Our History

History of Microfinance in Yemen

Yemen, one of the first in the region has its own Microfinance Bank Law, No. 15. It defines a microfinance banks as any financial institution authorized andregulated by the Central Bank to run Microfinance activities with the purpose of offering banking services to families, small farmers and small and microenterprises in both urban and rural Yemen, aiding in creating equal opportunities and improving living standards of members of society. All inclusively contributing to reducing unemployment and poverty in the country.

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This year also saw relatively growth in the number of borrowers. New MF practitioners joined the sector like the Enjaz Capital MF Islamic Bank and Unit of Economic Empowerment in the Islamic Bank of Yemen. In this year YMN members reached to 20.


It was a year full of accomplishments for the microfinance sector in general. The number of clients increased to more than 95,000 clients and the number of savers are more than 213,000. Many of MFI’s opened new branches in some governorates, so MF sector became spread nearly in all Yemen’s governorates


The Microfinance sector began to recover from the 2011 turmoil and several activities were organized in this year such as the Clients Fair which had a tremendous effect on increasing the awareness about the Microfinance Sector. In addition there was an increase in the number of Microfinance beneficiaries in comparison to the previous year 2011.


The microfinance Sector was effected by the political turmoil that began in February 2011 which had a catastrophic impact on the overall economy of the country. This damage in the economy will require a long period of time for the overall economic performance to improve and recover.


YMN was registered in 31st August 2009 by the SFD and UNDP as an NGO to be the first Local Network that serves the Microfinance Sector. The Network was registered under the Ministry of Social Affairs and Labor as a non-governmental organization (NGO), with its own board of directors and consisting of the member microfinance institutions. At the end of 2014 the Network has grown to include 20 member Microfinance Institutions from Banks, Foundations, Companies and Microfinance Programs. The goal of YMN is to work on providing training and capacity building, technical assistance, lobbying and awareness-raising, linkages with internal and external players and challenges related to achieving greater outreach of Microfinance services for low income members of society and also those who seek financing for their Small or Medium businesses.


In 2006, Al-Tadhamon International Islamic Bank, the largest private bank in Yemen, established a program to serve SMEs with loans. This initiative represented the first involvement of the Yemeni private banking sector in the SME financial industry. In October 2008 Al-Amal Microfinance Bank started its operations which formed a new turn of events in microfinance industry in Yemen, as it constituted the first bank specialized in small and micro financial services.


The third major transformation took place in June 2005 with the merger of the three MFIs established in Aden back in 2001 to form Aden Microfinance Foundation. In this stage SFD also partnered with the Small Enterprise Development Fund and Alislah Charitable Society – the largest NGO in Yemen to finance microfinance programs.


The continuous expansion of the program’s operations and business volume necessitated an evolution of their legal and institutional status. The first transformation came in October 2002, when a Board of Trustees was formed for the National Microfinance Foundation (NMF), which transformed it from a mere program into an independent and officially registered NGO supervised by a Board of Trustees. The second transformation took place in March 2004, with the evolution of the legal status of Taiz Microstart Project, which was registered at the Ministry of Industry and Trade (MOIT) as Al-Awael Microfinance Company.


A new phase began in 2000 by establishing strong urban programs with the idea that they could branch out into rural areas. The main program was Alif program which started with three main branches in Taiz, Ibb and Dhamar and was modeled after ASA’s group lending and saving methodology. Alif program provided the basis for SMED unit to encourage the wide spread use of group lending methodology that was used by almost all the other MFIs. It increased the

number of active female clients, both borrowers and savers remarkably. SMED signed several agreements with NGOs in Yemen to establish new microfinance programs, in Seiyun_Hadramout, Aden, Abyan and Sana’a.


Microfinance industry started in Yemen in 1997 by the Social Fund for Development, which piloted 5 microfinance programs in rural areas. The first program was in Al-Hodieda city which started its operations in January 1998. It was a successful example for that time frame, yet a single centered activity such as cattle raising and agricultural inputs for crops limited diversity of products available in rural areas. This limited diversification in addition to a combination of reasons led to the collapse of those programs which closed down or were absorbed by larger MFIs.