1. Financial Literacy as new frontier for SMEs in the Arab Region
Habib ATTIA
Financial Sector Specialist
Arab Monetary Fund
Financial Education in the Arab World Conference
Skhirat, Rabat, Morocco October, 2016

2. SMEs in the Developing World Key Characteristics of Arab SMEs
SMEs Enterprises Landscape
SMEs in the Developing World
Key Characteristics of Arab SMEs
MSMEs constitute the vast majority of enterprises in MENA, but 90% of the million MSMEs are informal;
Contribution to job creation is highest among formal sector enterprises: 67% of the labour force in MENA are informal and produce 27% of GDP.
Typically have weak balance sheets and use retained earnings to grow.
Lack skills and access to professional services.
Inadequate access to finance for SMEs is still the no.1 constraint for its development. Only one in five (1/5) of SMEs in the region has a loan or line of credit.
Source: WB 2012, Nasr and Pearce, SME Access to Financial Services N°71551; based on Government databases – World Development Indicators

3. SME entrepreneur ecosystems
Finance
Suppliers,
Customer,
employees
Management capacity
Market information
& access
Entrepreneur
Infrastructure
Law enforcement
Regulations,
Licenses, Taxes

4. SMEs in Arab countries are heterogeneous
Size
Requirements
Lower End
Large numbers, very small, often informal, little or no collateral, highly vulnerable, access to short term financing through MFIs most pressing need.
Middle
‘Life-style’ businesses, family owned, stable without growth, more often formalised, often banked, but little or only short term credit available.
Upper End
Growth-oriented and sometimes export oriented enterprises, which need working capital and investment financing and more advanced business development services.
One-size doesn’t fit all – Risk of over-simplification

5. MENA SMEs’ Financing needs
Source: IFC, 2013, Closing the Credit Gap for Formal and Informal Micro, Small and Medium Enterprises

6. Key issues affecting SMEs in the region
Access to and affordability of finance a main constraint, caused by: collateral & titles, credit information, entrepreneur’s capacity, bank capacity, opportunity costs banks;
Enabling environment; and
Internal capacity.

7. Constraints & responses
SMEs Finance:
Constraints & responses
Constraints
Responses
Information asymmetry
Credit Reporting Systems
Usable collateral
Secured Transactions Frameworks (inc. movable assets registries)
Lack of Financing Sources and Products
Credit lines, Guarantee Schemes, State Banks, SME Exchanges, SME Funds, Licensing banks/NBFIs for Competition, Reforms to encourage leasing, factoring .
Lack of Access Points
Branch Expansion, State Banks, Agent Networks
SME Financial Capability
Financial Education, Training, Awareness Campaigns
Focus on services
Focus on users

8. Recent stocktaking study on the Financial Education programmes in the Arab region
Most of the 100+ national and regional initiatives have been launched within the past five years.
Morocco‘s engagement in financial education activities makes up 20% of all national initatives. This is followed by Lebanon, Egypt and the Palestinian Territories with respectively 15-16%.
Egypt reaches the biggest scale in terms of number of beneficiaries with more than 2 million, followed by the Palestinian Territories with more than 1.2 million, followed by Yemen with more than 0.5 million.
The largest project carried out was the Extended and Sustained Access to Financial Services Program (ESAF) in the Palestinian Territories. The costs of $36 million for the three-year period were provided by USAID.
Source: AMF / GIZ Study October 2016

9. % of all initiatives focusing on special target groups
Source: AMF / GIZ Study October 2016

10. # of national initiatives with special target groups
Source: AMF / GIZ Study October 2016

11. Development of a national strategy on financial education
YES NO
IN PROGRESS
REMARKS
Algeria X
Egypt
Need for draft of Action Plan
Jordan
Lebanon*
Need for clear leadership and draft of NSFE
Morocco*
Currently in implementation phase
Palestinian Territories*
National Strategy on Financial Inclusion is planned
Tunisia
Need for leadership. National Strategy on Financial Inclusion is planned
Yemen
NSFE is planned, but no draft existing yet (put on hold due to crisis)
Source: AMF / GIZ Study October 2016

12. % of projects targeting…
National initiatives
# of initiatives
# of beneficiaries
% of projects targeting…
children
youth
women
M/SME
MF clients
Refugees
Algeria 5+ ~ 1 3 2 -
Egypt
14+ ~ 5 9 8
Jordan 9+
~4.200+ 4 6
Lebanon
15+ ~ 7
Morocco
19+ ~ 10
Palestinian Territories ~
Tunisia ~
Yemen 8+ ~
Source: AMF / GIZ Study October 2016

13. Thank you
Q & A