CONSUMER-LENDING PRODUCT

In February 2002, a new Consumer-Lending product was piloted in Jabalia refugee camp in the Gaza Strip. When the pilot phase is successfully completed, the product will be retailed in other areas of Gaza and the West Bank. The product is aimed at improving the quality of life of low-paid poor and marginal families through the provision of consumer credit. This consumer product will assist these families through times of shortages, allowing them to preserve household assets in times of hardship and helping them reconstitute lost assets after periods of unemployment. Workers and low-paid professionals usually secure income shortfalls from non-formal family, community and work sources. As the Palestinian economy is being driven deeper into crisis these non-formal networks are collapsing. The primary market for the product is the families of wage labourers employed in different commercial, service sector businesses either in Gaza, the West Bank or Israel. In addition, the families of lower-paid salaried employees and wage labourers in governmental offices, NGOs and international organizations are included in the target population.

The target population currently has no direct access to formal consumer credit services, as the banks will only provide personnel loans to employees that have their salaries paid through the bank. The banks consider wage labourers to be high-risk borrowers who have no realizable collateral and whose income flows are erratic due to the instability of the labour markets in both Gaza and Israel. The Consumer Lending product will provide sustainable credit in a cost-effective manner by focussing its financial services in refugee camps, where the poorest Palestinians are concentrated. People can use these loans to build up household assets or for extraordinary events such as the marriage of a son, an illness or death in the family, or cyclical ones such as the start of the school or university year or annual feasts.

The main product being sold to clients is short-term consumer loans that will help them to meet their families' living requirements. Loans will be offered individually on the basis of the client's needs and their ability to repay. Clients will be eligible for additional loans if they repay their loan on time. For many of the workers, the creation of this product will open up a new frontier of formal finance that will increase their self-respect and that of their families. By May 2002, the programme provided 64 loans worth US$27,550, and it maintained a 5-monthly repayment rate of 98.71 percent.