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MICROENTERPRISE CREDIT PRODUCT In February 1996 in Gaza, and April 1998 in the West Bank, UNRWA created a third loan product to meet the need for working capital among an estimated 43,000 microenterprises. Including owners and family members, these enterprises employ about 40 percent of the labour force. Approximately 91 percent of them employ fewer than five workers, including the owner. As a result of the frequent, prolonged closures of the checkpoints between Israel and the West Bank and Gaza Strip many of these formal and informal enterprises have exhausted their working capital reserves. Without access to alternative sources of funds the owners are unable to either develop or to expand their businesses. They are unable to hire new employees, nor even retain those already on their payroll. Indeed, in many cases their survival is at risk. Most of these microenterprises do not enjoy access to credit from formal financial institutions to enable them to meet their short-term working capital requirements. Banks are unwilling to extend them credit without collateral or personal guarantees, and since owners of the majority of these businesses cannot meet such requirements, they are forced to depend on goods from suppliers on credit. Otherwise, they must borrow from moneychangers charging between eight and 10 percent interest monthly for loans denominated in Jordanian Dinar or US dollars, i.e. six times above the commercial rates charged by formal financial institutions. In order to meet the need for this type of credit, which neither the banks or non-profit credit organisations were satisfying, UNRWA secured funding for a Microenterprise Credit product to enable these businesses to meet their short-term working capital requirements. The new fund promotes trade, increased business activity and ultimately produces employment opportunities. With the creation of this fund, the Agency is building a stronger, more diversified microenterprise business development portfolio. By 31 May 2002, the product had awarded working capital loans to 28,580 businesses in the West Bank and Gaza with a total value of US$29.1 million. There are currently 3,892 active loans with an outstanding balance of US$1.88 million. In addition, there is a bad debts portfolio of 2,882 loans with an outstanding balance of $1.30 million. Since the creation of this product, the MMP has established two branches in Gaza (Gaza city and Khan Younis), two in the West Bank (Nablus and Hebron) and two sub-branches, one in Tulkarem and one in Jenin. The principles governing this programme are almost the same as those of the Solidarity Group Lending product, except that the microenterprise loans are made to individuals rather than through group methods, and are also available to men. By adapting the methodology of the SGL product to suit the requirements of other microenterprises, the Agency is now in a position to serve a broader range of clients and help thousands, rather than hundreds, of business owners meet their credit needs. Both the SGL and MEC products utilise a lending methodology that includes:
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