Aga Khan Agency for Microfinance

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Microfinance in Syria

Basel Abu Saada runs a men's shoe store, which has been in his family for 51 years. The loan he received from FMFI-S has helped keep stock in his store. He hopes his sotre will be open for another 100 years.The First MicroFinance Institution Syria (FMFI-S), which was established as a programme in March 2003, was the first private-sector microfinance service provider in Syria. In 2009, the institution was transformed so that it could take deposits.

The Syrian economy slowed in 2009. Declining oil prices and the global economic crisis were the main causes. Syria is a middle income developing economy that is opening up to global markets. An estimated 1.3 million households live below the poverty line, with 11 percent of Syria’s 20.2 million people living on US$ 2 a day or less, with most of this population in rural areas.

Syria has a nascent microfinance sector, with only a few microfinance institutions serving a limited pool of clients. It is estimated that over 1.3 million households would benefit from microfinance, or other services offered by FMFI-S such as savings. FMFI-S is the market leader amongst the microfinance institutions in Syria as it has a nationwide license and serves the largest number of clients. Greater access to financial services makes it possible for low-income families to capitalise on possible economic opportunities and improve their quality of life.

At the end of 2009, FMFI-S had a portfolio of 15,605 loans, up 14 percent compared to 2008. The portfolio’s value increased 15 percent to over US$ 15.9 million. Two branches launched FMFI-S’s deposit products in 2009. The rest will begin offering this service to their clients in 2010.

Agricultural loans, social loans and housing loans are products that allow FMFI-S to help improve its clients’ quality of life.

FMFI-S is focused on serving rural areas where agricultural activities predominate. These products also integrate well with other AKDN activities. In Salamieh, located in central Syria, FMFI-S is working in cooperation with AKF to provide clients with the knowledge they need to improve agricultural production.

In Damascus, FMFI-S is partnering with the Governorate of Damascus on a drive to restore and preserve the Old City’s unique architectural heritage. The project will help invigorate the local economy. The Rehabilitation Fund aims to provide the residents of the Old City of Damascus with access to financing and incentives to rehabilitate traditional houses. The Governorate of Damascus and FMFI-S have agreed to offer loans for residents who wish to undertake renovation work.

FMFI-S has focused on housing improvement loans for the last three years. At the end of 2009, the institution had about 3,000 outstanding housing loans valued at US$ 2.9 million. Housing loans are being promoted that help households to install piping in their residences, connect to water mains, and improve latrines and sanitation facilities. These loans help families to protect their health and, in turn, achieve a better quality of life.

To further this goal, FMFI-S will enter into share capital agreements with KfW Banking Group, the International Finance Corporation (IFC) and European Investment Bank. KfW and IFC have also entered into technical assistance agreements with FMFI-S to review existing credit policies; create a product development tool kit; review, pilot and launch new products; and implement a social rating measurement tool.