Summary of UAE Microfinance Research. Noor Al Jallaf Khalifa Fund for Enterprise Development October 8, 2013

Transcription

1 Summary of UAE Microfinance Research Noor Al Jallaf Khalifa Fund for Enterprise Development October 8, 2013

2 Demand for Microfinance in the UAE Estimated Demand for Microfinance: United Arab Emirates October- 12 A Population (UAE Nationals Only)* 947,997 B Average Number of National Persons per Household** 8 C Number of Households A divided by B 118,500 D National Population with Income < 10,000 AED/month (%)*** 20.0% E Number of Low- Income Households C multiplied by D 23,700 F Number of Vulnerable Households 20% of C 23,700 G Estimated Total Number of Households E plus F 47,400 H Market Potential 40% of G 18,960 *NBS Population Estimates 2006 to 2010, National Bureau of Statistics, 2010 mid- year estimate, UAE. **2009 Analytical Report on Economic and Social Dimensions in the United Arab Emirates, National Bureau of Statistics, April 2010, UAE, p. 37. *** Household Income and Expenditure Report in the United Arab Emirates, National Bureau of Statistics, UAE, p. 79.

3 Supply of Microfinance in the UAE Microfinance hasn t been deployed on a scalable, widespread basis in the United Arab Emirates. Emirates Post considered offering a microcredit loan targeted at laborers living and working in the UAE Commercial banks such as Noor Islamic Bank and NaPonal Bank of Abu Dhabi (NBAD) considered downscaling to the micro segment Fujairah Welfare Associa9on (FWA) is a charity organizapon that provides micro loans in Fujairah Khalifa Fund for Enterprise Development, a governmental organizapon that provides support and interest- free business loans to EmiraPs to encourage entrepreneurship and self- employment, works across the country through its naponal branches

4 UAE Field Survey DescripPon Microenterprise definipon: businesses with less than 10 paid employees (Ministry of Economy) Low- income definipon: households living on less than AED 10,000 (US$2,700) per month Lowest 20% income group earns AED 10,986 (US$3,000) average monthly household income in the UAE* About 100 EmiraPs interviewed (primarily women) NaPonal scope: Ras al Khaimah, Fujeirah, Umm al Quwain, Al Dhaid, Al Ghayathi, Ajman Key survey findings are summarized in following slides. *NaPonal Bureau of StaPsPcs, Household Income and Expenditure Report in the United Arab Emirates.

5 Interviewee Profile Marital Status of Interviewees 2% 11% Married Single 12% Widowed 56% Divorced 19% Separated Average Age of Interviewees 26% 11% 1% 5% 34% 23% <20 years years years years years >55 years Average Educa9onal Level of Interviewees 13% 8% Illiterate Government Subsidies Received by Interviewees 5% 22% Primary Secondary School 23% 5% 3% None Ministry of Social Affairs 21% High School Marriage Fund Technical EducaPon 69% Other 31% University

6 Types of Businesses Business Sector 15% 20% ProducPon Trade Services 65%

7 Bank Loans: Business vs Personal Ease of GeTng Business Loan from Bank 0% Personal Bank Loans Outstanding: Interviewees with a Business 7% 12% Impossible Very difficult 34% Yes 40% 41% Difficult Easy Very easy 66% No

8 Need for Financial Literacy Training Funding Needed to Start a Business 21% 10,000 Dhs or less 10,001-30,000 Dhs 53% 5% 5% 0% 30,001-50,000 Dhs 50,001-99,999 Dhs 100,000 Dhs or more 16% Does Not Know

9 Shariah Compliant Loans Importance of Shariah Compliant Loans 28% Important Not Important 72%

10 Key Challenges for Microfinance in UAE Risk of overindebtedness. Clients have mulpple personal bank loans; flexible credit bureau; low financial literacy rate. Small market size with low populapon density. Homogenous businesses (bukhoor, food, seamstresses). RegulaIon in UAE not inclusive of micro businesses (costly annual business registrapon requirement).

11 RecommendaPons to Adapt Microfinance in the UAE Target certain regions. Focus on microfinance in opportunity scarce regions to generate self- employment and income- generapng businesses. Focus on low- income clients. Target exispng home- based businesses and start- ups owned by EmiraPs with average monthly household income of less than AED 10,000 (US $2,700). Provide both financial and non- financial products with emphasis on training and capacity- building (parpcularly financial literacy and business development services) in order to prevent client overindebtedness and increase financial access. Offer Islamic loan structure to increase demand.

12 Thank you! Leila Ben- Gacem Senior Manager Khalifa Fund for Enterprise Development leila.ben- Noor Al Jallaf Senior Business Counselor Khalifa Fund for Enterprise Development

13 Appendix

14 Khalifa Fund s Micro funding program Ø Khalifa Fund s micro funding program was launched in 2012, targeting UAE national microbusiness owners Ø Micro loans provided are interest-free and offer the following terms: Loan range (min - max): AED 5,000-50,000 (USD c.1,361-13,613) Grace period (min - max): 3-6 months Repayment period (min - max): months Ø Micro business training provided in-house Ø Khalifa Fund collaborated with the Ministry of Social Affairs, Businesswomen Counsels, Development Foundations & Welfare Associations to raise awareness of the program across the UAE

15 Sta9s9cs of funded micro businesses Khalifa Fund Loan terms Loan size (avg) AED 32,966 Loan installment (avg) AED 1,450 Grace period (avg) 5 months Repayment period (avg) 22 months Gender breakdown F: 83% M: 17%

16 Micro Case Studies Khalifa Fund Business & locapon: Entrepreneur: Household income: Business descrippon: Years in business: Loan request: MarkePng: Business & locapon: Entrepreneur: Household income: Business descrippon: Years in business: Loan request: MarkePng: Business & locapon: Entrepreneur: Household income: Business descrippon: Years in business: Loan request: MarkePng: Pickled vegetables (Achar) / Ras Al Khaimah 25 years; Secondary educapon; 2 children AED16,000 (husband salary 26k, loan installment 10k) Selling homemade pickled vegetables (sales AED3-6k per month) 3 years AED 23,600 for new products, license, storage, fridge Has 1,200 bbm customers, parpcipapng at fairs & exhibipon EmiraP Kitchen / Ajman 53 years; Primary educapon; 5 children; widow AED12,000 (Ministry of Social Affairs) Cooking tradiponal EmaraP food (sales: AED 5-15k per month) 10 years AED 35,000 to build a workspace and purchase equipment Catering at funcpons, exhibipons, business cards Incense business / Al Ain 42 years; illiterate; 7 children AED4,000 (from husband) Selling homemade bukhour & perfumes (sales AED 3-5k per month) 18 years AED 17,000 to parpcipate in exhibipon and purchase raw material ParPcipates at exhibipons in Al Ain, RAK