By Elissa McCarter, Vice President of Development Finance, CHF International
This article first appeared in Microfinance Focus.
After weeks of headline news about the Arab Spring, we seem to have forgotten the man who started it all: Mohamed Bouazizi, the Tunisian fruit vendor who set himself on fire after police confiscated his small cart. It was Mr. Bouazizi, a microentrepreneur, who sparked this revolution in a single act of protest against the same harsh economic realities shared by the majority of citizens across the Arab world. If this was a protest started in response to economic realities, why has there been such limited discussion on the topic?
Having worked as a microfinance practitioner for well over a decade, providing small loans to entrepreneurs very much like Mr. Bouazizi, I can picture his cart, like so many others scattered along dirty crowded streets and outdoor markets in developing countries around the world. Given the changing political situation today, the first question from potential investors in our Middle East microfinance programs is all about risk. “How will they ensure that their money is safe, that microfinance borrowers will pay back?”
Little do they know that our highest repayment rates from microentrepreneurs are in the Middle East – despite the second intifada in Palestine in 2000, the Bagdad uprising in 2005, the “July War” in Lebanon in 2006, the blockage of Gaza strip in 2008, and now, the Arab Spring that we witness playing out today. Indeed, 88 percent of CHF International’s $200 million microfinance and SME portfolio is in four countries: Jordan, Lebanon, West Bank and Gaza, and Iraq, where we have nearly 47,000 clients and over 600 staff – all of whom are of Arab origin. Since 2004, we have provided loans to 200,000 people and been instrumental in the creation of an estimated 400,000 jobs in the region.
Still, many investors fail to see the opportunity. There may not be a sizeable middle class in the countries where we see the Arab Spring unfold, but there is a vast majority of working class. For instance, over 40 percent of the Egyptian population is living under the poverty line and it is this same group that represents the working class. They are hard working, they pay back, and they have no other choice but to stay in the country and make things work. They live through war, conflict, disaster, regime change, stagnation, and regime change again. At first it may feel risky, but these are the people – Bouazizi and people like him – that you should want to invest in, because they represent the future, and they will determine what their countries ultimately become. They cannot flee their country in the event of an emergency – the have to invest in it, and in their future, and show determination in so doing.
Building up institutions and establishing policies that support small businesses, enact more favorable taxation and safety nets, and facilitate private sector and investment cannot happen overnight. It takes years, if not decades. The real threat of the Arab Spring is inertia; the slow economic change needed to help someone like a Bouazizi fruit vendor does not have media appeal as the excitement of youth demonstrations, the buzz words of social media or even war. Yet the real opportunity is investing in ways that will directly benefit people like him. It is economic change, away from the oligarchy, family patronage, clientelism of state workers, and toward capital investment in people and enterprise, that will ultimately drive the outcome of the Arab Spring.
According to Dr Ali Kadri, the former Head of the Economic Analysis Section of the United Nations regional office in Beirut, recent events in the Middle East are the culmination of decades of under development, and in some cases de-development – fueled by failed economic policies and broken institutions. He points out that between 1971 and 2000 overall economic growth in the Arab world was negative, with the real GDP per capita of Gulf Countries contracting by 2.8% annually.
I see real opportunity and real potential for change that can filter down to the average citizen, despite all this. The microfinance work we do in the Middle East and North Africa [MENA] region demonstrates a collective power in numbers. According to 2009 MENA statistics from the MIX Market, there are approximately 2.5 million microfinance borrowers, 76 civil society organizations, over 5,000 employees involved, and one could estimate over 1 billion children growing up in those families. What would happen if we connected all of them through the same power of social networking that has fueled the uprisings across so many communities? What would happen if they could launch an agenda in each country to lobby governments specifically for the right economic policies? In the Middle East, more than in other regions, we have witnessed the power and resilience of the entrepreneurial spirit, and a lot of smart small business people who are making things happen. Imagine now how history might change with the right policies in place and long-term investors willing to take the risk. Sustainable economic change is going to take patience and a real discussion, involving the people who matter and who can make change happen. Those are the kinds of news headlines we need.