New growth: Shurush welcomes first eight Gaza entrepreneurs
Thanks to the generous support of Kiva lenders, we are proud to introduce our first eight Gaza entrepreneurs, who bring the grand total number of Shurush entrepreneurs in the West Bank and Gaza to 16. These new loans are the result of Shurush’s successful collaboration with the Gaza office of our inaugural microloan partner, the East Jerusalem YMCA, and Kiva, whose technological platform allowed individual lenders to have an immediate impact on the economic livelihoods of the first six Gaza entrepreneurs by funding all six loans within hours of their posting on the Kiva website. (The next two businesses will be posted soon.)

We are excited to introduce you to our eight new Gaza entrepreneurs, who are supporting a combined total of approximately 65 family members. Here are three of their profiles:

•	Mousa, who supports a family of 12 people, is one of more than 100,000 Palestinians who have lost their jobs in Israel since the second intifada began in September 2000. When Israeli closure restricted the number of Palestinians allowed to work in Israel, Mousa established his own business to repair telephones and mobile phones. Kiva lenders provided the necessary capital of $600 to purchase more spare parts to expand his business.
•	In 1988, Mohammad established his own carpentry business in Gaza; simultaneously, he worked as a carpenter in Israel. Since closure barred Mohammad from employment in Israel, he has focused primarily on his family carpentry business. In order to increase the income of the family business, which supports 14 family members, Mohammad applied for loan capital to purchase raw materials to make and sell a set of salons.
•	Twenty-five-year-old Azam has been married for four months and has been a business owner for a year and a half. Azam and his business partner, Jamal, maintain a construction supplies store that sells paint, tools, and other construction supplies. In order to increase sales, Azam applied for a loan to purchase stock to sell in the store.

To view photos of six of Shurush's Gaza entrepreneurs, and to read more about their recently funded businesses, please visit http://www.kiva.org/businesses.php?sub=raised

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Ask the expert: Answers to your questions about Palestinian microfinance
In previous issues of The Roots Report, we asked readers to submit questions for Palestinian microfinance expert Samir Barghouthi, who is general manager of the Arab Center for Agricultural Development (ACAD) and former chairman of the Palestinian Microfinance Network. We are honored and grateful that Mr. Barghouthi took time out of his busy schedule to expand Roots Report readers’ understanding of Palestinian microfinance.

QUESTION 1: What is the current Palestinian microfinance climate?

SAMIR BARGHOUTHI: The Palestinian microfinance sector suffered greatly from the political situation that prevailed after 2000, when the second intifada began. The economic situation was deteriorating; the poverty rate reached 70 percent; the unemployment rate was around 40 percent; and the legal system collapsed. As a result of this situation, most microfinance institutions (MFIs) adopted a very conservative policy aimed at minimizing loan disbursement due to the high risk [associated with lending in such a depressed economy]. Therefore, the path to sustainability was affected, and huge losses accrued. In 2004 and 2005, the economic and the political environments improved slightly; in turn, policy shifted toward expansion and increasing outreach. In 2004, Palestinian MFIs disbursed U.S. $30 million in loans, and the number of active borrowers reached 26,000 (which is relatively high for a small country). By the end of 2005, it is expected that disbursements reached U.S. $40 million. Again, as a result of the Palestinian election and increasing the political tension, it seems that the microfinance industry will again face a new cycle of depression that will affect the industry for the long run.

QUESTION 2: What is the greatest need of the Palestinian microfinance industry (e.g., capital, capacity-building within each MFI, etc.)?

SAMIR BARGHOUTHI: The industry's main priority now is how to deal with increasing risk while continuing to provide financial services to the poor and marginalized people in a period during which the poverty and unemployment rates are sky rocketing. The agenda of the community of donors who are willing to assist the Palestinian people should be how to find a way to deal with this dilemma -- for example, creating a credit guarantee scheme for microfinance providers. The second priority is capacity-building in terms of investing in human resources and sophisticated technology to enable the MFIs meet the best-practices requirements. There is a need also to work with the stakeholders in Palestine for creating a suitable legal framework and environment for industry development and expansion. There are no immediate needs for capital unless the Palestinian economy is fully recovered, with exception that a few small MFIs are in need for capital increase due to financial shortage.

QUESTION 3: What impact do you predict that the new for-profit microfinance bank, Al Rafah,
will have on the Palestinian microfinance industry?
SAMIR BARGHOUTHI: If the political situation was not improved and the Palestinian economy had not been recovered, I think that the bank will have a minimum effect on the microfinance industry in Palestine. But the most positive development is that the private sector in Palestine finally realized the importance and the profitability of microfinance businesses.

QUESTION 4: Ideally, what impact would a nonprofit American charity organization
like Shurush have on the Palestinian microfinance industry?

SAMIR BARGHOUTHI: Shurush is important initiative that reflects the spirit of solidarity with Palestinian people, and it is a new model that links the Palestinian microfinance sector with international grassroots. Although the financial commitment of Shurush and other charity organizations is limited, every dollar donated has a positive effect on children suffering from poverty.

QUESTION 5: What procedures do Palestinian MFIs undertake to ensure that microcredit loans are not used for illegal purposes?

SAMIR BARGHOUTHI: The Palestinian microfinance industry is not politicized. Financial services are provided only to people who have income-generating projects and are looking to get out of the poverty cycle through economic activities. Every Palestinian MFI has its own field workers who check -- on the ground -- the compliance of financed projects, with the objective of poverty alleviation. In addition, there are internationally well-known external financial audit companies working with MFIs that report to the board of directors, donors, and government.

QUESTION 6: Which country or region serves as a model for how the Palestinian microfinance industry could achieve success (e.g., Latin America, Egypt, etc.)?

SAMIR BARGHOUTHI: MFIs in Palestine are looking for international standards for best practices modified to local context; of course, the industry is willing to know and to learn from successful microfinance activities -- mainly in the fields of microsaving and microinsurance -- such as with the microfinance industry in East Asia and Latin America.
Submit your questions about microfinance to info@shurush.org

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Ear to the ground: current stats
- Gaza’s population is 1,363,513, making it one of the most densely populated places on earth; half the population is under age 18.
- The total area of Gaza is 365 square kilometers (45 km long; 2.5 km wide).
- Gaza’s population growth is 5.4 percent per annum.
- The unemployment rate in Gaza is 38 percent.
- The percentage of Gazans living below the poverty line ($2 U.S. per day) is 73 percent.
- There were 2,704 homes in Gaza demolished during military operations in the last five years, resulting in a total of 25,000 Palestinians being made homeless.

Source: "Eye on Gaza" (pdf), the September 2005 issue of Focus, a publication of the United Nations Development Programme’s Programme of Assistance to the Palestinian People. To read this and other issues of Focus, visit: http://www.papp.undp.org/en/12/pub/index.htm

 

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