'Jordan's microfinance entities operate most of direct lending outside Amman'

AMMAN – Microfinance industry in Jordan grew by around 24 per cent between 2010 and 2013, reaching a JD123 million total gross loan portfolio, according to the Jordan Microfinance Network (Tanmeyah). 

In its report, made available to The Jordan Times, Tanmeyah attributed  the growth to increasing demand for small loans in areas outside Amman.   

The 74-page study on the industry said microfinance institutions in Jordan managed to operate most of their direct lending portfolio in areas outside the capital –– such as Zarqa, Irbid, Balqa and Karak –– taking around 62 per cent of the total portfolio or JD76 million.

The microfinance industry has succeeded in increasing the total number of clients directly served with the industry's available financing products reaching around 282,000 client in all over the Kingdom, Tanmeyah indicated. 

Nearly 84 per cent of the clientele are female based, 80 per cent of them are under the age of 45 years.

The report showed that active loans grew by 20 per cent reaching 302,000 in 2013.

Around 63 per cent or 178,000 of borrowers live outside Amman, according to the study, which said that increasing demand for small loans was mainly derived from developmental needs in governorates. 

According to the network, 87 per cent of the microfinance loans extended during the four-year period were under the range of JD3,000, with nearly 31 per cent of the loans positioned within the financing group of JD100-JD500 with an average loan size of JD435. The rest was between JD501-JD1,000 and JD1,001-JD3,000. 

The ceiling of microfinance loans varies from one institution to another, ranging between JD15,000 and JD70,000.

"Jordan microfinance industry has taken a good leap towards achieving financial inclusion goals. The market is mature comparing to neighbouring countries’ markets in MENA region in terms of number of lenders, penetration rates [number of clients comparing to population],depth of outreach [average amount of outstanding loan comparing to GDP per capita], and credit products range offering to productive poor and low income people," said the report. 

"Today, Jordan has eight active microfinance institutions through 133 branches deployed in all parts of the Kingdom covering all governorates," it pointed out.

Tanmeyah was established and formally registered as a non-profit institution at the Ministry of Industry and Trade in 2007. It succeeded the Microfinance Association of Jordan as the official representative of the Jordanian microfinance institutions. 

The report detailed the ratios to measure the quality of the microfinance institutions loan portfolio by indicating that lenders enjoy high-quality and robust portfolio. 

It said that  the write-off ratio, which represents the loans that the institution has removed from its books because of a substantial doubt that they will be recovered, was very low as it was less than 1  per cent in 2013. 

The report also highlighted the portfolio at risk of lending institutions, which shows the portion of the portfolio that is “contaminated” by arrears and therefore at risk of not being repaid. 

"Generally, any portfolio at risk exceeds 6 per cent should raise a flag of concern," it said, but in Jordan, all microfinance institutions have an average of portfolio at risk of less than 2  per cent.