Commercialization of Microfinance in Jordan: Progress and Prospects

This paper analyzes the impact of commercialization of microfinance in Jordan and suggests ways of moving ahead in the future. It discusses:

• Progress towards commercialization of the microfinance industry in Jordan:
  • Subsidized credit from the government has dwindled considerably;
  • Four commercial MFIs supply the remainder of the markets microcredit.
• The supportive operating environment for commercial microfinance:
  • The government has strengthened the economic environment for micro entrepreneurs and is providing adequate business development services (BDS) and social services;
  • It is reducing the provision of subsidized credit.
• The positive impacts of commercialization of the four market oriented MFIs:
  • Increased outreach;
  • Encouraged focus on market demand;
  • An array of products and services;
  • Enhanced financial self-sufficiency;
  • Increased productivity and efficiency;
  • Enhanced transparency.

The paper suggests the roles that the government, donors and commercially oriented MFIs can play in moving microfinance commercialization forward in Jordan.

• The government can:
  • Continue monetary and fiscal management and investment in social services;
  • Investigate providing legal space for microfinance providers and adapt the regulatory framework to support the new institutional form.
• Donors can:
  • Support the activities of the Government with technical advice and training;
  • Fund grants for market research, product development and expansion.
• MFIs can lobby for a national strategy for microfinance and the establishment of a legal and regulatory framework.