ONE concise, yet informative, report on the microfinance industry in Egypt is the recently issued country profile by the Microfinance Network of Arab Countries, "Sanabel", a regional network that works closely with 17 members in Egypt, including the Alexandria Businessmen's Association, Banque du Caire, the Egyptian Society for Small Enterprise Development, along with a handful of other businessmen's associations and foundations. Intended to offer donors, investors, researchers and other industry stakeholders an overview of latest trends of the industry, the report is also useful in making comparisons between Egypt and other Arab countries in the region. Sherine Nasr reviews the report The report falls within the broad activities of the Citi Network Strengthening Programme, a three-year $11.2 million international grant programme funded by the Citi Foundation and tailored to advance the integration of microfinance into mainstream economic activity in developing countries. According to Sanabel's report, Egypt is the largest potential microfinance market in the Arab region. In terms of its existing portfolio, Egypt ranks second to Morocco. "By end of 2008, the Egyptian market consisted of about 1.3 million active clients," the report indicated. According to estimates by United States Agency for International Development (USAID), demand for microfinance is as high as $20 million; however, market penetration as of the end of 2008 is only eight per cent, which implies a market gap of 92 per cent. "There are almost 16 million potential microfinance clients in the market." "While the potential size of the market for microfinance does not necessarily represent the real demand, this penetration rate demonstrates that the Egyptian market is currently underserved," indicated the report. Some parts of the country are better served than others. According to the USAID Microfinance Programme (MAP), 48 per cent of active clients are in Upper Egypt while 31 per cent are in Lower Egypt. "The highest penetration levels, however, are found in the frontier governorates followed by the urban governorates," said the report. The Egyptian market maintains very low Portfolio at Risk levels compared to its regional and global peers, reflecting strong portfolio quality. In 2004, the Central Bank of Egypt led a project for developing the National Strategy for Microfinance in Egypt with the support of USAID, the United Nations Development Programme and the banking group of KFW, dedicated to encouraging sustainable improvement in different economic fields, including the small and medium enterprise (SME) sector. The aim was to develop, within five years, a microfinance industry that would allow for more sustainable and diverse financial services to that sector. Many developments have occurred since then, and a new law for microfinance is soon to be enacted. Although there have been few studies assessing the impact of microfinance in Egypt, some impact tracking studies were conducted under USAID-funded projects between 2001-04. On business growth and development for SME clients, it was reported that 30 per cent of clients purchased new machines and the cumulative value of loans led to a positive change in the value of the enterprise and increases in weekly sale volume. As for household standard of living, a strong relation between accessibility to loans and the ability to make improvements in the home was reported, although no significant trends of further enrolment of children in schools or transferring savings to banks were observed. On the employment track, given the economic recession experienced in Egypt, there was a trend towards employment preservation rather than creation, although an average increase of 43 hours of temporary employment per enterprise was reported. Efforts to measure the impact of microfinance have been so far donor-led initiatives. Recently, Sanabel introduced the Social Performance Management (SPM) concept in the Middle East and North Africa region. SPM received a warm welcome by microfinance institutions in Egypt, many of which have developed initial action plans to integrate it into their present systems.
