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

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