I.   SMED Internal Activities

1.   Funding activities

A- Grants

During the fourth quarter of 2020, the SMED Unit has continued providing grants and technical support to its partners in the field of small and microfinance, and non-financial services as well.

The Small and Micro Enterprise Promotion Agency (SMEPS) received a cash grant amounting to about GBP 599 thousand, which it allocated to the Emergency Project to Support Business Continuity (Second Phase FCDO), in addition to approximately USD 1.63 million to continue implementing its various activities in providing financial and non-financial services during the third phase (ERG III).

A grant of GBP 31.3 thousand was disbursed to the Yemen Loan Guarantee Program (YLG) in the last quarter to continue providing its services. Also, during the quarter, grants totaling USD 80,000 have been disbursed in support of the IT Infrastructure Development Project for Namaa Microfinance Foundation, Azal Microfinance Program, Hadramout Microfinance Program and the National Microfinance Corporation, at the tune of USD 20,000 for each entity.

As part of the Vocational Literacy Project (VOLIP), grants were disbursed to establish “revolving funds” within the project through the National MF Foundation (USD 115.2 thousand), Namaa MF Foundation (USD 143.4 thousand), Azal MF Program (USD 89.4 thousand), Hadhramout MF Program (approx. USD 109.8 thousand), and Al-Ittihad MF Program (approx. USD 82,000). Thus, the grants disbursed during in quarter amounted to about USD 539.64 thousand. The project aims at enabling a number of beneficiaries to improve their living conditions, and integrate them technically, financially and administratively with MFIs. The total number of beneficiaries has reached 445, receiving a total amount exceeding YR 249.4 million.

B- Loans

Due to the events Yemen faced in 2020 caused by the Covid-19 pandemic, the demand for funds by MFIs from SFD have stopped during the quarter, as the MFIs saw the need to reduce their credit operations to avoid risks. Only Namaa MF Foundation was provided with a loan, amounting to YR 200 million, which was due to a scarcity of liquidity it faced.

The total number of loans issued to MF clients during the quarter has reached 10,928, valued at YR 13.774 billion, while the number of active clients at the end of the period has reached 88,445 clients (of which approximately 33% were women). Thus, the active loan portfolio at the end of the period has reached approximately YR 33.38 billion. It is worth noting that the total number of cumulative loans issued since the establishment of the sector in 1998 until the end of the fourth quarter has reached 875,000 loans, totaling approximately YR 165 billion.

2.  Support for war-affected clients (Phase 2)

The project was established with the aim of compensating those MFI clients whose businesses have been damaged by the war, and alleviate the financial burdens they suffer from by canceling the debts they owe by providing them with grants to restore their activities or continue their existing ones, and improve their standard of living and that of their families. During the quarter, 55 small and microfinance clients (including 14 women) have been compensated. The total compensations disbursed have amounted to about YR 32.1 million. Also, the debts of 52 male and female clients were written-off, amounting to approximately YR 8.7 million. The cumulative total number of beneficiaries from the project since its inception has reached 5,047 beneficiaries (48% of which were women), receiving cumulative compensations of approximately YR 2.1 billion at the end of the quarter.

3.  The Village Savings and Loans Associations (VSLA)

Work in the program continued in the 13 areas it operates across 5 districts (one for each of five governorates) namely in Amran, Dhamar, Ibb, Lahj, and the Governorate of Aden). By the end of 2020, the number of existing groups has reached 216, of which 103 were female ones. Since the program was established in late 2018 until the end of the quarter the number of group members has reached 4,895, including 2,565 men and 2,330 women (48% of the total). The cumulative savings until the end of the quarter have amounted to YR 109.2 million (equivalent to approx. USD 189.2 thousand, for an average value of YR 577 per dollar). Until the end of the quarter, the cumulative number of funds disbursed to the group members has reached 507 loans, worth approximately YR 76.9 million. The loans were used to fund income-generating projects and activities, such as: raising livestock, beekeeping, and other productive, commercial and service activities. By the end of the quarter, the number of VSLA trainees has reached 1,004, who received training in various technical fields, such as: livestock, beekeeping, modern agricultural techniques, handicrafts, handicrafts, hairdressing, incense making, and food production. On the other hand, the cumulative number of VSLA trainees since the start of the program on the principles of savings and rural finance has reached 4,926 (men and women), as well as 1,034 (men and women) covering bookkeeping, management skills, and group leadership. Also, 1,891 VSLA members have been trained in entrepreneurship and feasibility studies of small and micro projects. Finally, 133 female consultants have been trained since the start of the program in VSLA methodology, rural finance, entrepreneurship, and in carrying out the economic feasibility study of income-generating activities.

4.  The Yemen Loan Guarantee Program (YLG)

The program's activities have continued during the quarter in support of those owners of small and micro-enterprises unable to provide sufficient guarantees to obtain loans from the MFIs operating in the sector. The number of guarantees issued by the program during the fourth quarter has reached 220, equivalent to approximately YR 363.5 million, covering loans worth approximately YR 544 million (principal and Murabaha). By the end of the quarter, the value of active loan guarantees has amounted to approx. YR 1,566 million for 1,365 outstanding MFI clients. Since the establishment of YLG in November 2017, 2,263 cumulative guarantees have been issued, totaling more than YR 3.2 billion in value, used to finance approximately YR 4.7 billion in loans (principal and Murabaha). The program has also carried out a number of other activities during the quarter, such as attending an advanced training course in Excel, and a training course by the Yemen Microfinance Network in strategic planning and financial forecasting. During the quarter, YLG has also obtained a grant by the American Association of Internal Auditors for an international diploma in internal auditing. In addition, YLG held a training workshop for MFIs on how to apply for loan guarantees through YLG’s electronic portal on the Internet.

5.  Internal auditing and auditing

To enhance effective control and supervision by SMED over its partnering MFIs, the audit team in the Unit has carried out a number of auditing activities during the fourth quarter of 2020. These included field audits on a wide sample of clients in the branches of Al-Ittihad MF Program (688 males and females) scattered in the governorates of Abyan, Aden and Lahj. A sample of 187 clients (males and females) in the National MF Foundations within the same governorates was also audited. In addition, a financial and administrative audit was carried out by a number of consultants and financial auditors in the National MF Foundation, Nama MF Foundation, and Azal MF Program.

 6.  IT and automated software systems

Work has continued during the quarter in developing the SMED website, in which reports and analytical graphs were added, in addition to the regular updating of the database component of the Credit Bureau, as well as periodic maintenance work on the SMED website. Work also continued in providing routine technical support to the entities that use the SMED automated systems (Loan Tracking, Accounting, and Human Resources systems), making data backups continuously and preserve them in the Unit. SMED has also implemented a new and qualitative project during the quarter consisting of developing the IT infrastructure of MFIs. The project included funding 80% of the procurement cost of IT equipment, such as servers, network devices, and Internet and data storage devices for five beneficiary MFIs.

II.  Yemen Microfinance Network

 In the fourth quarter, the network organized 8 training courses, as follows:

1.   Credit feasibility study (Oct. 5-11):

The course was among 3 training courses in total in this field held by YMN in 2020. It was held in Seiyun at the headquarters of the Hadramout MF Program, and was attended by 15 trainees. Several issues were covered, most importantly of which were familiarizing with the evaluation tool for small projects and activities on the basis of the model of the German consulting company LFS, the development of micro-lending mechanisms, how to evaluate and financially analyze the activities, and the practical application of the tool.

2.  Arrears management and calculation of Murabaha (Oct. 11-22):

Two courses were organized by the network during the period, with the participation of a total of 33 employees from MFIs and funding institutions. The two sessions dealt with the calculation of loan arrears, their negative consequences on the quality of the portfolio and the financial performance of financial institutions, and how to prevent or reduce the occurrence of arrears. The courses also introduced the concept of Islamic Murabaha, and how to calculate it on the basis of the loan amount and repayment period.

3.   Courses for credit specialists (Oct. 17-27 and Nov. 1-25):

The network organized 3 training courses on the subject during the period, which were targeted at the credit specialists working in MFIs. The number of participants reached 58, in total. The courses focused on giving a general idea about ​​microfinance, provide the necessary basic skills that a credit specialist should possess, in addition to other aspects such as: how to evaluate the activity of applicants for loans, the loan cycle, follow-up and collection, arrears management, and field work.

4.  Certified internal auditing (October):

YMN launched the course on October 18, 2020 with the aim of qualifying 13 trainees among internal auditors and financial managers with long experience working in a number of MFIs. The course is divided in 3 sections, and will last 8 months, whereby graduates will eventually obtain the International Certificate in Internal Auditing accredited by the American Association of Internal Auditors (IIA USA).

5.   Strategic planning and financial forecasting (Nov. 22-26):

The Network implemented the course with the participation of 17 MFI trainees. The participants received practical training on how to prepare strategic plans for their agencies, how to prepare detailed financial forecast sheets (including expected revenues, expenses, and profits) on the basis of the plans developed, and general financial and economic variables.