Micro-Finance in Lebanon
Al Majmoua
Reda Mamari
Joey Ghaleb
Micro-Finance in Lebanon

What is micro-finance
–

Offering sustainable financial services to microentrepreneurs
What is a micro-entrepreneur
–
Owner-operator of a business that typically
employs between zero and five employees
Micro finance in Lebanon

Al Majmoua estimates that there are over
400,000 individuals involved in small and micro
enterprises in Lebanon

Suppliers of financial services are:
–
–
–
–
Commercial Banks
Non Governmental Organizations
Money Lenders
Wholesalers
Banks in Lebanon
Banks
in Lebanon
Lebanon boasts 69 banks with a total of 773 branches. Top 5
banks captured in 1999 around 42% of total credits.
•
•Banks
tend to equate consumer lending with micro-finance.
•Credit
market favors major borrowers, less 1% of borrowers
capturing about 50% of credit funds.
distribution of credits according to the borrower’s
geographic location (Beirut and urban areas) and relevant
economic activity (e.g., services).
•Biased
•Recently
a growth in consumer lending (Sep. 2000, 48% of
beneficiaries received loans of less than LL25mn, capturing less
than 2.5% of total loans in volume)
Micro Finance in Lebanon; NGOs
Non Governmental Organizations

Network of 22 Lebanese NGOs involved in micro finance

Targeting mostly rural areas

Target groups: Men and women entrepreneurs, displaced,
farmers,

59.7% of active clients was dominated by top three
providers
Legal Framework of Micro Finance
For NGOs:




NGOs abide by legal provisions and restrictions applied to
charities
Micro lending is not explicitly regulated by any legal text of
authority.
NGOs have limited access to funds and Lebanese charities are
not allowed to take deposits.
Their legal structure makes it difficult to access funds from the
financial sector in the form of loans.
Consequently NGOs:
* highly depend on donor funds (no stability in access to credit)
* Face a greater financial risk in case of default with the lack of
regulation; thus growth potential is limited.
Al Majmoua’s Vision





A more open and equitable financial system must be developed that will promote the long term
development of the country. This system must be based on transparent and equitable
processes, on the respect of individuals for their ideas, their work, their desire to produce and
their honesty and not for their assets, their contacts or their lineage.
This is not just about products and services. It is about customer understanding and empathy. It
is about ensuring that individuals feel ownership of the financial system that serves them.
Only this will create the necessary system for people to feel secure and respected, thus
improving their capacity to plan and produce.
In effect we want to create a country were there are equal financial opportunities for all.
A new breed of financial institutions that inspires people to be productive, invest and
prosper economically.
Al Majmoua’s Mission









What We Are:
A point of reference to clients for financial services
An institution that is principally dedicated to the provision of diverse financial services and advices
National in scope and non-discriminatory (in terms of geography, religion, revenue and gender). We will operate on
Lebanese territory; serving all clientele residing and working in Lebanon
Strategy and operations driven by clients' needs and by the quest for service excellence
What We Will Do:
Maximize profitability with the view of offering efficient and diverse financial services that are affordable and client
valued
For Whom Will We Do This:
Productive individual who has financial needs, with a focus on owners of small businesses (1-5 employees)
Why We Will Do It:
Al Majmoua is built on the belief that offering sustainable financial services in an equitable manner is a social good.
Creating a financial intermediary that will serve this clientele will create social change and increase welfare
Al Majmoua believes that micro-entrepreneurs in Lebanon are the group that is the most excluded from the financial
sector and they represent an important social and economic sector for the development of the country.
Operating Principles

Client satisfaction
–

Focus on client needs
–

Products must be delivered in a prompt and efficient manner. They must be designed with
a clear focus on client needs
Synergy
–

We sell a service and our focus must always remain on client satisfaction and service
quality
Synergy must be created between the institution and the client. Staff must empathize with
clients. Clients must understand, and believe in, the rules and methods of the organization
Competitive price
–
Services must be offered at a competitive price, that allows clients to get value for money
and the institution to ensure its independent long-term financial viability
Core Values
–
Commitment:

–
Inclusiveness

-
Inclusiveness shows the non-biased, apolitical and non-discriminatory aspect of Al Majmoua. We
welcome all micro entrepreneurs legally living and working on Lebanese territory regardless of
their nationalities, sects or religions.
Responsiveness
•
–
Creating national, sustainable micro-finance organizations is hard work. Having committed and
passionate staff who believe in the institution’s Mission and Vision, and who are willing to go
beyond the call of duty is imperative for success. Moreover, clients’ commitment to the institution’s
rule and regulations must always remain a nonnegotiable condition for borrowing
Responsiveness is key to the success of operations. Micro-finance institutions must remain aware
of their environment at every level of operations and must be responsive to events in order to
maximize client satisfaction, preempt external shocks, and make timely use of opportunities
Transparency

Transparency is the basis of all successful micro-finance organization. If financial services are to be
democratized, policies and procedures as well as decisions and accounts must be of the utmost
transparency in order to build trust between the institution, its clients, financiers and the the
general community
Al Majmoua Products
Group Lending (GL)
Individual Lending (IL)
Eid Loan
Loan Terms
Bi-weekly or monthly repayment
over 4 or 6 months duration
Maximum of 12 months
Two months
Loan Size
$200 to $1300 in a stepped manner
$500 - $5000 + depending
on capacity to repay
$100 or $200
Guarantee
Based on group guarantee where
the members:
- are living in the same area
- each has a small business
- are a minimum of five people
- mutually guarantee each other
Based on strength of
business and capacity to
repay
Can be based on
either group or
individual
guarantee.
Interest
2% per month
1.65% per month
Same as GL
Eligibility
Client should:
- have an existing business
- should use loan for growth of
business
- men and women (predominantly
women)
Client should:
- have an existing business
that is more than one
year old
- have a clear business
plan
- any form of eligible
guarantee
- good reputation in the
market and community
For clients who
have been with
Al Majmoua for
more than one
year and with a
good repayment
history.
Key Figures (dec. 2001)
Total loans granted
USD 37,028
Total cash disbursed
Loans outstanding
USD 23,274,560
USD 3,432,081
Active Clients
5,769
P & L ratio
93%
Delinquent loans (over 30
days)
Delinquent loans (over 90
days)
3.65%
2.6%
North
22%
South
30%
Bekaa
18%
Beirut
30%
Individual Loans Distribution by Business
1999
Transport
3%
2000
Agriculture
3%
Agriculture
7% Industry
4%
Transport
13%
Services
14%
Services
22%
2001
Trade
64%
Agriculture
Industry
Transport 3%
8%
6%
Services
24%
Trade
59%
Industry
9%
Trade
61%
Loans Disbursed
10000
9018
9000
8408
8000
Number of Loans
8852
7451
7404
6742
7000
IL
6000
GL
5000
Eid Loan
4000
Total
3000
2110
2000
1000
794
650
964
163
-
0
1999
2000
End of Year
2001
Loans Outstanding USD
3,500,000
2,978,336
3,000,000
US Dollars
2,500,000
1,932,189
2,000,000
1,930,707
IL
GL
Eid Loan
1,500,000
1,050,014
1,000,000
688,174
1,047,629
711,235
500,000
203,040
1,019,054
158,800
201,900
-
1999
2000
End of Year
2001
Total
Al Majmoua Clients in Lebanon
Number of Clients
Al Majmoua Outstanding Clients
5769
3094
2791
1999
End of Year
2000
2001
Projected Growth of Al Majmoua
GL Clients
IL Clients
Total Clients
GL Outs. Portfolio
$
IL Outs. Portfolio
$
Total Outs. Portfolio $
Number of LAs
Number of AS
Average Loan Size
$
2002
4,461
3,652
8,113
1,191,220
3,919,034
5,110,254
41
6
1,105
$
$
$
$
2003
4,559
5,934
10,493
1,556,045
6,954,757
8,510,802
51
8
1,423
$
$
$
$
2004
5,201
9,229
14,430
1,979,457
14,577,071
16,556,528
75
10
2,013
Lebanese Government Policy

Laissez-Faire (no laws, no clear role)

Two key (recent) initiatives
–
–
Kafalt
Social Fund (work in progress)
Kafalat- a Lebanese Govt. Initiative

In 1999, the government established a joint stock
company, Kafalat, with objective of guarantying up to
75% of the loan value with a ceiling of LL 300mm credit
risk of bank loans granted to SMEs
–
–
–
–

Lending is undertaken trough commercial banks
Client must be operating in the specified sectors of agriculture, industry,
handicraft, tourism and new technologies.
Eligible SMEs benefit from an interest rate subsidy, paying 7% per year (LL).
Loans >$5,000, < $200,000 (< than 3 years).
Kafalat does not address the structural problems of
banks and their policy-makers (… no new clients, same old
clients but with subsidized rates)

… and staff of Lebanese banks do not “understand”
micro-enterprises
Role of Government

The Government should not:
–
Get involved in direct or indirect lending (unless warranted
by exceptional circumstances)
–

Interfere with market conditions (distorting markets)
The Government should:
–
–
–
Promote Information sharing
Promotion of “best practices”
Develop Appropriate legal environment


Appropriate and enforceable credit laws
Appropriate institutional regulation
Govt. Should promote information sharing

Development of an adequate “Central des Risques” to
allow for the sharing of information on “delinquent”
clients between various organizations

Provide basic statistics on micro enterprises in
Lebanon, such as number, location, typical profile etc.

Provide operational tools such as basic maps
Govt. should always promote “best
practices”

The success of micro-finance across the globe has
helped establish “best practices”.
–
No subsidies (interest rates)
–
Policies that encourage small loans with short maturities
–
Delivery of services in a market-oriented manner
–
The grounding of actions in a well articulated long-term plan.
–
Promotion of partnerships between donors and the private
sector
Develop appropriate legal environment

Appropriate and enforceable credit laws
–

Appropriate laws that will facilitate collection
and increase accountability of client. Must allow
for cost effective enforcement through the
courts and on the ground
Appropriate institutional regulation
–
Government
must
operate
within
the
“institutional development” matrix … assist
providers to move along the development continuum
Institutional development matrix
Type of micro finance institution
: ‫نوع المؤسسات المالية الصغيرة‬
-------------------------------------------------------- --------------------
NGO ‫منظمات غيرحكومية‬
Finance corp. ‫مؤسسات مالية‬
Bank ‫مصرف‬
Sources of funds:
‫موارد األعمال‬
-------------------------------------------------------- --------------------
Donors ‫الواهبين‬
Loans from inst. ‫قروض من مؤسسات‬
Savers ‫مدخرين‬
Stages of institutional development
: ‫مراحل التطور المؤسساتي‬
-------------------------------------------------------- --------------------
Low ‫منخفض‬
Medium ‫وسط‬
High ‫مرتفع‬
Regulation continuum
:‫اخلط التنظيمي‬
-------------------------------------------------------- --------------------
Low ‫منخفض‬
Medium ‫وسط‬
High ‫مرتفع‬