JEDDAH, 17 March 2004 — The first Arab bank for the poor will be established in Yemen shortly as Prince Talal, president of AGFUND, will launch the project by signing an agreement with a Yemeni minister today.
“By signing this agreement, Yemen will become the first Arab country to have a bank for providing micro credit for the poor,” said AGFUND (Arab Gulf Fund for United Nations Development Organizations).
The launching will be held at AGFUND headquarters in Riyadh and Prince Talal and Abdul Kareem Al-Arhabi, the Yemeni minister of social and labor affairs, will sign the accord for the establishment of the “Al-Amal Micro-credit Bank.”
The initiative of Prince Talal to establish banks for the poor has received wide support from most Arab countries. Yemen’s President Ali Abdullah Saleh agreed to establish the bank after talks with the prince. AGFUND and Yemen have signed a memorandum of understanding, under which the latter will provide Sanaa with financial assistance, technical support and consultancy services to establish the bank.
“The Yemeni government has provided all facilities to establish the bank and ensure its continuity,” AGFUND said.
Apart from AGFUND, the Yemeni government and private sector will contribute to the bank’s capital.
Plans are under way to establish similar banks in Jordan, Lebanon, Sudan, Morocco and Mauritania. AGFUND has signed a MoU with the Jordanian government to establish the bank and follow up executive steps. In Lebanon, “Al-Rajaa Micro-credit Bank” is being licensed while in Sudan, a definition is being worked out for the appropriate form of the bank, AGFUND said.
The idea of the banks for the poor relies on the principle of extending micro-credit to the poorest of the poor who cannot borrow from commercial banks because of the guarantees required by these banks.
These people, whether individuals or groups, need someone to grant them skills and money to start a production project that would yield income and allow them to contribute to the change and development of their society.
The bank will not require any guarantee or mortgage of property for a borrower to be able to receive a micro-credit. The borrowers will be free to choose their production and investment activities on the basis of their knowledge and skills. The bank’s activities will include programs that promote social development and encourage the savings of the poor.
“Poverty is a plague that should be fought with the appropriate mechanisms. If nothing is done to eradicate it, it will only lead to more decline and suffering,” AGFUND said. The United Nations has devoted a decade for the eradication of poverty starting from 1997 and ending in 2006.
“Micro-credit has become a powerful tool as recognized worldwide for the alleviation of poverty, raising the standards of living, and promoting economic growth,” AGFUND said. Banks for the poor are essential as more than half of the people in the developing countries are either neglected or under-served by formal financial sector. Such banks can provide financial services and assistance to the poor to make them productive and ensure individual and collective self-reliance.
