Al Amal Rural Expansion Project

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Al Amal Microfinance Bank collaborated with IFAD Rural Youth Economic Empowerment Program (RYEEP) to offer a range of financial products that do not require traditional collateral to young entrepreneurs in Yemen.
What are the main aims and objectives?

The main aims and objectives of Al Amal Microfinance Bank and the IFAD Rural Youth Economic Empowerment Program (RYEEP) in providing youth-inclusive small business loans was to empower young entrepreneurs in rural Yemen by enhancing their access to financial resources. This initiative sought to address the barriers that young people face in securing traditional financing, thereby fostering economic inclusion and reducing poverty. The program had two key objectives: to provide youth-inclusive financial products to 3,000 young entrepreneurs and to build the bank's capacity to deliver non-financial services to 3,500 young people in rural areas. 

How does the program work?

Al Amal Microfinance Bank offers loans without requiring traditional collateral through a unique approach that involves the use of guarantors or third-party guarantees instead. This method is particularly beneficial to youth entrepreneurs, where many potential borrowers lack the traditional assets typically used as collateral. 

Al Amal adopted a strategic approach to expand its services to rural areas. Initially, the institution offered rural clients a modified version of its existing urban-focused savings and credit products, making slight adjustments to suit rural conditions. The plan was to subsequently introduce specialized rural livelihood products to complement its existing portfolio of services, thereby tailoring its offerings to meet the specific needs of rural communities.

Al Amal provided a diverse range of lending options, comprising five distinct products tailored for both adult and youth clientele:

  • The group lending program extended relatively modest, short-duration loans to collectives of 5 to 25 individuals. These loans, designed to address business or household requirements, were secured through group guarantees and featured incremental increases in loan size over time.
  • The Reayah Welfare Payment Program targeted poor households receiving government support payments. Through this product, Al Amal offered small loans with the government support payments used as collateral.
  • Al Amal's primary enterprise lending product for adults was its individual loan offering. This product allowed for loans up to 1 million Yemeni Rials (approximately US$4,667), but came with more rigorous requirements, including detailed business plans and substantial collateral.
  • The Mawsimi loan was a consumption-focused financial product. This loan was designed to assist active borrowers in managing their cash-flow needs during specific periods, such as holidays or the start of the school year. It functioned as a supplementary loan, providing additional financial support to existing customers during these seasonal periods of increased expenditure.
  • the Sharakat loan product specifically designed for individuals with regular salaries. This product was primarily intended for consumption purposes. 
What is the overall cost?

The loans distributed through the program amounted to approximately $2 million 

How was it implemented?

The collaboration between Al Amal Microfinance Bank and the IFAD Rural Youth Economic Empowerment Program (RYEEP) emerged in 2013 from a shared commitment to address the economic challenges faced by young people in rural Yemen. This partnership was driven by the recognition that youth unemployment and underemployment are significant barriers to economic development in the region. IFAD, with its focus on rural poverty alleviation and agricultural development, identified the need to empower young people by improving their access to financial services and entrepreneurial opportunities.

Al Amal Microfinance Bank, known for its expertise in providing microfinance services to underserved communities, was a natural partner for this initiative. The bank's established presence and infrastructure in Yemen enabled it to effectively reach rural youth, offering them customized financial products that cater to their specific needs. The collaboration was designed to leverage the strengths of both organizations: IFAD's development expertise and Al Amal's financial service capabilities. Together, they aimed to create a sustainable model for youth economic empowerment, fostering entrepreneurship and enhancing the economic resilience of rural communities.

What impact has been measured?
  • By the program's conclusion in 2016 it had disbursed a total of 5,445 loans with a cumulative value of approximately US$2 million. 
  • 30 percent of these loans were extended to women borrowers. 
  • The average loan size across the program was US$370. 
  • 2,512 young clients utilized these loans to expand their existing businesses
  • 69 percent of the bank’s rural youth clients started businesses with the Reayah program
What lessons can be learned?

Al Amal identified four key factors contributing to its success in reaching rural clients:

  1. First-mover advantage: As the pioneer financial institution in many rural areas, Al Amal found that even products not specifically designed for youth appealed to this demographic.
  2. Strategic partnerships: Collaborations with local NGOs for non-financial services enhanced Al Amal's credibility. This approach encouraged marginalized groups, including youth, to open accounts and seek funding without significantly increasing operational costs. Al Amal also tailored its non-financial services based on market studies, which revealed these services were not essential for economically active youth.
  3. Innovative collateral acceptance: Al Amal's willingness to accept unconventional forms of collateral, such as enrollment in government support payment programs, was popular among clients who often lacked traditional collateral required by other formal financial institutions.
  4. Balanced client focus: In rural areas, Al Amal's equal emphasis on both youth and non-youth clientele allowed it to reduce cost per loan and achieve market saturation.
Notes + Additional Context

This case study draws from the Unlocking Finance for Youth Entrepreneurs report by World Bank. See here for more information on this program and other finance policies aimed at young entrepreneurs.

CURATED BY

Tom Hancock

Research Associate
Global Entrepreneurship Network
United Kingdom