Aga Khan Agency for Microfinance

AKAM home

About AKAM

Key Figures

Country reviews

Product Overview

Microinsurance

Products for SMEs

Housing Finance

Case studies

Contact information

Other AKDN agencies

Rss

Microfinance in Egypt

The programme in Cairo focuses on the revitalization of an impoverished and dense district, called Darb al-Ahmar, which borders Al-Azhar Park.Steady growth, new product offerings and expansion of the branch network characterised the progress made by the First Microfinance Foundation (FMF) in Egypt during the course of 2007. The Foundation, which developed out of AKDN microfinance programmes that have been operating since 2002, is approaching sustainability and is expected to achieve break-even in 2009. Like all AKAM institutions, FMF seeks to alleviate poverty and generate economic growth by fostering entrepreneurial activity, especially among women.

The programme is now operating in several districts of Cairo and in the Aswan Governorate in the south of Egypt, where it focuses on providing financial services and credit to farmers and other agricultural producers. Three new branches were opened during 2007 in southern Egypt and in the Cairo district of Manishiat Nasser, adjacent to the traditional area of operations in Darb al-Ahmar. Lending and other operations in Darb al-Ahmar have continued to be a priority. FMF has worked closely with local merchants and artisans, particularly those with shops and kiosks along the tourist routes through the old city.

2007 marked a significant year of growth for FMF Egypt. By March 2007, FMF reached 10,000 clients, and by the end of the year, the Foundation had disbursed US$ 6.5 million to over 15,000 borrowers (40% of which were women). The average loan size was US$ 373, and 58% of the clients earned less than US$ 2 a day. Despite high inflation, the quality of the loan portfolio has remained strong with less than 2% portfolio-at-risk by the end of the year.

As the Egyptian microfinance market remains underserved, there still exists tremendous potential for growth. This is due to the lack of a dedicated microfinance law or policy framework, which has prevented MFIs from being able to mobilise deposits. FMF has recently joined with a number of other Egyptian MFIs in the newly formed Egyptian Microfinance Network to work closely with the government and regulators to develop new laws and guidelines that will support further growth in the sector. FMF also joined Sanabel, the microfinance network of Arab countries, in order to facilitate cross-border learning and exchange.

A number of strategic partnerships were established during the year which are yielding important insights into best practices and resulting in new product developments. An agreement was reached with the global insurer Allianz, along with PlanetFinance and the Surety Fund, to provide all FMF clients with accidental death and disability insurance to protect the family of the borrower in case of tragic events. The insurance policy will pay off the loan and provide a small stipend, thereby protecting the family from debt and helping to pay for a portion of the immediate medical or funeral expenses. This service is being provided at no extra charge to the client as it involves an innovative partnership between local Egyptian insurers and a consortium of international reinsurers.

This first foray into the delivery of microinsurance will hopefully pave the way for the development of more complex insurance products, particularly for health, in line with the broader AKAM strategy to use insurance and other risk pooling mechanisms to support improved health outcomes. FMF has also been providing an innovative programme since late 2006 for its clients in Darb al-Ahmar whereby they are able to consult with doctors who visit the branches on a bi-weekly basis and provide check-up and referral services.

FMF is also jointly funding a National Impact Assessment Study of Microfinance in Egypt with the Small and Medium Enterprise Policy Development Project (Egyptian Ministry of Finance, CIDA, and the IDRC), German Technical Cooperation (GTZ), the Social Fund for Development (SFD), the United Nations Development Program (UNDP) and PlanetFinance in order to measure the effects of participation in a microfinance program in Egypt on an individual’s business activity and the well-being of his or her household.

The study’s objectives include measuring the real impact of microfinance on the improvement of economic opportunities, determining if microfinance projects achieve their intended objectives, and ascertaining whether there is a gap between the services provided and the needs of clients. The information from the study will then be used to improve FMF’s impact within the community through development of better products and services.

FMF is also partnering with CIDA and the Mennonite Economic Development Association (MEDA) on a children’s rights project. The project called Protecting and Promoting the Interest of Children who Work (PPIC Work), applies a gender-sensitive, rights-based approach to improving the working conditions and learning opportunities of girls and boys who work in micro and small enterprises in Egypt.

The outlook for 2008-09 is extremely positive as FMF expects to grow exponentially to meet the enormous demand both in Cairo and the rural areas of the Aswan Governorate. An agreement has nearly been finalised with USAID which will provide FMF with a loan guarantee facility that will support continued growth of the portfolio and improve liquidity. As a result of this guarantee facility, FMF will begin to be able to access local capital markets and start to build relationships with local commercial banks which are eager to get involved in the expanding market.

FMF is projecting record growth in 2008 of over 50% in both the number of borrowers and portfolio value, and anticipates ending the year with more than 20,000 borrowers. FMF is also expected to achieve sustainability during 2008, although it will continue to rely on some grant funding for expansion into new areas and new product developments. Cooperation is underway with USAID to expand the FMF lending programme in Aswan, while in Darb al-Ahmar FMF is partnering with CIDA on an initiative that will see it greatly expand its offering of business development services.