Beyond Numbers: How One Gaza MFI Emerged from the Rubble

It’s a strip of land 25 miles long and, at most, eight miles wide. Yet Gaza is home to some 1.8 million people, the majority of whom are under the age of 25. With unemployment rates in the double digits and the United Nations estimating that more than three-quarters of the population there depends on aid to survive, it’s little wonder that the services of our microfinance institution, FATEN, are in such high demand.

But what role can a financial service provider play when its clients’ needs become more elemental? Nowhere, perhaps, is that question more pressing than in Gaza, where a sizeable portion of what FATEN and its estimated 10,000 clients had built since our inception in 1999, including a $13.5 million loan portfolio, was literally destroyed in a matter of weeks last summer. All told, the so-called “Operation Cast Lead” directly impacted roughly one-third of our clients and one-fourth of our portfolio, respectively.

During a 51-day Israeli air, ground, and sea assault, in which more than 2,100 people were killed - nearly a quarter of them children - large swaths of the strip were reduced to rubble, at one point displacing a quarter of Gaza’s population. That some of them were already refugees, sheltering in one of eight UN-administered “camps,” compounded the suffering.

For us at FATEN, the numbers alone don’t capture the depth of our tragedy, which is, after all, personal. But even on paper, what happened last summer is shocking: 37 of our clients were killed and more than 600 injured, with nearly as many of their relatives losing limbs, breaking bones, or otherwise traumatized by the near-constant bombing and shelling. When the guns fell silent, our clients emerged to find that more than 450 of their homes had been completely destroyed, with twice that number otherwise uninhabitable. Add to that the number of borrowers’ projects either completely or partially destroyed - some 600 - as well as the fact that FATEN’s own offices and employees’ homes were not spared, and you get a sense of the challenges inhibiting our work.

Ultimately, though, we are a financial institution, and we do not shy away from numbers. In fact, FATEN’s mere presence in the Gaza Strip (as well as the West Bank) necessitates an appetite for risk and adoption of conservative lending policies to manage impromptu conflict. During the 2009 incursion, as in the wake of the latest man-made storm, gathering data on the extent of our losses - both human and infrastructural - was our first step on the long road to recovery. From 15 years of experience working in risk-prone conflict zones, and most recent analyses of the facts on the ground, here’s what we’ve learned.

Most important, we’ve learned that tallying the losses of any disaster takes a holistic understanding of your clients’ predicament. We know, for example, that our clients’ projects suffered some $2.7 million in damage. Perhaps more importantly, our micro-entrepreneur borrowers - who have endured three wars in the last half-decade and live under a near-total Israeli siege - saw some $11 million worth of their property destroyed. Why does this matter? Simply put, for families everywhere, shelter comes before enterprise. In an effort to appeal to our more conservative borrowers in Gaza, we at FATEN have increased our disbursement of sharia-compliant murabaha housing loans by almost 50% during 2014 compared with 2013. 

Following 2009’s Operation Cast Lead, FATEN created a Social Cohesion Cooperative Fund, which allocated a loan provision for borrowers facing illness, disease, or unforeseeable challenges such as what we saw in 2014. This fund was recently increased to $500,000, from which deceased borrowers and borrowers who lost family members were fully or partially forgiven. At the same time, FATEN is already hard at work replenishing our clients’ business needs, offering loans to help them rebuild “bricks and mortar,” while reinvigorating the local market through emergency cash loans.

FATEN offers, both in the West Bank and Gaza, non-housing loans, which are designed to address health issues, climate change, and various social needs. These include loans for higher education, solar panels for homeowners, water purification, and women and disabled populations who wish to start an enterprise. For example:

• In November 2014, a married woman from Khan Younis, Gaza Strip, took a $1,500 “Green” loan to buy supplies for and expand a bicycle repair shop that she owns with her husband.
• In October 2014, a 22-year-old resident of Gaza City, took out a $1,000 loan to buy a solar panel and tank for heating his family’s water. By taking out a loan, this client will use clean power and also reduce his monthly electricity expenses. 
• In February 2015, another woman client took a loan to restock her food stall in Khan Younis, Gaza. 
• In February 2015, a manager of a cosmetic store took a $1,200 murabaha loan in order to implement an accounting system for his shop.

Creating opportunities for scale, while managing sharp decreases in repayment ability during these difficult times, FATEN has introduced new loan themes, which reflect private solutions to current public health and safety concerns. The Palestinian Water Authority estimates that only 5-10% of Gaza’s water is suitable for consumption, a health predicament worsened during the summer, when much of the water and sanitation infrastructure was severely damaged. Through its partnership with US-based KIVA Microfunds, FATEN has developed a water-purification loan theme to address the growing health concerns for families to independently produce clean water, many of which are still fundraising online.

Building a positive future outlook for 2015, FATEN plans to add at least two additional branches in Gaza to its existing five branches, including a recently reconstructed branch in the central Gaza Strip, providing local jobs and portfolio growth, loan-restructuring services, and psychological support for our borrowers. With 15 years under its belt, a growing portfolio of close to $60 million, and a robust risk management team, we at FATEN take a long-term view on things. When you consider the difficulty of providing support for private-sector economic revitalization, even during times of peace, you get an idea of how well-positioned FATEN is to plow forward.

But all told, our efforts are about more than FATEN’s portfolio. They’re about rebuilding and sustaining Gaza, this tiny strip of land that has borne so much hardship.

Read this post in Arabic on the FinDev Gateway