Microfinance in JORDAN Developments, Challenges and Future Prospects MICROFINANCE IN JORDAN Developments, Challenges and Future Prospects DISCLAIMER The findings, interpretations, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of International Finance Corporation or the Executive Directors of the International Bank for Reconstruction and Development/ The World Bank or the governments they represent. IFC does not guarantee the accuracy of the data included in this work. All data on microfinance institutions in this report, unless otherwise stated, have been provided and reviewed by the institutions themselves through Tanmeyah. Table of Contents ABBREVIATIONS & ACRONYMS ................................................................................................................. v FOREWORD .............................................................................................................................................vi ACKNOWLEDGEMENT .............................................................................................................................vii NOTE TO THE READER .............................................................................................................................vii EXECUTIVE SUMMARY ............................................................................................................................... 1 1. INTRODUCTION .....................................................................................................................................3 2. BACKGROUND: POLITICAL AND ECONOMIC CONTEXT ............................................................................ 4 3. DEMAND FOR MICROFINANCE IN JORDAN ............................................................................................ 5 4. OVERVIEW OF MICROFINANCE IN JORDAN .............................................................................................7 4.1 Historical Overview ...........................................................................................................................7 4.2 Microfinance and Financial Inclusion ................................................................................................. 8 4.3 Microfinance Outreach....................................................................................................................10 4.4 Role of the Banks ............................................................................................................................ 12 4.5 Other Financial Service Providers ..................................................................................................... 12 4.6 Payment Systems ........................................................................................................................... 13 5. LEGAL AND REGULATORY STRUCTURE .................................................................................................. 14 5.1 Minimum Capital............................................................................................................................. 14 5.2 Restrictions on Branching ............................................................................................................... 15 5.3 Corporate Governance .................................................................................................................... 15 5.4 Provisioning Requirements ............................................................................................................. 15 Microfinance in Jordan- Developments, Challenges and Future Prospects iii 5.5 Permitted Activities ........................................................................................................................ 15 5.6 Caps, Limits and Fees ...................................................................................................................... 16 5.7 Taxes ...............................................................................................................................................17 5.8 Financial Consumer Protection .........................................................................................................17 6. MFI OUTREACH AND PERFORMANCE IN JORDAN TODAY ....................................................................... 19 6.1 Regional Coverage ......................................................................................................................... 20 6.2 Average Loan Sizes .......................................................................................................................... 21 6.3 Gender Outreach ............................................................................................................................ 23 6.4 Refugee and Other Non-Jordanian Outreach .................................................................................... 23 6.5 Portfolio Quality ............................................................................................................................. 23 6.6 Financial Performance ....................................................................................................................24 7. MICROFINANCE PRODUCTS .................................................................................................................. 27 7.1 Lending & Financing ........................................................................................................................ 27 7.2 Digital Financial Services .................................................................................................................28 7.3 Microinsurance Products & Services ..................................................................................................30 7.4 Non-Financial Services (NFS) ............................................................................................................ 31 8. SOURCES OF FUNDING ........................................................................................................................ 32 9. MICROFINANCE MESO-LEVEL MARKET INFRASTRUCTURE .................................................................... 33 9.1 Tanmeyah Jordan Microfinance Network ........................................................................................... 33 9.2 Informal Information Sharing and the Credit Bureau ......................................................................... 33 9.3 Credit Guarantees ...........................................................................................................................34 9.4 International Organizations ............................................................................................................34 10. SOCIAL PERFORMANCE AND CLIENT PROTECTION ..............................................................................35 10.1 Overindebtedness .......................................................................................................................... 35 10.2 Gharimat ......................................................................................................................................36 11. MOVING FORWARD ............................................................................................................................ 37 11.1 Regulation and Supervision ............................................................................................................. 37 11.2. Taxes ............................................................................................................................................39 11.3 Digital Financial Services (DFS) ........................................................................................................39 11.4 Overindebtedness ..........................................................................................................................39 11.5 Improve/Diversify Microfinance Sector Products, Services and ClientSegments ..................................39 11.6 Formalizing the Role of Tanmeyah .................................................................................................. 40 12: ANNEXES ............................................................................................................................................ 41 12.1 Annex I: Current Microfinance Providers ........................................................................................... 41 12.2 Annex II: Interventions by International Organizations in Jordan ....................................................... 41 12.3 Annex III: Tanmeyah Jordan Microfinance Network ...........................................................................42 BIBLIOGRAPHY ........................................................................................................................................44 iv ABBREVIATIONS & ACRONYMS ACC Agriculture Credit Corporation MCF Military Credit Fund ACH Automated Clearing House MEMCC Middle East Micro Credit Company AMC Ahli Microfinance Company MENA Middle East and North Africa AMIR Achievement of Market-Friendly MF Microfinance Initiatives and Results MFI Microfinance Institution API Application Programming Interface MFW Microfund for Women APR Annual Percentage Rate MNO Mobile Network Operator ATM Automated Teller Machine MOPIC Ministry of Planning and International BOD Board of Directors Cooperation CAB Cairo Amman Bank MOITS Ministry of Industry, Trade and Supply CBJ Central Bank of Jordan MSE Micro and Small Enterprise CBO Community