FIRST MICROFINANCE BANK, AL-AMAL BANK

UNCLAS SECTION 01 OF 02 SANAA 000293

SIPDIS

USTR FOR JASON BUNTIN, DEPT OF COMMERCE FOR TYLER HOFFMAN,
USAID FOR NATHAN PARK, USTDA FOR CARL KRESS

E.O. 12958: N/A
TAGS: EAID ECON EFIN EINV YM
SUBJECT: FIRST MICROFINANCE BANK, AL-AMAL BANK
REESTABLISHED IN YEMEN


1. SUMMARY: Al-Amal Bank has renewed its commitment to
microfinance since November 2008. The bank is targeting
micro-enterprises, low-income families, and women. It is
basing its five-year business plan on reports from the Social
Fund for Development (SFD) and International Finance
Corporation (IFC) as well as recommendations from the
Al-Amana Microfinance Bank in Morocco. Al-Amal Bank is a
welcome addition to the underdeveloped Yemeni banking sector.
END SUMMARY.

AL-AMAL BANK RENEWS COMMITTMENT TO MICROFINANCE
--------------


2. Mohammad S. A. al-Lai, Executive Director of the Al-Amal
Microfinance Bank, told Econoff on February 16 that the bank
has renewed its commitment to microfinance in Yemen since
November 2008. Although the Al-Amal Bank was established in
2002 as the first microfinance bank in Yemen, it reorganized
itself under new leadership in 2008. According to al-Lai,
the bank has 4500 active clients and USD 1.2 million in
disbursed loans. Although the loan amounts are small (USD
50)4000),they target Yemenis who would otherwise not
qualify for loans. The bank also particularly targets women
as clients; a minimum of 65% of total active clients are
women. Al-Lai told Econoff that Al-Amana Bank, the most
successful microfinance bank in the Middle East and North
Africa region, is mentoring Al-Amal by training employees in
microfinance best practices. According to al-Lai, other than
Al-Amana, there is a paucity of experience of microfinance
experience in the region. (Note: Established in 1997,
Al-Amana is a highly successful USAID initiative, becoming
independent five years after establishment. End note.)


3. Ali Azaki, Director of Research and Development at
Al-Amal Bank, told Econoff on February 16 that the bank
intends to provide inclusive financial services for all
Yemenis. By targeting low-income families and
micro-enterprises, it is providing financial services to an
emergent market within Yemen. Azaki said that Al-Amal has a
five year business plan, which aims to provide financial
services to underserved Yemenis, to expand the bank across
Yemen, and to evolve into a sustainable institution. Over
the course of five years, Al-Amal bank intends to expand to
100,000 active clients and USD 60 million disbursed loans.
Al-Amal Bank is basing its business plan on studies by the
SFD and International Finance Corporation (IFC). In 1997,
the SFD identified 32,000 possible active clients and 12 NGOs
that would benefit from microfinance. In addition, in a 2000
study, the SFD identified one million potential microfinance
clients. Similarly, according to a December 2007 IFC report,
there are 400,000 micro small enterprises (MSEs) in Yemen.


4. Al-Amal Bank emerged from the combined efforts of the
Social Fund for Development (SFD),the Arab Gulf Program for
United Nations Development Organizations (AGFUND),and
contributions from the private sector. Its capital (USD 5
million) comes from three sources: the Yemeni Government
(45%),the AGFUND (35%),and the private sector (20%).
(Note: al-Lai also mentioned that much of the capital is
coming from Yemenis outside of Yemen, particularly in Saudi
Arabia, but did not specify the amount. End note.)

A WELCOME ADDITION TO YEMENI BANKING SECTOR
--------------


5. The Al-Amal Bank is a welcome addition to the
underdeveloped Yemeni banking sector, where 17 banks serve
five to six governorates, according to Al-Lai. Yemeni banks
are not present in all 22 governorates, and suffer from
limited investment opportunities. Because the banking sector
is restricted to urban areas like Sana,a, it works with only
4.2% of Yemenis and misses approximately 120,000 actual
population centers. (Note: Only two million people live and
work in Sana,a; the other 20 million people live outside of
Sana,a.) Al-Lai said that Yemeni banks tend to work only
with large businesses. (Note: They would be considered
medium-sized businesses by world standards. End note.) If
Yemenis have wealth, they save it at home or retain it in the
form of material objects, such as gold, he added.


6. COMMENT: Yemen is the least developed country in the
Middle East and North Africa region with almost half of its
22 million people living below the poverty line, on less than
USD two per day. Microfinance efforts are an infusion of
much-needed capital to entrepreneurial Yemenis. Previously

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not active in Yemen, microfinance is a way to combat poverty.
As the first microfinance bank in Yemen, Al-Amal is a
pioneer within an underdeveloped banking sector and a
struggling economy. END COMMENT.

SECHE