Challenge
Jordan has long been a center of stability in the Middle East but now faces a multitude of challenges, including COVID-19, rapid population growth, and high unemployment. The country’s micro, small and medium enterprises (MSMEs) account for the vast majority of all businesses and are critical to an economic recovery but have suffered from decreased consumer purchasing power and liquidity in the wake of the pandemic. These MSMEs face a credit gap as high as $7 billion, according to International Monetary Fund estimates.
Solution and Impact
DFC has committed a $50 million loan portfolio guaranty to help Vitas Jordan, a Jordanian microfinance institution, expand its lending to “missing middle” small and medium-sized enterprises (SMEs), businesses in need of financing too large for microfinance loans yet often considered too small or risky for commercial lenders.
Vitas will focus its SME lending on underserved groups including women and rural communities and aims to increase the share of women-owned SMEs to 20 percent of its SME loan portfolio under the guaranty as compared to one percent of its existing SME loan portfolio. In addition, it expects about half of the borrowers supported by the DFC guaranty to be first-time borrowers or microloan customers graduating to larger loan sizes.
This transaction advances DFC’s 2X Women’s Initiative and builds on the success of the DFC-sponsored Jordan Loan Guarantee Facility, which guaranteed $265 million to SMEs through 657 bank loans between 2011 and 2019.