'Future of micro finance in the Middle East promising'

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Low risk, good returns and a low volatility would drive growth of micro finance as an asset category in the region amid the ongoing financial crisis.

Being more "closely" related to the "real economy", micro finance holds the advantage of managing the challenges that the current situation offers better, Jack Lowe, President, BlueOrchard United States, told Emirates Business.

This region, where micro finance has a penetration of less than 10 per cent so far, holds tremendous potential. As Arab investors get to tap into micro finance, it would result in more MFIs in this region reach out to small borrowers and help in building wealth and alleviating poverty, said Lowe.

"For investors in this region, investing in micro finance provides an opportunity to earn returns and contribute their bit to the society at the same time. Micro finance is on its way to become a true asset class," added Lowe.

More than 100 investors, leading financial experts and representatives from investment-ready Arab microfinance institutions (MFIs,) got together at the First Arab Microfinance Investment Symposium.

The UAE Ministry of EconomyMinistry of Economy has been assigned the task of launching a strategy to develop a programme to support and finance micro and small businesses to be set up in the UAE, said symposium organiser Grameen-Jameel, the first social business in the Arab World.

The task, that has been assigned by the Cabinet and is to be executed in co-operation with the Central BankCentral Bank, aims to improve the livelihood of many Emirati families across the country with a focus on supporting women, youth, and pensioners who are eager to improve their economic and social environment, it said.

A meeting took place last week among officials from the UAE Ministry of EconomyMinistry of Economy and the Central BankCentral Bank and Grameen-Jameel to explore co-operation possibilities.

The meeting highlighted the importance of a number of issues to tackle, focusing on applicable structures suitable to the UAE Government, licensing and regulatory issues, and educational programmes.

In addressing all those issues, a suggestion to organise a national market study has been favoured by those attending the meeting.

"We want to extend our reach to as many new places as possible. We are active in 42 countries and this region is diverse and we see a great potential here," said Lowe, adding: "business-oriented" approach of MFIs enabled them to stay profitable.

As a lender to perform in the micro finance skills like money raising, analytical and investment talent, market intelligence and prospecting and skills to run a far flung geographic spread of institutions were needed, he said.

Heather Henyon, General Manager, Grameen-Jameel said: "The size of micro finance market at the end of 2007 was $5.3 billion (Dh19.4bn) but only four per cent of the demand was met.

"This leaves a potential of an untapped market of 96 per cent," she added.

Quoting a study by CGAP, Henyon said more than $800m of financing had been raised in the Arab region, 50 per cent of which was from commercial bank lenders.

By Shveta Pathak

© Emirates Business 24/7 2008