Microfinance in Yemen: The Abyan Program

Since early 2011, the situation in Yemen has been deteriorating because of security and political disturbances. The productivity of micro-entrepreneur projects in Yemen has dramatically declined and even stopped. Also, the continued power blackouts and the lack of food and gasoline have led to stalled projects, and a repayment crisis. Some institutions and microfinance programs in Yemen have cut down loan disbursement, and even at times, stopped lending completely, leading to a decrease in the number of clients in Yemen. The Abyan Program was not immune from dealing with the unrest, especially when an armed group seized control of Abyan Governorate, where the Abyan program is located. The main office along with the Zinjibar, Rigal, Al Mukalla, and Shahr branches were seriously affected.

Currently the situation in Yemen is getting worse. For the fourth month, Abyan Governorate is under the control of Al-Qaeda. Ongoing battles have resulted in Abyan inhabitants fleeing the area to other governorates, especially Aden. Since then, some Abyan inhabitants have lived in schools and mosques while others live in rented houses. Public and private facilities, including program offices, have been completely destroyed after being captured and plundered and all assets and offices in Zinjibar and Rigal were destroyed by missiles.

It is noteworthy to mention that, before the events started in Yemen, the program had achieved marked expansion and unprecedented success and was one of the best microfinance programs in Yemen in terms of the repayment rate. However, because of the current situation, the program still suffers from outstanding loans portfolio especially for the two affected branches in areas where customers lost their homes and had to flee to nearby Aden. The Abyan program has not insisted on repayment from borrowers in this region during the crisis period.

Accordingly, the program suffers from a lack of liquidity. With the largest loan portfolio in Zinjibar, the oldest branch, representing about 80% of the outstanding portfolio, the program adopted the following procedures:

1. Require branch staff (in Zinjibar and Rigal), especially female loan officers, to collect installments in two phases
2. Remind borrowers about their loan installment and that they can repay it through the nearest bank or office; reminders were conducted by phoning customers or conducting field visits at least one month before the due date.
3. Increase productivity by focusing on other branches rather than Abyan, namely Al Mukalla and Shahr in Hadramout to reduce loan payment arrears and risk.

The procedures that the program implemented since the beginning of the events and before May 2011 were as follows:

1. Do not keep money in the safes of branches and deposit all sums of money immediately into bank accounts. If banks are closed, staff are required to transfer and deposit the collected installments in the program accounts in other governorates, namely Aden and Hadramout.
2. If facing unrest and violence in the area, office devices should be kept in a safe place after transferring all important data, including the main computer.

It was arranged to place all machinery in the house of one of Zinjibar’s inhabitants until it was safe to transfer these devices to Aden. At this time, looting facilities was common while homes were safe. One of the staff members was assigned to guard the administration office and transfer such devices to a safe place. Thankfully, the program was able to maintain all data and information.

After the armed group took over Abyan governorate in May 2011, the program adopted the following procedures:

1. A new office was opened in Aden governorate, with cheaper, more expendable equipment.
2. All relevant authorities were informed of the new office in order to be able to communicate with program staff.
3. Branch employees were monitored in order to collect loan installments and receive their salaries.
4. In collaboration with the Social Fund, donors were asked to postpone and reschedule loan installments
5. Grants and trainings were requested from donors and the Yemen microfinance network
6. The program maintained continuous communications with NGOs in Yemen

We hope the unrest in the Abyan region stops and we look forward to going back to our homes, bearing in mind that most of the region has been completely destroyed. Due to the ongoing crisis, the program will increase the productivity of other branches that are not being affected. The program also will open new branches so that loan installments can be repaid.

Special thanks are due to Sanabel, the Yemen microfinance network Social Fund, and the Grameen Jameel Organization as well as other microfinance agencies for their ongoing support.