2 nd. in
profit margin, and rated the 1 st. in yield on real gross loan portfolio.
On the other hand, Jordan MFIs were in the middle of the seven Arab countries in comparison
to risk & liquidity indicators. Also, these MFIs proved to be above Arab industry norm to all outreach
KPIs; which reflects the depth of their activities.
When comparing outreach KPIs for Jordan’s eight MFIs industry norm against Arab norms, we
conclude that, Jordan MFIs net activities were shown to be better to almost all outreach KPIs, this
proves that Jordan had widening its Microcredit professional activities, and its MFIs set a platform to
prosper Microfinance sector in the country. This fact can be drawn also by comparing active
borrowers, percentage of females’ loans, loans outstanding, and loans’ portfolio to population; the per
capita Microfinance achievements, Jordan is seen to be the first Arab country thereof.
5.2. Recommendations
Due to the abovementioned facts, Jordan MFIs have the financial viability to maximize their
Microcredit outreach to penetrate more in the Jordanian financialmarket, especially more focus on
serving in the poor and remote areas. Therefore, promoting Jordan MFIs will nourish Microcredit
sector, mainly when compiling up with international best practices. Thereby, the study recommends the
followings:
1. Releasing deposit gathering to MFIs in order to widen its sources of capital in one side
and, to have complementary interests with their clients on the other side. The Central
Bank of Jordan should facilitate it under itscontroland follow-up.
2. Establishing a Credit Bureau and facilitating the transparent mainstream of credit
information.
3. The government of Jordan should promote the MFIs to focus their activities on remote
areas and poverty enclaves, and maximize their outreach.

131 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
4. The MFIs should, by themselves, focus their activities on establishing start-up projects
as income-generating projects to serve as an active tool to combat poverty and
unemployment.
5. MFIs in Jordan have the capability to be a private-led sector not to continue working as
non-profit agencies. Therefore, an exit strategy should be drawn to transfer to private
sector agencies.
References
1] Al Atoum, Radi, Microfinance Inthe MENA Countries: A position paper on Partnership for
Development, prepared to MENA - Net Conference, Cairo - Egypt Dec. 13-17, 1998.
2] Brandsma, Judith, Microfinance sector in Jordan; World bank, NY, USA, 2001.
3] Planet Finance; National Impact & Market Study of Microfinance in Jordan, Ministry of
Planning & International Cooperation and, GroupeAgenceFrancise de Development. Oct. 2007.
4] World Bank, Social Productivity; from Concept to Action, NY, 1998.
5] Brandsma, Judith and Bourjorjee, Deena, Microfinance in the Arab States; Building Inclusive
Financial Sectors, United Nations Capital Development Fund (UNCDF), NY, USA, 2004.
6] SANABEL and Mix, Arab Microfinance Analysis & Benchmarking Report 2010.
7] www.themix.org/mfi/country/Jordan&www.mixmarket.org.
8] Planet Finance; National Impact & Market Study of Microfinance in Jordan, Ministry of
Planning & International Cooperation and the Agence Française de Développement, Oct. 2007.
9] Seep, Citi Foundation and, SANABEL, Arab Microfinance Regional Report: An Industry
Update, (April 2009 and Dec. 2010).
10] Economic & Social Council, Micofinance in Jordan, Policy Paper, 2011.
11] www.microfinancegateway.com.
Appendix: The KPIs’ Utilized by this Study
Outreach Indicators
1. Active Borrowers: No. of borrowers with loans outstanding, adjusted for standardize
write-offs.
2. Percent of Female Borrowers: No. of active women borrowers/ Adjusted No. of active
borrowers.
3. Total Loans Outstanding: No. of outstanding loans adjusted for standardized writeoffs.
4. Gross Loan Portfolio: Gross loan portfolio adjusted for standardized write-offs.
5. Average Balance per Borrower: Gross loan portfolio, adjusted / No. of active
borrowers, adjusted.
6. AverageBalance per Borrower/GNI per Capita: Average loan balance per borrower /
GNP per capita.
7. Average Outstanding Balance: Adjusted gross loan portfolio/ Adjusted no. of loans
outstanding.
8. Average Outstanding Balance per Capita: Adjusted average outstanding balance/
GNI per capita.
Overall Financial Performance & Revenue Indicators
1. Return on Assets: Adjusted net operating income-Taxes /Adjusted average total assets.
2. Return on Equity: Adjusted net operating income-Taxes /Adjusted average total
equity.

132 European Journal of Economics, Finance And Administrative Sciences - Issue 42 (2011)
3. Operational Self-Sufficiency: Financial revenue /(Financial expense + Impairment
losses on loans + Operating expenses).
4. Financial Self-Sufficiency: Financial revenue / Adjusted (Financial expense +
Impairment losses on loans + Operating expenses).
5. Financial Revenue / Assets: Adjusted financial revenue / Adjusted average total assets.
6. Profit Margin: Adjusted net operating income / Adjusted financial revenue.
7. Yield on Gross Loan Portfolio (Real): Adjusted yield on gross portfolio (nominal) –
Inflation rate / (1 + Inflation rate).
Risk & Liquidity Indicators
1. Portfolio at Risk >30 days (PAR): Outstanding balance, portfolio overdue > 30 days +
renegotiated portfolio / Adjusted gross loan portfolio.
2. Portfolio at Risk > 90 days: Outstanding balance, portfolio overdue > 90 days +
renegotiated portfolio / Adjusted gross loan portfolio.
3. Write-off Ratio: Adjusted value of loans written–off / Adjusted average gross loan
portfolio.
4. Loan Loss Rate: (Adjusted write-offs – Value of loans recovered) / Adjusted average
gross loan portfolio.
5. Risk Coverage: Adjusted impairment loss allowance / PAR > 30 days.
6. Non-Earning Liquid Assets to Total Assets: Adjusted cash at banks / Adjusted total
assets.