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In 2007, the microfinance sector in the Arab region (also called the Middle East and North Africa, or MENA, region) intensified its activities, providing access to financial services to more customers while developing the product range offered. International financial partners, growing in number, invested heavily in the sector and as a result, the microfinance market in the Arab region is entering a phase of maturity, although the levels of maturity vary by subregion.

While savings remained negligible due to legislative restrictions and limitations, Arab microfinance institutions (MFIs) diversified their lending product mix to include agricultural, consumer, education, housing, seasonal, and start-up loans, in addition to the working capital loans for microenterprises already on offer. The MFIs in the region focused more on understanding the needs of their customers, and new loan products were designed thusly. For instance, in Jordan, MEMCO introduced a family business loan so as not to burden family members with high indebtedness. In Egypt, ABA introduced a twist to their group lending methodology, called Road to Development, which includes one to three borrowers, of which one may be male, for the purpose of facilitating the smooth graduation of clients from group lending to individual lending. FY 2007 also witnessed an increase in the provision of micro-insurance in the region, with six Arab countries currently providing micro-insurance products, although these are still largely limited to death and disability. Moreover, for the first time in the region an MFI, MFW from Jordan, piloted a micro-leasing product. This dynamism encouraged a multitude of international financial partners to invest intensively in the microfinance sector that is reaching maturity, despite some obstacles in the region.

The MFI sample for this report is composed of 2007 data from 48 MFIs in 10 countries for the benchmarks, and 36 MFIs from nine countries for the 2006-2007 trend data. This study, co-written by the Arab Microfinance Network Sanabel and Microfinance Information Exchange, Inc. (MIX), also relies on data from a CGAP study on international investment in the Arab region. To compare the performance of the Arab sector to the rest of the world, this report also refers to the results (medians) of international benchmarks from 890 MFIs that MIX produced in autumn, 2008.

Please note that including countries other than Morocco, Egypt, Jordan, Yemen and Palestine in the 2006-2007 trend lines is not yet possible, because of limited number of MFIs in the other countries (fewer than three institution), which is not sufficiently representative of the market.