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