Syria continues to see positive developments in the microfinance sector, again proving to be a regional leader in this area. New financial products are now available to families, new investors and organizations are entering the market and Syria will soon have a five-year national microfinance strategy.

Worldwide, microfinance institutions are working to develop new services and products, believing that low-income families benefit from a range of financial services, not only microcredit.

"For decades, microfinance providers have focused on providing small, but effective loans. In fact, microfinance became nearly synonymous with microcredit. But, that is changing. Today the microfinance providers are thinking beyond credit, and are implementing micro-savings, insurance and payment solutions," according to the Bill and Melinda Gates Foundation.

A traditional saving account allows poorer families to save more money, potentially enough for small investments. In some places, Syrian families now have that option, with microfinance providers expanding to provide a wider range of services.

In 2007, the government of Syria passed the General Microfinance Decree, which facilitated the expansion of microfinance agencies. Importantly, the decree allows for microfinance institutions to accept deposits. The fruits of that decree are now visible on the street.

In August 2009, First MicroFinance Institution Syria (FMFI-S) introduced deposit services to Sweida, expanding the program to all FMFI-S branches in 2010. Each branch offers current accounts, savings accounts and fixed-term deposits. The customer reaction, according to FMFI-S, has been good, particularly with respect to savings accounts.

FMFI-S, part of the Aga Khan Agency for Microfinance (AKAM), which is an agency of the Aga Khan Development Network (AKDN), was the first institution to be licensed under this decree and is the largest provider of microfinance services in Syria, serving 15,000 clients in both rural and urban areas in seven provinces. More branches are expected to open in the coming years.

FMFI-S continues to expand the products and services offered to clients. Small and medium enterprise (SME) loans and micro-insurance policies are scheduled to launch this summer. SME loans are larger than microenterprise loans and provide capital for microenterprises to expand and for small businesses to develop. SME loans are roughly US$10,000 to US$15,000, compared to microenterprise loans that average US$1,000.

SME loans will allow FMFI-S to follow current clients as they grow into small and medium sized businesses. It will also serve a large segment of the business community currently unserved by financial institutions. This middle segment, sometimes called the "missing middle," requires credit too large for traditional microcredit but too small for a commercial banks.

Providing credit to small and medium enterprises is critical to the economy, according to FMFI-S. "While microenterprises help to sustain and support the core livelihoods of families and households and are central to the alleviation of poverty, small and medium business activity is at the heart of growth. It sustains jobs and creates employment. Without financial services, these businesses may not be able to start-up or grow," says Ashraf Nassif, Chief Operations Officer, FMFI-S.

FMFI-S believes that insurance is important to help their clients manage economic uncertainties and is partnering with local insurance providers to offer life and disability insurance to current clients. Eventually, asset and livestock insurance may be offered.

In September 2009, one of Syria's oldest microcredit providers resumed lending activities after restructuring under the Syria Trust for Development. The Fund for Integrated Rural Development of Syria (FIRDOS) is currently lending to entrepreneurs in four villages in Idleb. As of mid-April, they issued loans to 24 women and 33 men, each loan averaging 87,000 SP. Loans are also available in Latakia, as part of the FIRDOS Village Business Incubator program for women entrepreneurs.

Rather than become a licensed microfinance institution, FIRDOS is focused on providing holistic business development services, including support in marketing, product development and business management. "The main objective is to empower rural communities, give them tools to improve their lives—tools not provided by the large banks," says Deema Nijem, Microfinance Officer at FIRDOS.

Additionally, two new microfinance providers are moving into the market and are scheduled to begin services in the coming months. The Ibda Microfinance Bank is an Arab Gulf Program for Development (AGFUND) initiative.

AGFUND has established four banks and over 30 bank branches in Arab countries through a partnership with Muhammad Yunus, founder of the Grameen Bank.

Bab Rizq Jameel for Microfinance is a Saudi Arabian Abdul Lateef Jameel Community Services Programmes project. Both banks are expected to significantly increase financial service access to poor families across Syria.

On the national level, efforts are underway to develop a unified microfinance strategy that is in line with the vision of the national 11th Five-Year Plan. This strategy is being developed in collaboration between the State Planning Commission and the United Nations Development Program (UNDP) in Syria, and will launch during the Sanabel conference in June 2010. Among other key objectives, the strategy calls for the development of a microfinance credit bureau, the promotion of business development services and the strengthening of partnerships between
the microfinance sector and other sectors.

What policy changes might be on the horizon? Microfinance institutions would like to see the abolition of stamp duty, a fee paid to the Ministry of Finance for every loan, a burden to micro-borrowers, who are borrowing very small amounts of money. For instance, a 3,000 SP loan requires a stamp duty of 600 SP, the minimum duty applied to any loan. This effectively increases the cost of the loan by 20%. The stamp duty will not apply to Al Ibda, which was licensed under a special decree.

In the beginning of June, Damascus hosted the Seventh Annual Sanabel Microfinance Conference, held under the patronage of H.E. Mrs. Asma al-Assad, The First Lady of Syria. Hundreds of experts and practitioners attended the conference, which was themed Responsible Growth: Learning from Global Trends and Regional Experiences.
During the conference, Sanabel recognized outstanding Syrian micro-entrepreneurs who have created thriving enterprises.

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