Microfinance Solutions for MSMEs and Consumers
Microfinance Solutions for MSMEs and Consumers
Business Model Description
Offer alternative microfinancing options for MSMEs and consumers with limited access to the banking system
Expected Impact
Increase access to capital for SMEs and disadvantaged people via the use of microfinance
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Tunisia: South East
- Tunisia: Centre-East
- Tunisia: Centre-West
- Tunisia: South-West
- Tunisia: North-West
- Tunisia: North-East
Sector Classification
Financials
Development need
The COVID-19 crisis, in conjunction with underlying weaknesses (high non-performing loans, large credit risk exposure to afflicted businesses and SOEs, and relatively low capital buffers), demonstrated the urgent need for development in the Tunisian financial sector (1,2).
Policy priority
The Ministry of Finance's National Strategy for Financial Inclusion aims to ensure that all economic operators - particularly young people, women, rural populations, and SMEs - have access to a diverse range of financial products that are tailored to their needs and available at affordable prices. Digital finance development is also a critical component of the Strategy (3).
Gender inequalities and marginalization issues
Numerous segments of Tunisian population, particularly in rural regions, are economically excluded. Women are much more impacted than men by institutional discrimination. These factors contribute to the widening of the gender divide and impair women's economic involvement (5).
Investment opportunities introduction
In 2020, financial sector accounted for 1.2% of overall FDI, rising over the previous year. (7) Moreover, digital finance has risen to prominence, particularly with the COVID-19 pandemic, when it became the financial industry's front-runner in delivering critical services (8).
Key bottlenecks introduction
Structural weaknesses of the financial sector include regulations limiting lending rates (no more than around 2% over the average rate), collateral requirements and low digital penetration. Additionally, banking sector vulnerabilities have risen in tandem with the growth of NPLs and the industry's exposure to the public sector (9).
Corporate and Retail Banking
Development need
Bank finance accounts for 85% of the total financing, (10) despite its high credit costs (ranging from 10%-12%, as opposed to 0%-1% in Europe) (11), hence inaccessibility to the majority of SMEs and low-income groups. Alternative solutions such as microfinance are underutilized as a source of financing force.
Policy priority
Law 2011-117 laid the groundwork for the healthy development of microfinance by defining operating standards and establishing the Microfinance Supervisory Authority (ACM) (12). Recently, the state implemented strategies to further support the alternative finance ecosystem, including a national strategy for financial inclusion, and a crowdfunding law (13).
Gender inequalities and marginalization issues
Microfinance is critical for advancing women's financial inclusion. It is beneficial, since women face gender-specific barriers when it comes to obtaining loans; less favorable owing to property rules and bias of bank officials (14). Women account for 83% of microfinance clients worldwide (15), and 57% of microcredit recipients in Tunisia (16).
Investment opportunities introduction
Microfinance is a young yet promising field. As of June 2021, microfinance institutions have 468,126 active clients, with a portfolio worth 1,403 million TND (USD 485 million). In the first half of 2021, the number of active customers and their outstandings increased by 27.56%, and those accessing first-time financing increased by 87.7% (17).
Key bottlenecks introduction
Microfinance has been under strain throughout the pandemic due to deteriorating portfolio quality as impacted families struggle to make repayments due to refinancing challenges under the existing governance and regulatory framework (18).
Consumer Finance
Pipeline Opportunity
Microfinance Solutions for MSMEs and Consumers
Offer alternative microfinancing options for MSMEs and consumers with limited access to the banking system
Business Case
Market Size and Environment
USD 100 million - USD 1 billion
The total current capital of prominent microfinance institutions in Tunisia points to a market size between USD 100 million-1 billion.
Indicative Return
> 25%
The return information is acquired from stakeholders active in microfinance in the MENA region.
Investment Timeframe
Medium Term (5–10 years)
The timeframe information is acquired from stakeholders active in microfinance in the MENA region.
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Market - Highly Regulated
Capital - Requires Subsidy
Capital - Requires Subsidy
Impact Case
Sustainable Development Need
Tunisia continues to face significant precarity and a rural migration, which boosts the peripheral working-class districts. In order to improve living circumstances, access to financial services is necessary but difficult due to banks' refusal to lend to impoverished people (22).
Nearly 30% of Tunisian micro-enterprises and SMEs do not have access to any type of loan, according to estimates from the International Financial Corporation (22).
Gender & Marginalisation
Women face much greater barriers to financial services and property ownership; they own less agricultural land and continue to face disadvantage under inheritance law. Entrepreneurship enables women to be active outside of home responsibilities and gives them economic independence (23).
Data in Tunisia demonstrates that impoverished individuals, particularly women, return their debts. Only around a third of customers who fall behind on their payments (less than 2%) are female (24).
Expected Development Outcome
Even seemingly little sums of money assist people in lifting themselves and their families out of poverty.
Microfinance is expected to assist in the creation of new job possibilities for these small firms, which will also benefit the local economy (25).
Gender & Marginalisation
Microfinance creates social and development impact because it creates jobs, especially for women. Since microfinance often targets women borrowers, who are statistically less likely to fail on loans than men, it is both likely to empower women and safer for those lending the cash (25).
Access to the usage of financial services benefits not just women and women-led enterprises, but also women's autonomy, enables for more effective use of personal and family resources, and minimizes household and company vulnerability (26).
Primary SDGs addressed
1.2.1 Proportion of population living below the national poverty line, by sex and age
15.5
8.1.1 Annual growth rate of real GDP per capita
(-0.305315%)
For 2021, growth is temporarily expected to accelerate to 5.9% in Tunisia (9).
9.3.2 Proportion of small-scale industries with a loan or line of credit
N/A
N/A
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Corporates
Indirectly impacted stakeholders
People
Public sector
Outcome Risks
If widespread customer over-indebtedness occurs, it may easily result in defaults, which can then have a negative financial effect on the MFI and its investors (29).
Gender inequality and/or marginalization risk: Regardless of legislation, improper consumer protection may have devastating implications, especially for women (overindebtedness, multiple lending).
Impact Risks
External factors such as Tunisian currency risk and market risk may affect the number of stakeholders reached and might limit the achieved impact.
If not well managed, the credit risk of the MFI's portfolio might lead to lowering the impact creation.
Gender inequality and/or marginalization risk
Impact Classification
What
Microfinance solutions enabling SMEs and low-income customers, particularly women from underserved areas, to get funding for income-generating activities
Who
SME entrepreneurs and employees as well as low-income groups, particularly women from underserved areas
Risk
While microfinance solutions model is proven, external factors and the management of credit risk require consideration.
Impact Thesis
Increase access to capital for SMEs and disadvantaged people via the use of microfinance
Enabling Environment
Policy Environment
Since 2013, the Finance Ministry and Microcredit Association (ACM) have been members of the Alliance for Financial Inclusion, a global network of policymakers and financial authorities dedicated to increasing low-income populations' access to quality financial services (30).
Recently, the state implemented strategies to further support the alternative finance ecosystem, incl. a national strategy and law for social and solidarity economy (SSE) as well as a strategy for financial inclusion.
(Policy document): Within the framework of the National Strategy for Financial Inclusion (SNIF), many institutions (BCT, ACM, OIF) are designed to promote development in disadvantaged regions, with digital financial services playing a central role (31)
The National Strategy for Financial Inclusion include diversifying the financial services offered beyond microlending, strengthening legal and institutional frameworks by addressing consumer protection, borrower insolvency protection, and risk management (32).
Financial Environment
Financial incentives: Premium for increased added value and competitiveness in direct investment operations in economic sectors for economic efficiency in the sphere of physical investments to regulate contemporary technology and increase productivity, as well as intangible investments (36).
Fiscal incentives: If a business operates in a regional development zone, it is allowed a complete tax exemption of benefits for up to 10 years (37).
Other incentives: Subsidies, including revolving capital, are limited to 10% of the project's cost. 30% maximum 3 million TND (USD 1 million) in second regional group; 15% maximum 1.5 million TND (USD 500,000) in first regional group (37).
Regulatory Environment
The first law on microcredit, Law No. 99-67 established the Microcredit Association (AMC), Tunisian Solidarity Bank (BTS) as the national refinancing organization, and National Guarantee Fund (NGF) as a risk-management mechanism (covering 90% of bad debt from AMC and BTS clients) (33).
Law 2011-117 laid the groundwork for the healthy development of microfinance by defining operating standards and establishing the Microfinance Supervisory Authority (ACM).
In 2018, the Minister of Finance increased the microcredit cap for MFIs from TND20,000 to TND40,000, and for AMC from TND5,000 to TND10,000, with a payback duration of 7 years and 5 years. To issue micro-loans, the Microfinance Control Authority must first approve the request.
Law 2019-47: A cross-cutting law that affects laws across all industries, approved in May 2019. This legislation enabled new financing techniques, strengthened corporate governance standards, and granted the private sector the ability to run a project through a PPP (34).
Other forms of finance, such as crowdfunding and business angel investment, are gaining traction in Tunisia, particularly after the crowdfunding legislation was established in July 2020 (35).
Marketplace Participants
Private Sector
Microcred / Baobab Tunisie, Enda Tamweel, CFE Tunisie, Taysir Microfinance, Advans Tunisie, Zitouna Tamkeen.
Government
Microfinance Control Authority (ACM), Financial Inclusion Observatory (OIF), Deposit and Consignment Office (CDC), Payments and Banking Supervision Departments within the Central Bank of Tunisia (BCT), Tunisian Guarantee Company (SOTUGAR)
Multilaterals
European Bank for Reconstruction and Development (EBRD), European Union, Center for Entrepreneurship and Executive Development (CEED), The African Development Bank (AfDB), German Development Agency (GIZ), World Bank, OECD, Proparco
Non-Profit
Tunisian Union of Industry, Trade and Handicrafts (UTICA), Tunisian General Labour Union (UGTT), NGO Spark, Support to Autonomous Development (ADA)
Target Locations
Tunisia: South East
Tunisia: Centre-East
Tunisia: Centre-West
Tunisia: South-West
Tunisia: North-West
Tunisia: North-East
References
- (1) ADA. MicroMED: accélérer l’inclusion financière en Tunisie. https://www.ada-microfinance.org/nos-projets/conseiller-les-institutions-publiques/tunisie
- (2) IMF, 2021. Tunisia: 2021 Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for Tunisia. https://www.elibrary.imf.org/configurable/content/journals$002f002$002f2021$002f044$002farticle-A002-en.xml?t:ac=journals%24002f002%24002f2021%24002f044%24002farticle-A002-en.xml
- (3) La Presse, 2021. Réduire la masse monétaire en circulation. https://lapresse.tn/85660/reduire-la-masse-monetaire-en-circulation/
- (4) LE COURRIER DE L’INDUSTRIE, 2017. http://www.tunisieindustrie.nat.tn/fr/download/ci/ci135.pdf
- (5) GIZ, 2021. Promotion de la finance digitale. https://www.giz.de/en/downloads/giz2021-fr-promotion-de-la-finance-digitale.pdf
- (6) Smart Tunisia. http://www.smarttunisia.tn/about-us/
- (7) Stakeholders consultations held in 2021.
- (8) Stakeholders consultations held in 2021.
- (9) World Bank, 2020. Tunisia Economic Monitor. https://documents1.worldbank.org/curated/en/194331608565600726/pdf/Tunisia-Economic-Monitor-Rebuilding-the-Potential-of-Tunisian-Firms-Fall-2020.pdf
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- (11) L'Economiste Maghrebin , 2020. Quel financements a moindre cout pour la PME? https://www.leconomistemaghrebin.com/2020/12/19/conect-alternatives-proposees-pme-face-echec-etat/
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- (13) UNDP. https://procurement-notices.undp.org/view_file.cfm?doc_id=235386
- (14) Shops Plus and USAID, 2020. Digital Financial Services in the MENA Region. https://www.shopsplusproject.org/sites/default/files/resources/Digital%20Financial%20Services%20in%20the%20MENA%20Region.pdf
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- (17) Le baromètre de la Microfinance N°16-Septembre 2021 , Autorité de Contrôle de la Microfinance
- (18) World Bank, 2020. Tunisia Economic Monitor. https://documents1.worldbank.org/curated/en/194331608565600726/pdf/Tunisia-Economic-Monitor-Rebuilding-the-Potential-of-Tunisian-Firms-Fall-2020.pdf
- (19) AfDB, 2019. FINANCIAL SECTOR MODERNISATION SUPPORT PROGRAMME II - (PAMSFI II). https://www.afdb.org/sites/default/files/documents/projects-and-operations/tunisia-_ar-_financial_sector_modernisation_support.pdf
- (20) Shops Plus and USAID, 2020. Digital Financial Services in the MENA Region. https://www.shopsplusproject.org/sites/default/files/resources/Digital%20Financial%20Services%20in%20the%20MENA%20Region.pdf
- (21) Stakeholders consultations held in 2021.
- (22) Oxford Business Group. https://oxfordbusinessgroup.com/analysis/think-small-more-banks-are-looking-improve-funding-small-and-medium-sized-businesses
- (23) SWP, 2020. A Stable Countryside for a Stable Country?. https://www.swp-berlin.org/en/publication/tunisia-a-stable-countryside-for-a-stable-country/#en-d37675e1495
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- (25) Plan International. https://plancanada.ca/microfinance-benefits
- (26) G20 Insights, 2020. Financial Inclusion for Women: A Way Forward. https://www.g20-insights.org/policy_briefs/financial-inclusion-for-women-a-way-forward/#:~:text=Having%20access%20to%20and%20use,of%20their%20households%20and%20businesses
- (27) EBRD, 2020. EBRD and EU strengthen small businesses in Tunisia. https://www.ebrd.com/news/2020/ebrd-and-eu-strengthen-small-businesses-in-tunisia-.html
- (28) Oxford Business Group. The Report: Tunisia 2019. https://oxfordbusinessgroup.com/tunisia-2019-0
- (29) Microfinance CEO Working Group, 2014. Over-Indebtedness: A Risk Management Approach. https://www.findevgateway.org/sites/default/files/publications/files/mfg-en-paper-over-indebtedness-a-risk-management-approach-apr-2014.pdf
- (30) World Bank Group, 2015. Technical Note Financial Inclusion in Tunisia. https://openknowledge.worldbank.org/bitstream/handle/10986/22497/Financial0incl0hot000technical0note.pdf?sequence=1&isAllowed=y
- (31) GIZ, 2021. Promotion de la finance digitale. https://www.giz.de/en/downloads/giz2021-fr-promotion-de-la-finance-digitale.pdf
- (32) GIZ. Support to the microfinance sector. https://www.giz.de/en/worldwide/19710.html
- (33) AMEF Consulting. Progress and Impacts of Microfinance Regulation in Tunisia. https://www.amef-consulting.com/progress-and-impacts-of-microfinance-regulation-in-tunisia/?lang=en
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- (35) Switchmed, 2020. Profile pays Tunisie. https://www.euneighbours.eu/sites/default/files/publications/2020-12/Tunisia_countryprofile.pdf
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- (37) Invest in Tunisia. Incentive Legislation. http://www.investintunisia.tn/En/incentive-legislation_11_24