Syria: Responsible Growth Key to Success of Microfinance
Damascus, Syria, July, 07 2010 -
Syria's microfinance industry will only succeed if it adopts sustainable growth practices that balance the interests of lending institutions with their clients, Sanabel Board Director Youssef Fawaz told a microfinance conference held in Damascus last month.
Fawaz made the comments at the seventh Microfinance Network of Arab Countries (Sanabel) annual conference held from June 1 to 3 under the patronage of Syria's First Lady Asma al-Assad. Speaking at the opening ceremony, Fawaz said micro-credit had grown by 30 percent annually in the Arab world over the past decade. At the end of 2009 some 2.9 million people in the region held SYP 75.2bn (USD 1.6bn) in loans. Fawaz warned, however, that past growth was unsustainable and the industry needs to review its business practices.
"It is not possible to have sustainable growth without responsible practices which are characterised by good internal governance and a responsible regulatory framework," Fawaz said. "Responsible financing aims to balance the relationships between microfinance institutions and their debtors."
Also speaking at the conference, State Planning Commission Director Amer Hosni Lutfi said Syria has fallen behind in meeting the demand for microfinance. He added, however, that expanding micro-credit will be a central goal of the government's upcoming five-year plan.
"This conference is a qualitative leap in enhancing efforts for creating sustainable job opportunities to improve living conditions for poor people and support national economies," Lutfi said.
In the past year the microfinance sectors in a number of countries such as Pakistan, Nicaragua, Morocco and Bosnia and Herzegovina have been plunged into crisis with debtors unable to repay loans. A report by the Consultative Group to Assist the Poor found that the rapid expansion of microfinance in these countries, rather than the global economic downturn, was the prime reason for the default crisis. As money flowed into the sector, lending principles were weakened and borrowers were able to take loans from multiple institutions. High interest rates charged by some private microfinance institutions also prompted lenders in countries such as Pakistan and Nicaragua to band together and refuse to pay back their loans.
US Small Enterprise Education and Promotion Executive Director William Tucker told the conference that these cases had raised questions about the social benefits of microfinance which the industry needs to seriously consider. Microfinance works best when institutions can take deposits as well as extend loans, Tucker said. A smaller number of large microfinance institutions, rather than a large number of small players, promotes stability, he added.
Sanabel was established in 2002 as a government-backed not-for-profit organisation designed to serve microfinance institutions in the Arab world.