From Arab Spring to Real Opportunities for the Poor

As spring turned to summer and now winter, the uprisings in the Middle East and North Africa continue. At first the euphoria was widespread as Arabs across the region began to see a future for the first time without dictatorship, corruption, and hypocrisy. Nearly one year after Mohammed Bouazizi’s self-immolation on December 17 in Tunisia, the countries in the region are still very much engrossed in a historic transition that will take several more years to unfold.

While the revolutions in the region are a manifestation of numerous grievances, it was a simple microentrepreneur in Tunisia who sparked it all, pointing to the heart of the problem. Mohammed Bouazizi epitomized the frustrations of so many. In countries with high growth rates, strong economic reforms, and the praise of the West and the Bretton Woods Institutions, how could so many millions go jobless? For many, self-employment was the only means of survival. And this is where macro meets micro – where Gamal and his entourage meet Umm Azza and her crying children.

Microfinance industries in the region have been supported by governments as a form of benevolent neglect. In Tunisia, the government supported BTS channeling subsidized funds to over 2,80 associations, none evolving to do much but help a few hundred people here and there. In Egypt, the government created the Social Fund for Development, also a wholesale facility, to channel loans and technical assistance to small associations around the country. It allowed USAID and others to support more sophisticated businessmen’s associations, but ensured that legislation continued to hamper their evolution into financial intermediaries. In both countries, microfinance was considered a form of “alternative charity” as opposed to a financial activity that warrants the attention of the Central Bank or the real economy, which remained firmly in the hands of the elite and the formal banking sector. Financial inclusion legislation in the region is best characterized as not conducive, let alone encouraging of innovation.

Only in Syria and Yemen (in 2007 and 2009 respectively) did governments recognize the potential of microfinance as a way to integrate the poor into the financial system, allowing MFIs to transform into deposit-taking institutions to serve the multiple financial needs of clients. But perhaps this was too little too late to counter the political oppression that came hand in hand with these reforms.

In spite of this neglect, the performance of MFIs in the region has been amazing, as many have demonstrated through this blog series. These institutions should be commended for their resilience both before and after the revolutions. They continue to survive and maneuver within a very narrow band of permissibility. They rose up to the challenges posed by the unrest and responded with care not only for their own self-interests but also for their clients.

Today the microfinance industry in MENA sits at an interesting cross-road. Donors and investors are lining up to show their solidarity with the 350 million people across the region who are demanding equal access to the world’s opportunities. But again, it is the governments that are slow to recognize the people’s demands. Financial inclusion, while it will not solve all of the pent up frustrations and the enormous injustice that exists in the Arab States, can go a long way in creating self-generated economic opportunities when the more formal ones are not yet available. It can help people to manage their financial flows which rise and fall with the seasons and with the generosity of their family-members abroad.

It is time to step up to the next challenge and every stakeholder has a role.

I am calling on the newly forming governments in the region to step up. The region is full of dynamic, creative individuals who have been prevented from fulfilling their potential. Archaic rules that prevent financial institutions to serve the full financial needs of clients need to be scrapped. New rules that help telecommunications firms, postal banks, and other viable financial delivery channels meet the needs of the poor need to be encouraged and enacted. I am calling on MFIs to step up. Survival, while commendable, is no longer enough. MFIs need to evolve into client-centered institutions. They need to link, leverage, lobby — whatever it takes to provide services that are relevant and will help their clients manage their complex financial lives.

Finally, I am calling on donors to step up. This means coordinating with other donors, being responsible in disbursement practices, adding value with each and every intervention…it is certainly not about disbursing large sums quickly to ensure promotions at home.

Together, it is possible to see the democratic transformation in the region accompanied by real opportunities for the millions who have been waiting for so long for a chance to be responsible for their own futures and to contribute productively to the societies in which they live.