Microfinance in the Arab States 3.3 Market Penetration By frequently used international standards, poverty numbers in the Arab world are low. Only 2.3% of the population lived on less than $1 per day in 1999.10 But at $2 per day, a more realistic number for a largely middle-income region, 29.9% of the population lived in poverty. Although this is still relatively low compared with some other developing countries, it is still a significant proportion of the population. If we would use nationally defined poverty standards, the percentage of poor people is slightly lower, as shown below.11 A rough estimate of the potential market for credit in the region can be calculated based on the national poverty headcount percentages. It is common practice in the microfinance industry to assume that not more than one member per household should have a loan (because with an increasing number of household members borrowing, the household risks becoming permanently indebted). If we assume that the average size of a poor household is seven, we can compute the number of poor households per country. Not every poor person is a good entrepreneur or has a good project to finance. If we assume that 40% of all poor households would be eligible for a loan, we can calculate the potential market for credit (in terms of number of potential borrowers). Table 3.2: Market Penetration Based on National Poverty Lines Country
Egypt
Population
Poverty headcount (national definitions) (%)
Number of poor people
Number of poor households
Potential market (40%)
Active borrowers
Market penetration (%)
66,372,000
23
15,265,560
2,180,794
872,318
256,159
29
Jordan
5,171,000
12
620,520
88,646
35,458
24,348
69
Lebanon
4,441,000
10
444,100
63,443
25,377
13,429
53
Morocco
29,641,000
19
5,631,790
804,541
321,817
297,148
92
Palestine
3,231,000
50
1,615,500
230,786
92,314
13,394
15
16,986,000
20
3,397,200
485,314
194,126
32,170
17
Tunisia
9,781,000
8
782,480
111,783
44,713
63,736
143
Yemen
18,601,000
33
6,138,330
876,904
350,762
9,872
3
Total
154,224,000
22
33,895,480
4,842,211
1,936,885
710,256
37
Syria
Based on these calculations we can also show the market penetration for the region, or the percentage of potential clients who currently have access to microfinance. We see then that Yemen, one of the youngest and more challenging markets in the region, is underserved with only 3% having access to financial services. At the other extreme, a country such as Morocco, which has the largest number of active borrowers, appears to have very good coverage given its
20