IFC Report Highlights Pros and Cons of Transforming Microfinance Institutions in Arab World
A new study by IFC, a member of the World Bank Group, has investigated the potential benefits of transforming microfinance institutions (MFIs) from not-for-profit organizations into for-profit organizations.
Transforming Microfinance Institutions in The Arab World, carried out jointly with Sanabel, the Microfinance Network of Arab Countries, takes a closer look at the challenges and costs of transforming into a for-profit company in the region. It also highlights the benefits, which include increased access to capital, improved governance and ownership, and increased financial products and services, which can make MFIs more competitive and sustainable.
The study surveyed 20 MFIs, of which 11 are not-for-profit. Of these, eight operate in regulatory environments that allow for transformation. Several Arab countries, including Syria, Yemen, Sudan, Egypt, Tunisia, Jordan, and Palestine have made regulatory changes recently that allow for transformation; however, some still have no clear road map for how the move can take place.
“Nearly 2.5 billion people in developing countries have little or no access to formal financial services,” said Mohammed Khaled, IFC Head of Microfinance Advisory Services in the Middle East and North Africa. “Supporting the transformation of microfinance institutions could help boost access to financial services and allow MFIs to reach more low-income people more efficiently.”
The report is the third in a series of papers developed jointly with Sanabel, the Microfinance Network of Arab Countries, and supported by IFC’s MENA Transition Fund.
In fiscal year 2017, IFC’s microfinance teams invested $833 million in 39 projects globally, including nine in fragile and conflict-affected countries. The portfolio also includes 44 advisory projects across six regions.