The microcredit sector in Palestine emerged in the 1990s in response to the growing demand for microfinance, with the aim of improving the standard of living of small and low-income entrepreneurs and combating poverty and unemployment by providing diversified financial services targeting marginalized groups which are unable to borrow from the banking sector. The Palestinian Monetary Authority (PMA) began regulating the sector in 2012 by issuing instructions for the registration and supervision of microfinance institutions, which contributed in the organization of the sector and enhance its development.
The number of active Microfinance institutions in Palestine is nine companies that have been able to withstand and maintain their capital and growth despite all the crises that have passed over the past 30 years. They all fall under the Palestinian network for small and microfinance “Sharaka”, which is considered the body that represents the sector and its institutions.
The microfinance sector aims to reduce poverty and unemployment rates in Palestine by providing financial services to marginalized groups whom are unable to borrow from the banking sector and considered a high risk group, especially youth and women. The sector also contributes to the rehabilitation of a new category of society with the ability to borrow from the banking sector by building a good credit history that can be relied on.
Importance of the Sector
Studies around the world have shown that microfinance can be an effective tool in promoting economic growth, reducing poverty and improving the living standards of people in developing countries. At the local level, the importance of the microfinance sector stems from the structure of the Palestinian economy that is based on small and micro-enterprises which represents 95% of its components, which are the main source of economic growth and employ more than 35% of the Palestinian labor force. Most Projects are not officially registered and are unable to borrow from the banking sector, so the microfinance sector is the main window for providing financial services.
Sector Achievements – As of 2018
- The amount of loans disbursed since the establishment of the sector are about 1.355 billion dollars, disbursed to about 575 thousand families/loan.
- The value of the active portfolio of the sector in Palestine reached about $ 269 million.
- Lending companies serve more than 83,000 clients, 70% of them in the West Bank and 30% in the Gaza Strip.
- The percentage of women in the total number of clients was 36% and the percentage of youth was 53%
- The nine institutions employ more than 950 employees, distributed to 107 branches and field offices in Palestinian cities and villages. The percentage of women in these institutions is 44% of the total number of employee·
- The sector grew by 36% annually between 2011 and 2018.