UNRWA launched its microfinance and microenterprise programme (MMP) in the West Bank and Gaza Strip in June 1991. This initiative was taken in response to rapidly deteriorating economic conditions marked by high unemployment and spreading poverty following the outbreak of the first intifadah in1987 and the Gulf War. After 1993 the programme intensified its activities in support of the peace process through UNRWA's Peace Implementation Programme.

The MMP is now organised around four revolving loan funds in Gaza and two in the West Bank. These make loans to small-scale enterprises in Gaza and the West Bank (the Small-Scale Enterprise product), to women organised in groups in Gaza only (the Solidarity Group Lending product), to microenterprises in Gaza and the West Bank (the Microenterprise Credit product), and to workers and low-paid professionals (Consumer Lending product).

At the end of 1996 the Agency had set a target date of 31 December 1999 for the programme to be fully self-sufficient. However, this target date had to be brought forward due to the budget crisis facing the Agency and the programme started to meet its operational costs from 1 January 1998 (a year ahead of the original schedule). However, by the end of 2001 the programme was covering 88.5 percent of its operational costs from interest income; the future cost recovery of the programme depends on the loosening of the recessionary pressures, primarily the trade constraints imposed by the closure.

The Small-Scale Enterprise (SSE) product was established in Gaza and the West Bank in 1991 with a capital fund of US$407,000. This fund has now reached almost US$10 million, to which the Government of the United States of America has contributed 35 percent. In 1994, the MMP launched its first microcredit initiative by establishing in Gaza a new Solidarity Group Lending (SGL) product with a small fund of US$42,270. This was followed by the establishment of the Microenterprise Credit (MEC) product in Gaza in 1996, and another in the West Bank early in 1998. The donor-based capital fund for these three microenterprise initiatives now stands at US$3 million, almost 30 percent of which has been donated by the United States. In February 2002, a new Consumer Lending product was piloted in one of the poorest areas in Jabalia refugee camp in Gaza with a small fund of US$50,000 from the 1999 AGFUND prize.

These small-scale and microenterprise credit products promote small business development opportunities, create new jobs and safeguard old ones, and help the poorest in the society.

As of 31 May 2002, the combined portfolios of all of these initiatives totalled just over US$60.99 million and supported 50,282 loans to businesses in the industrial, service, trade and commercial sectors.

The businesses supported range in size from micro-vendors and microenterprises employing just one or two individuals to small industries employing up to 30 workers. The funds' clients represent distinct groups of borrowers, so that the Microfinance and Microenterprise Programme meets a variety of needs, providing working capital and investment funds to industries and service firms and also alleviating poverty and generating incomes among owners of the smallest enterprises.

• UNRWA's Microfinance programme in Gaza wins AGFUND prize (February, 2000)