In the run-up to UN World Refugee Day (June 20th), Dutch development bank FMO signed the first ever Risk Sharing Facility for refugee entrepreneurs from the Syrian crisis, as a pilot under its NASIRA program. This signing took place at the European Development Days, organized by the European Commission in Brussels.
Until now, Jordanian banks refrained from providing financing to Syrians living in Jordan, largely due to perceived high risks. Likewise, with a political solution to the Syrian crisis still pending, most Microfinance Institutions (MFIs) have also remained on the sidelines.
By sharing risks with the Jordanian MFI Tamweelcom, FMO supports access to finance for Syrian refugee entrepreneurs via small loans. FMO provides a USD 1.5 mln unfunded Risk Sharing Facility to Tamweelcom through its MASSIF Fund, which FMO manages on behalf of the Dutch government.
Next to signing the first NASIRA guarantee, FMO and the European Commission also signed a EUR 4 mln. Technical Assistance facility to support the NASIRA program and its beneficiaries in Sub-Saharan Africa. The equally sized TA facility for the European Neighbourhood is expected to be signed in November
Investing in local opportunities
Tamweelcom is Jordan’s second largest MFI serving 90,000 clients including youth and women entrepreneurs, and has a strong position via its 38 branches across Jordan, particularly in the smaller urban areas.
With FMO’s support, Tamweelcom will start providing loans to Syrian refugees in possession of UNHCR identification and a Jordanian Ministry of Interior Card. Syrian refugee entrepreneurs can now obtain loans of 1,000 to 7,000 Jordanian dinar (JOD) - equivalent to approx. USD 1,400 to 9,900. The loans will be used for income-generating businesses, rather than for consumption.
Linda Broekhuizen, Chief Investment Officer FMO: “FMO intends to increase its activities in the MENA region. Jordan, considered a regional safe haven and hosting country of many refugees, is ideally positioned to turn migration challenges into inclusive economic growth opportunities. Tamweelcom will offer local chances to Syrian refugees, enabling them to integrate in Jordan’s economy and to build their livelihoods.
Ali Abdel Jabbar, CEO of Tamweelcom “We are proud to be the launching partner of this innovative solution and are pleased to have worked with FMO, MASSIF and the European Commission under its NASIRA program. This transaction marks an important milestone for Tamweelcom as it strengthen its mission to utilize expertise as well as its ability to connect with the Syrian Entrepreneurs community.”
|Signing ceremony FMO and Tamweelcom at European Development Days in Brussels|
Blockchain solutions for digital identities and credit history
FMO’s Risk Sharing Facility will be accompanied by a Capacity Development project. With the support of consultant Making Cents International, Tamweelcom will onboard these new borrowers to a secured digital database - based on blockchain technology - thereby creating a digital ID, including the borrower’s credit history.
With this information being stored on the blockchain, it becomes verifiable, immutable and portable across borders. This provides an incentive for refugees to settle the loan before returning home as they will bring their credit record, whether good or bad, back home. What’s more, their Jordan credit record could facilitate access to loans upon return in Syria. The digital identity can also contain other information such as trainings the refugee attended, or education records (verified by networks). All this data can be taken home and presented upon return, facilitating access to finance.
In addition, FMO will support Tamweelcom by improving the reporting capabilities on the guaranteed portfolio and help in gaining risk management knowledge in collaboration with Hypoport’s investor reporting tool Prommise.
NASIRA, a new chance guaranteed
NASIRA uses guarantees to allow local banks to on-lend to underserved entrepreneurs. It targets portfolios consisting of loans to young, female and migrant entrepreneurs (including refugees, returnees and internally displaced people). The goal of these guarantees is to allow local banks to provide loans to groups they normally perceive as too risky. By so-called ‘risk-sharing’ NASIRA reduces the perceived and real risks of lending to vulnerable and underserved parts of the population. It enables and stimulates financing needed for people who want to grow their business. NASIRA can be implemented across the European neighborhood and Sub-Saharan Africa.
Blended finance solutions for inclusion of underserved entrepreneurs
NASIRA is an example of blended finance, bringing together public and private funding. The guarantee for NASIRA is provided by the European Fund for Sustainable Development (EFSD). The Dutch government also supports NASIRA with a €7.5 million contribution from the MASSIF fund, which is managed by FMO. By mobilizing other investors, the program is expected to support EUR 500 million in financing.
For more information on the NASIRA program, please visit: www.nasira.info