Beirut - May 2009

State of the Industry in 2008

Ranya Abdel-BakiTransparency & Research Manager

Sanabel 6th Annual Conference

Sanabel – The Microfinance Network of Arab Countries

Data Collection & Resources

Primary Sources:

• Sanabel Annual Industry Survey• FY 2008 data•Sample: 363 Arab MFIs

• Benchmarks (Sanabel/MIX Annual Data Collection for MBB)• FY 2007 data• Sample: 48 Arab MFIs

• Fixed Sample Benchmarks•FY 2004 FY 2008 data•Sample: 20 MFIs

Secondary Sources:

• CGAP Funders Survey (FY 2007)

The Region in a Snapshot: Overview

2008 2007

Median Age 9.75 years 8.5 years

Number of Branches 2,542 1,960

Number of Employees 21,808 18,984

Percentage of Female Employees 31% 32%

Number of MFIs with HR Managers 37 MFIs NA

Sanabel Annual Industry Survey 2008

NGO95%

Bank2%

Govt Institution1%

Intl Organization1%

Limited Liability 2%

Legal Status

The Region in a Snapshot: Financial Services in 2008

CountryLoans Savings Insurance

A B C E H I S SU Y V C D /D F/T H/M L

Bahrain X

Egypt X X X X X X X X X X X X

Iraq X X X X X X X

Jordan X X X X X X X X X X X X X

Lebanon X X X X X X X X X X

Maurirania X X X X X X X X X

Morocco X X X X X

Palestine X X X X X X X X X X X

Saudi Arabia X

Sudan X X X

Syria X X X X X X X X X X

Tunisia X X X X X X X

Yemen X X X X X X X X X X X X X

The Region in a Snapshot: Non-Financial Services in 2008

Country BDS Consultancy Financial Education

HealthEducation

Training

Bahrain

Egypt X X X X

Iraq X

Jordan X X X

Lebanon X X X X X

Mauritania X X X X

Morocco X X X X X

Palestine X X X

Saudi Arabia X X X

Sudan X X

Syria X X X X

Tunisia X X X X X

Yemen X X X X

The Region in a Snapshot: Outreach & Scale in 2008Sanabel Annual Industry Survey 2008:

2008 2007

Number of Borrowers 3.141 million 2.985 million

% Women Borrowers 62% 59%

% Rural Borrowers 40% 42%

% Borrowers Below Poverty Line 60% 63%

Gross Loan Portfolio USD 1.492 billion USD 1.405 billion

Average Loan Balance USD 475 USD 471

Members83%

Non-members

17%

The Region in a Snapshot: Outreach & Scale in 2008Sanabel Annual Industry Survey 2008:

Top MFIS # of Borrowers % of Borrowers from Total

Outstanding GLP (USD)

% of GLP from Total

Top 5 MFIs1,337,597 43%   720,714,161 48%

Top1 0 MFIs1,866,806 59% 901,655,207 60%

Top15 MFIs2,194,517 70% 1,003,671,764 62%

Top 20 MFIs2,338,829 74% 1,079,579,440 72%

Outreach: Breakdown by Country in 2008

Bahrain0%

Egypt42%

Iraq1%

Jordan5%

Lebanon2%

Mauritania1%

Morocco40%

Palestine1%

Saudi Arabia0%

Sudan1%

Syria 1%

Tunisia6%

Yemen1%

Scale: Breakdown by Country in 2008

Bahrain0% Egypt

22%

Iraq3%

Jordan9%

Lebanon3%

Mauritania1%

Morocco47%

Palestine5%

Saudi Arabia1%

Sudan0%

Syria 1% Tunisia

7%

Yemen0%

Growth in Outreach and Scale (2005-2008)

Fixed Sample

-20%

0%

20%

40%

60%

80%

100%

120%

37%

52%

30%

3%

35%

45%

112%

67%

-1%

11%

Growth in Number of Borrowers Growth in GLP

Growth in Average Number of Borrowers and Percentage of Women Borrowers (2005-2008)

Fixed Sample

2004 2005 2006 2007 2008 5,000

10,000

15,000

20,000

25,000

30,000

0%

20%

40%

60%

80%

100%

% of W

omen B

or-row

ersA

vera

ge

Nu

mb

er

of B

orr

ow

ers

Change in Financial Structure in Arab Region (2007)

Arab World

Large Medium Small FSS Non FSS

Egypt Jordan Morocco Pales-tine

Yemen0%

20%

40%

60%

80%

100%

Capital/ Asset Ratio Commercial Funding Liabilities Ratio

Funding in the Region: Amount (2007) Total Amount Committed by Funders in USD Million:

Source: CGAP, “Who is Funding Microfinance? Results of the First Global Survey of Funders”, Microfinance Portfolio, November 2008.

Funding in the Region: Key Players (2007)

Breakdown by Type of Funder

Source: CGAP, “Who is Funding Microfinance? Results of the First Global Survey of Funders”, Microfinance Portfolio, November 2008.

Funding in the Region: Financial Instruments (2007)Breakdown by Financial Instrument

Source: CGAP, “Who is Funding Microfinance? Results of the First Global Survey of Funders”, Microfinance Portfolio, November 2008.

Funding in the Region: Recipients (2007)

Breakdown by Countries

< 50 million 50 — 100 million 100—300 million > 300 million

Algeria Palestine Egypt Morocco

Djibouti Syria

Iraq Tunisia

Jordan Yemen

Lebanon

Source: CGAP, “Who is Funding Microfinance? Results of the First Global Survey of Funders”, Microfinance Portfolio, November 2008.

Breaking Down Return on Assets (2007)

Arab World

Large Medium Small FSS Non FSS

Egypt Jordan Morocco Pales-tine

Yemen0%

5%

10%

15%

20%

25%

30%

35%

40%

Financial Expense Ratio Loan Loss Provision Expense Ratio

Operating Expense Ratio Financial Revenue Ratio

Yield on Portfolio (2006-2007)

2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007Arab Region Egypt Jordan Morocco Palestine Yemen

0%

10%

20%

30%

40%

50%

Yield on Gross Loan Portfolio Operating Expense/ Loan Portfolio

Portfolio Quality in 2008

2004 2005 2006 2007 20080.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%4.00%4.50%5.00%

PAR > 30 days: Arab Region

2004 2005 2006 2007 20080.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

PAR > 30 days: Morocco

Legislation Highlights in 2009

Developments

EGYPT •Single Regulators Law was passed•Consultation Event on the Draft General Rules for MFC was held on May 4th 2009•USAID EMF/CGAP working with MoSS on transformation plan

YEMEN •On March 22nd 2008 Parliament approved the new microfinance law allowing for the establishment of microfinance banks

Conclusion: Future Outlook

• Only strong sustainable MFIs are able to survive

• By doing what?

• Addressing key human resource challenges and align staff with MFI strategy

• Carefully selecting clients and matching products with client needs

• Clearly disclosing loan terms to clients and properly evaluating creditworthiness and repayment ability

• Introducing innovations and establishing market niches

• Securing funding and diversifying funding sources on the medium to long terms

• Applying sound governance and risk management practices