Loan guarantee program aims to help Syrian refugees’ access to capital

The Netherlands Development Finance Company (FMO) – the Dutch development financing agency – has entered into a risk sharing agreement with Jordanian microfinance provider Tamweelcom to provide Syrian refugee entrepreneurs access to capital.

The program will also lend to other underserved entrepreneurs considered risky – namely women, youth and migrants.

“An opportunity to drive inclusive economic growth”

Jordanian banks and microfinance institutions have been wary of lending to Syrian refugees due to perceived high risks. With no end in sight to the Syrian civil war, the lending facility will “offer local chances to Syrian refugees, enabling them to integrate in Jordan’s economy and to build their livelihoods”.

The agreement with Tamweelcom is the pilot for FMO’s NASIRA risk sharing programme, which guarantees 95% of a loan portfolio to under-served entrepreneurs considered too risky to lend to otherwise. In the event of default, FMO’s partner bank absorbs the remaining 5% of the loss.

Under the terms of the agreement, FMO will provide a $1.5m Risk Sharing Facility to Tamweelcom through the Dutch government’s MASSIF fund. This is expected to support $5m worth of loans across a three to four year period.

The next facility under NASIRA will be rolled out in sub-Saharan Africa in November and will be of equal size.Loan guarantees under the programme are funded by a €75m contribution from the European Commission, €7.5m from the Dutch government and €400m from FMO.

Through the pilot, approximately 800,000 Syrian refugees with UNHCR identification and a Jordanian Ministry of Interior Card will be eligible for small business loans of between $1,400 to $1,900 each. These documents are a prerequisite to employment for refugees under Jordanian law.

Governance of Tamweelcom’s loan portfolio is enhanced by the use of a blockchain-based database which ensures that credit history is “verifiable, immutable and portable across border”. Defaulting on loans could therefore negatively impact future access to finance upon return to Syria.

Maurits Fliehe Boeschoten, Senior Advisor at FMO said to RI: “We have actually seen that repayment loan performance of Syrian refugees compared to, in this case Jordanians, have been excellent based on data from previous small-scale financing.

“Refugees are often at the mercy of supplier credit, money brokers and loan sharks which are unregulated and this is a problem I observed in my time at refugee camps. Through NASIRA, the influx of refugees which is putting a strain on the host country can instead be utilised as an opportunity to drive inclusive economic growth.”.

Jordan is a common destination for Syrians fleeing the violence, with many reportedly coming from Daraa, a predominantly rural and agricultural neighbouring region, and lacking the documentation needed to access housing, education and medical care.