Publications

Microfinance institutions in the Arab world rank among the youngest in the global industry. At 13 years in operation, the region’s most senior MFI is barely older than the average institution in Latin America. Arab microfinance has many of the hallmarks of a young sector non profits offer most financial services, and most clients are reached exclusively with small, working capital loans, and few other financial products. Given its place in the stages of development of the global microfinance industry, Arab microfinance has learned from industry experience and can leverage this knowledge to innovate in its own region.

How does this young sector stack up against its global peers? What differences exist in performance among Arab MFIs? This report addresses these questions. It investigates the performance of Arab MFIs through the lens of industry standard performance metrics and offers an analysis of this region in the world of microfinance and microfinance in this region.

Despite its young age relative to the global industry, Arab microfinance has achieved strong relative outreach in a short number of years. With this rapid growth, MFIs in the region maintain their strong outreach to poorer clients. On the whole, the region’s actors have already achieved sustainability, posting average positive returns like most other regions in the world. Arab MFIs earn relatively less on their portfolios, achieving profitability through low total costs. Little access to commercial debt and reliance on donations and equity for growth have kept such costs very low. Excellent portfolio qualities, among the lowest average ‘portfolios at risk’ in the world have helped Arab MFIs maintain such tight cost control. This lower average portfolio risk might also signal missed opportunities for growth and potential clients left unserved.