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MICROCAPITAL STORY: GTZ Provides Microfinance Training to Participants from the Central Bank of Yemen in Anticipation of New Microfinance Law

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The German Development Cooperation (GTZ) Private Sector Development Project (GTZ-PSDP ) began providing training workshops on microfinance for participants from the Central Bank of Yemen. The first workshop began on January 24 2008, and is the first in a series of workshops which aims to build the capacity of the Central Bank to better understand microfinancing, according to Ozaina Al-Jundi, an advisor for microfinance at the GTZ-PSDP. The workshops will be held every month in 2009. The trainees from this initial workshop will be responsible for applying a proposed microfinance law which is awaiting approval by the Yemeni Parliament. Yemen is a priority partner of the GTZ where it aims to develop and promote business related services, improve political, legal and institutional frameworks for investments and strengthen central government and private institutions. The proposal of a Microfinance Banking Law was discussed in 2007 by representatives of the Central Bank as a first output of a National Action Plan related to the National Microfinance Policy Statement. The Action Plan was developed through a cooperation between the Ministry of Planning and International Cooperation (MOPIC), the Central Bank, Social Fund for Development and with funding from KfW. More information on this can be found in this MicroCapital Story.

A 2007 report commissioned by the International Finance Corporation (IFC) to assess the financial needs of micro and small enterprises (MSEs) suggested that, while it is difficult to estimate the number of MSEs in Yemen, a conservative estimate not inclusive of farmers would be 400 thousand. Of these, 90.7 percent were microenterprises and 98.5 percent were owned by men. Only 3.5 percent of the population has an account with a formal financial institution, and this sector is highly underdeveloped. There are only

15 active banks. four of which are fully foreign-owned, three are public and eight are private. There are 13 active MFIs in Yemen, with an outreach of 31 thousand clients and a loan portfolio of USD 6.9 million and an average loan size of USD 97. Of these MFIs, five MFIs report to the MIX. which with a total of 18 thousand active borrowers and a gross loan portfolio of USD 1.8 million .

Yemen is the least developed country in the Middle East, with a Gross Domestic Product (GDP) per capita of USD 650 and a life expectancy of 59 years for men and 62 years for women. It has a population of 21.6 million with a population density of 37 people per square kilometer. Approximately 25 percent of the population is urban and nearly 40 percent of the population lives below the poverty line.

The Central Bank of Yemen was established in 1971. and merged with the Bank of Yemen in 1990 with the reunion of the northern and southern sectors of Yemen. Assets totaled YR 1.6 trillion (USD 8 billion) at the end of 2007.

The GTZ is an international cooperation enterprise for sustainable development with worldwide operations. It was founded in 1975 as a company under private law and is now a federal enterprise based in Eschborn, Germany. While the German Federal Ministry for Economic Cooperation and Development (BMZ) is its major client, it also operates on behalf of other German ministries, the European Commission, the United Nations and the World Bank. GTZ operates in over 120 countries globally.

By Lori Curtis, Research Assistant

Additional Sources:

Central Bank of Yemen: “ Home ” “ Annual Report “

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