Developing Microfinance in Algeria

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Developing Microfinance in Algeria Momina
AijazuddinMicrofinance Program
ManagerInternational Finance Corporation (IFC)
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IFC and Microfinance Working with IBRD and CGAP
to Achieve Impact

• World Bank policy framework
• CGAP Building the industry architecture
• Legal and policy diagnostic
• IFC Invest in commercially viable institutions
  and services
• MARKET STUDY AND FEASIBILITY

Macro level
Meso level
Micro level
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IFC and Microfinance

• Invested almost US500 million globally in over
  47 countries and over 100 projects
• 15 Global and Regional Funds
• Microfinance Investees have combined Loan
  portfolio of US5.6 billion and have served over
  5.6 million clients
• Double bottom line financial return and
  development impact
• Commercially viable business model return on
  capital
• MENA 17 investments reaching over 145,000
  borrowers in Morocco, Jordan, West Bank, Pakistan
  and Afghanistan

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Microfinance Strategy

• STRATEGY

• Create commercially viable MFIs to attract
  private capital
• Ensure long-term profitable growth of MFIs
• Develop capital markets linkages
• Launch product innovation
• Promote corporate governance and regulatory
  reform

• IMPLEMENTATION TOOLS
• Establish greenfield private sector MFIs
• Transform NGOs into regulated entities
• Encourage commercial banks in MF direct/service
  company model and leverage capital through pooled
  investment vehicles
• Promote MF as attractive asset class to capital
  markets investors

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Algeria Snapshot

• Population 33 million
• Per capita GDP (2006) 7,700
• Ambitious reform program
• Lending to private enterprise 13 (2004)
  compared to 56 in Morocco and 61 in Tunisia
• Unemployment estimated at 15 of workforce
  challenge for government
• Number of poor households estimated 2 million
• Potential Market for Microfinance about 800,000
  clients ( US256 million)

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Algeria Microfinance

• MF sector early stage of development greenfield
• Regional comparison Syria
• High growth potential and demand
• Need for awareness raising regulators/ public
• Develop demand for MF services

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Algeria Financial Sector

• Dominated by public sector government banks
  hold more than 90 of banking assets (which
  accounts for 93 of assets of financial sector)
• Six large government banks focus mainly on
  large firms, government corporations and real
  estate
• Innovative use of Algeria Postale extensive
  branch network and outreach

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Financial Market Snapshot

• Predominantly Government run institutions
• BANKS Focus on larger enterprises and salaried
  employees (consumer loans). No specific product
  targeting MSEs
• GOVERNMENT PROGRAMS ANSEJ, ANGEM and CNAC focus
  on youth and start-up enterprises. Loans are
  disbursed through formal financial sector
• NGO Touiza is one of the very few NGOs with a
  focus on microfinance. But with only 570
  disbursed loans, they cover a extremely small
  part of the MSEs in Algeria
• Quantitatively and qualitatively big loan demand
  76 of the entrepreneurs would be interested in a
  loan, if they had the possibility of obtaining
  one

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Overview of the current supply of financial
services main providers
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Almost 50 of microentrepreneurs consider
obtaining a loan difficult
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Most accessed sources of funding for MSMEs
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Average loan amount
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Interest rate on formal loans
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Informal Loans
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Potential market in Algeria
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What entrepreneurs need

• Simplified procedures to access loans
• Shorter disbursement procedures,
• Innovative products (microleasing,
• Islamic products, etc)

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Opportunity for Greenfield exists

• Quantitatively and qualitatively big loan demand
  76 of the entrepreneurs would be interested in a
  loan, if they had the possibility of obtaining a
  loan
• Strategy Focus on MSEs
• Provide outreach and customised delivery of
  services
• Market leader to introduce best practice delivery
  of MF

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SWOT ANALYSIS
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Challenges

• Pace of Licenses/Reforms
• NBFIs Scope of activity (cash
  management/lending to informal sector)
• Opportunities (privatization of public banks,
  establishment of a greenfield..)
• Staffing/capacity building for new institutions
  (senior bankers?)

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Algeria/ IFC contacts

• IFC Algeria
• 19, Rue Emile Marquis (Djenan El malik) 16035
  Algiers, Algeria
• Phone [phone]
• Fax [phone]
• Key Contacts for microfinance in the MENA region
• Mr. Deepak Khanna
  Ms Momina Aijazuddin
• Senior Program Manager
  Program Manager
• IFC Global Financial Markets
  IFC PEP MENA
• Email dkhanna_at_ifc.org
  Email maijazuddin_at_ifc.org
• Phone [phone]
  Phone [phone]
• Fax [phone]
  Fax [phone]