Essma Ben Hamida, Co-Founder, Enda Tamweel: Interview

Interview: Essma Ben Hamida

What are the main challenges in microfinance?

ESSMA BEN HAMIDA: Microfinance in Tunisia has performed well in recent years, with its outstanding portfolio increasing 34% year-on-year in December 2018. In addition, the number of active clients rose to 400,000, representing a 13% increase over the same period. However, the sector’s development is somewhat hampered by a non-conducive regulatory framework which, for instance, made refinancing difficult for microfinance institutions (MFIs), especially in light of the country’s severe liquidity shortage. More specifically, current regulations do not allow MFIs to offer clients deposit and savings services. In other countries these services help institutions finance themselves autonomously. What is more, the central bank, the Banque Centrale de Tunisie (BCT), restricts access to international refinancing solutions. Tunisian MFIs are required to obtain authorisation from the BCT every time they want to borrow more than TD3m ($1m) from an international lender.

A national microfinance association was created in March 2018 in an effort to address some of these issues and support the development of the sector. The association promotes best practices in line with international standards, pushes MFIs to monitor and improve the quality of their services, and provides outreach to micro-entrepreneurs. It includes both subsidised associations and more established MFIs.

In what ways could regulations be amended to foster growth in the micro-insurance segment?

BEN HAMIDA: There are many benefits to financial services and micro-insurance products in particular. Increased access can stimulate economic growth, financial stability, job creation, asset accumulation and risk management, as well as reduce inequality. Promoting a wide range of microfinance services is thus important for a country like Tunisia. Under current regulations, MFIs are permitted to act as insurance brokers but remuneration for brokerage services is not allowed. The sector is thus looking forward to the finalisation of the Framework Convention authorising micro-insurance MFIs to be compensated and recognised as brokers through established insurance companies.

How do you expect microfinance to become a viable alternative to conventional finance?

BEN HAMIDA: These products are tailored to two distinct markets with separate needs – the banked and the unbanked. Micro-entrepreneurs are unlikely to meet the eligibility requirements needed to access credit, and thus find themselves excluded from the conventional banking system. Financial inclusion programmes have been established to provide these customers with access to mainstream credit services and to better include them in the broader economy. Microfinance is therefore an attractive option for micro-entrepreneurs – particularly women and young people – who typically face a number of obstacles to accessing finance. There is also a significant need for financial education to ensure clients are well informed and can better manage their business. Having said this, I am convinced that effective cross-sector partnerships will allow us to better serve vulnerable populations.

There are opportunities to collaboratively finance entrepreneurs while at the same time minimising risk. Micro-credit offers banks a chance to grow by reaching out to a new portion of the population, while MFIs need funding and guarantees to develop their operations. Banks can benefit from MFIs’ on-theground experience, while MFIs can benefit from banks’ funding, investment, client referrals and technical assistance. For the cooperation to be fruitful it must be built on a shared mission, set of values and trust, with the key aim to benefit end users by minimising exclusion so that micro-enterprises can thrive.