New Policy Framework for Inclusive Finance in Jordan

In January 2005, the Ministry of Planning and International Cooperation (MoPIC) in Jordan formed a Microfinance Committee to prepare, with technical support from CGAP and through a consultative and participatory process, the first national strategy for microfinance in the Arab world. The strategy document which was ratified by the cabinet, included working plans and development strategies for the microfinance sector in Jordan for the decade ending 2010. It also specified the roles of the main players in the sector such as MFIs, the government, NGOs, commercial banks, and donors.

The core principles of Jordan’s national strategy are as follows:

• Market oriented financial and credit policies and pricing will dominate the market and gradually phase out subsidies
• The private sector will be the main provider of financial services
• Government agencies will slowly withdraw from the direct provision of credit or guarantee programs
• Government efforts will be focused on promoting an enabling policy framework and business environment for MSE development

In early 2011 and under the direction of the same ministry (MoPIC), and with some support from KfW, another consultative and participatory process was launched to review and update the strategy, based on the developments in the sector since its ratification by the Cabinet in 2005.

As part of this exercise a sector review was undertaken, which identified the following achievements made to date:

• Average annual growth rate in outreach of 28% between 2006 and 2010, translating into an increase in active borrowers from 76,830 to 203,579 and a total gross loan portfolio of 111.6 million JD
• A strong focus on women who account for 71% of all clients
• Strong operational and financial performance of MFIs operating in the sector
• Client credit information sharing among MFIs to help prevent against over indebtedness and maintain good portfolio quality
• Increased diversity of commercial funding sources among MFIs to fund expansion and growth
• National microfinance association positioned to take a lead role in promoting sector development for its members.

In spite of these significant achievements, it was found that some of the initial goals of the strategy have yet to be attained. The new policy framework intends to help bridge these gaps by defining concrete strategy elements that will be needed to further develop the microfinance industry as part of the financial sector in Jordan; and identifying concrete actions and resources needed to ensure implementation.

The policy framework has been informed and endorsed by the major industry stakeholders through their active participation in the Microfinance Steering Committee¹ as well as the Central Bank of Jordan as an important step in promoting a truly inclusive financial system in Jordan. It has been developed according to internationally accepted principles for promoting innovative financial inclusion for poor and low income people and is part of an iterative process and ongoing national dialogue among the major stakeholders operating in the sector. 

¹ The Steering Committee is made up of MFIs, government agencies, and donors operating in the industry.