Challenge
The vast majority of businesses in the West Bank are small and medium enterprises that are underserved by local credit markets. Local lenders often lack the capacity to assess or manage small and medium enterprises (SME) credit risk, and ongoing political and economic tensions have exacerbated these challenges.
Solution and Impact
A guaranty to the Middle East Investment Initiative (MEII) has supported loans totaling approximately $400 million to almost 2,400 SMEs in the Middle East and North Africa since 2008. MEII Loan Guaranty Facilities were designed to stimulate lending to SMEs with flexible terms and incentivize financial institutions to assume more credit risk. DFC’s support enables MEII to guaranty up to 75 percent of these SME loans.
Many of these loan recipients are businesses in the West Bank that used loans to expand their operations and repaid on schedule.
Mohammad Darabie is a farmer who raises sheep and sells sheep milk products but lacked the resources to expand his herd. With DFC’s support, MEII guaranteed 75 percent of a $20,000 loan from a local microfinance institution, FATEN (Palestine for Credit & Development). Darabie used the loan to purchase female sheep and a male ram, which enabled him to increase earnings and repay the loan in five years.
Dr. Charlie Nasri Bandak, an optometrist in Bethlehem, used an MEII-guaranteed loan to buy new optometry equipment and update his facility and services. Dr. Bandak repaid the loan in four years.
Another small business borrower was Ibrahim Mahmad, who secured a $40,000 loan from FATEN to expand his aluminum business in Ramallah. Ibrahim repaid the loan within its 58-month tenure.