Syria’s primary economic challenge is unemployment, which has been increasing at a rate faster than GDP growth. Economic policies based on the state’s responsibility to ensure full employment contrast with the increasing demands of a free market economy and attempts to deregulate. As a result, changes on the ground remain difficult despite the government’s commitment to expand foreign investment and increase the pace of economic liberalization.
One of the most difficult changes required to transform a state-run, command economy into a vibrant economic structure characterized by private enterprise, is to catalyze entrepreneurship by drawing on the creative potential of an educated labour force bolstered by enabling structures such as access to finance and business development services. To assist in building this human resource base, AKDN has initiated a credit and business advisory services programme in Hama, Lattakia, Aleppo, Tartous, Damascus, and Sweida, serving both rural and urban populations.
Under the programme, loans are disbursed for the creation of new enterprises, the expansion of existing businesses, and servicing agricultural activities. In the area of microfinance, AKDN works closely with existing Village Development Committees (VDCs) as part of the healthy villages programme in Haffeh within the province of Latakkia and in areas surrounding Aleppo. Within the first three years of the programme, more than US $12 million were disbursed in loans resulting in the creation of more than 11,000 new jobs. Nearly a quarter of loan recipients are female. The proportion of women benefiting from the programme is much higher after taking account of the fact that lending supports businesses which employ many women. This two-pronged strategy of building human resource capacity and providing access to microfinance, especially for rural populations, also addresses the income and wealth differential between Syria’s urban and rural populations.
A national Microfinance Institution, the first of its kind in Syria and the region, intended to scale up AKDN’s current microcredit programmes, is under discussion with the Syrian government. Given broad agreement about the critical role of credit and business advisory services in creating wealth and stimulating economic development, the AKDN is working closely with the Government to develop the necessary institutional and legal framework enabling the establishment of a microfinance institution within the country.
One of the sectors with significant potential for employment generation, and which is expected to benefit from credit and business advisory services, is cultural tourism. Syria has yet to capitalize on its rich and diverse history and vast cultural resource for tourism development. Building on its international experience in the leisure industry, especially as a key strategy for economic development, AKDN is exploring several opportunities to develop cultural assets in collaboration with the Syrian Ministries of Culture and Tourism and the Governorates of Damascus and Aleppo.
The Aga Khan Fund for Economic Development (AKFED) and the The Aga Khan Trust for Culture are proposing investments that will combine tourism development with conservation and re-use of landmark monuments, rehabilitation of historic areas, urban planning, and wide-ranging socio-economic development to boost living conditions in historic areas and create new opportunities for residents.
In March 2003, the Aga Khan Development Network (AKDN) launched the activities of the Aga Khan Agency for Microfinance (AKAM) in Syria. The programme draws on experience gathered from initiatives such as the Aga Khan Rural Support Programme in Pakistan and the Enterprise Support Programme in Tajikistan. Microfinance
Microcredit enables communities to access funds to help them obtain a better quality of life and become self reliant. Microcredit programmes and institutions have become increasingly important in achieving poverty reduction and small enterprise development. Although, initially, the impact of microcredit is not easily seen, the programme encourages individuals to build their incomes while simultaneously helping the community through job creation and greater economic autonomy. AKAM began operations in the Provinces of Tartous, Lattakia, Hama and Aleppo with the expectation of expanding to other areas in Syria e.g Damascus and Sweida. The goal is to break barriers to credit and provide access to those who otherwise would be unable to obtain loans. The microfinance programme is community based and tailors its approach to the needs of individual communities. A key objective of AKAM in Syria is to achieve sustainability, meaning, full cost recovery, to ensure the longevity of the programme and viability of its projects.
Along with financal provision, AKAM offers business advisory services. The programme provides intensive training courses to community members for preparing business plans and other services as needed. Building these skills complements the development of fiscally sound businesses and small enterprises, ultimately fostering entrepreneurship and self reliance. AKAM contributes to the regeneration of the local economy by facilitating sustainable enterprise development. The Agency seeks to finance a variety of businesses, particularly those that have a beneficial impact on surrounding communities or spur job creation. AKAM also strives to enhance fiscal responsibility and business acumen amongst local entrepreneurs. In the long term, AKDN hopes that the activities of AKAM will help mitigate the impact of unemployment and will work with local producers to reach new markets inside and outside Syria .
AKAM reached self sustainability in early 2004. Eventually, AKAM will reach additional areas within Syria , as well as serve as a model for the rest of the region.
AKAM uses a participatory approach with the community, working with local people in all facets of a project’s activities. Potential borrowers are allowed to submit applications for either individual or group loans and can request one of two types of loans: agricultural (seasonal) or commercial (monthly installments). Within the last year, the programme has also provided mortgage finance and loans for health and educational purposes.
In Haffeh, a local village committee works with the loan committee of AKAM, reviewing applications and making recommendations. Loan officers visit the villages regularly and talk to people to determine and respond to their needs. Potential borrowers are guided through the application process and assisted in developing a viable business plan. There are also designated female credit officers who meet with local women.
The progamme works in coordination with the Aga Khan Trust for Culture and aims to help and encourage owners of old homes preserve the historic fabric and texture of Syria’s historic cities. Loans range from SYP 3,000 (US$ 60) to SYP 150,000 (US$ 3,000) and the period of repayment is between three and 24 months. If the borrower is consistent with repayments, he/she can renew the loan at the end of the period, for a lower service charge.
As of September 2005, AKAM had disbursed over 12,000 loans in Syria worth over SYP 650 million (US$ 12 million) for retail and trade, agricultural purposes such as drip irrigation systems and animal husbandry, service and transport and the professions. Thus far, the loan repayment rate is 99 percent. Enterprises assisted include small farmers, shop owners and other retailers. While an impact assessment needs to be carried out, in house monitoring shows that many of the businesses have significantly increased their profits and borrowers express that they are now able to respond to changes in the market. To date, the loans disbursed by AKAM have led to the creation of many new jobs.
Although AKAM’s activities provide significant individual short-term benefits, it is in the long-term that the full scope of the programme’s impact will be felt, especially on a community and regional level.
An Area Development Approach
The Aga Khan Agency for Microfinance is an important component of the integrated development approach of the Aga Khan Development Network and complements other development activities. In the District of Haffeh, AKAM collaborates with the Ministry of Health’s Healthy Village Programme by providing loans to Village Development Committees.
AKAM is also working with the Government and various Ministries as well as other NGOs and groups, such as the International Center for Agricultural Research in the Dry Areas (ICARDA) and the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ), to ensure that the organizations complement each other and do not duplicate efforts. Within AKDN, AKAM is working with various agencies, in particular the Rural Support Programme, enabling local farmers to improve their productivity and adopt new and more efficient agricultural practices. Projects of the Network are complementary in nature and designed to improve the lives of people by increasing opportunities and encouraging self reliance.
What is Microfinance?
Microfinance supplies loans, savings and other basic financial services to populations with limited or no access to affordable finance. Such financial services include working capital loans, consumer credit, savings, insurance and money transfer services. The AKDN Microfinance programmes are not-for-profit and are designed to assist lower-income groups in accessing credit and other financial services.
What are the sizes of loans administered?
The amount of each loan varies, depending on the type of business. Loans range from 3,000 SL ($60) to 150,000 SL ($3,000).
What types of projects does the Aga Khan Agency for Microfinance (AKAM) support?
The Aga Khan Agency for Microfinance (AKAM) offers several types of loans: agricultural (which are repaid in coordination with the season) and commercial (repaid in monthly installments). Recently, AKAM has added credit products for housing, health and education. Businesses that add value to their surrounding communities are particularly welcomed. Women are also encouraged by AKAM officers to become entrepreneurs.
What guarantees does AKAM require to give loans?
Prospective borrowers are expected to find two local community members who will act as guarantors.
How long do borrowers have to repay the loan?
The period of repayment ranges between three and 24 months, although each proposal is judged on a case by case basis.
Does AKAM charge interest?
AKAM is a non-profit entity that charges an administrative fee in order to cover its administration costs. It differs from a bank, which is able to charge lower fees but does not administer small loans. However, once repayments have been made for a first loan, the fees for additional loans will be lower.
I want to start a business but I am not sure how much money I will need?
There are several things to consider before taking a loan. To facilitate this process, AKAM has a Business Advisory Service. Ideas can be discussed with staff based at local AKAM offices, and together a business plan can be designed. Training courses are also offered to support borrowers.
I live outside the current programme area. Can I get a loan?
Microfinance loans are only administered in areas where offices are based. They currently operate in the Districts of Salamieh, Masyaf, Haffeh, the Old City of Aleppo and selected areas in Tartous, Jobar in Damascus and in Sweida. However, AKAM is a growing institution and is expanding into more areas within Syria. AKDN’s intention is to create a national Microfinance Institution and expand access to microfinance services throughout the country.
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Integrated Development in Syria (PDF, 233KB)
Improving the Quality of Health Care (PDF, 151KB)
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Promoting Entrepreneurship and Job Creation (PDF, 123KB)
Supporting Heritage Conservation in Syria (PDF, 360KB)
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