Khabar Khair (Only Good News) – Fatima Rashad
Development loans are one of the main channels for supporting the youth and women sector, as these loans help secure the funds needed to implement and develop small projects.
But obtaining a bank loan in order to finance small projects in Yemen is not an easy thing, and about her experience in obtaining a loan, the owner of “Boutique Tech” says, “I tried more than once to obtain a loan, but I did not succeed. After many attempts, the bank agreed to grant me a bank loan”.
In order to apply for a financing loan from a bank, it must have been six months since the establishment of the “Samar Qassem” project as the minimum period of time that enables it to obtain the required loan. This procedure is a condition to which anyone applying for a grant or loan from the banks providing this conditional service must be bound.
In addition to this condition, the borrower is required to provide a valuable guarantee such as gold, commercial registration or real estate guarantee. These are the basic conditions for obtaining a loan from some Yemeni banks that work in financing and lending programs.
Ghada Muhammed (an employee in AlKuraimi Bank) told “Khabar Kheir” (Good News), “The bank started the financing project several years ago and this trend came in line with the need to develop small projects that improve the individual’s income, but the bank sets conditions that are presented to the customer so that he can benefit from the funding loan that will enable him to develop his project”.
She asserts, “The bank offers loans that are compatible with the individual’s income, so that the deduction of loan installments does not cause an imbalance in the individual’s level of income”.
She continues, “We support real projects so that the project is on the ground, and that’s to ensure that the customer is going to pay and not stall”.
Banks Impose Large Profit Rates on the Borrowers
Muayyad Ahmed (the owner of a food store) complains about the high percentage of profits charged by Yemeni banks that finance projects. He asserts that banks impose a percentage of 28-30% of profits on the amounts they grant to applicants to finance their projects.
He says, “I applied to one of the major Yemeni banks to agree to grant me a loan, but when I knew that the interest rate was big and might cause my project to fail in the event that I was unable to pay the debt, I backed down and went to Al-Amal Bank, which facilitated many of the procedures and conditions imposed by other banks. I calculated the interest rate and found it suitable for me”.
Financing banks and institutions are working to contribute to development through investment loans they provide to the beneficiaries of small business owners, especially the women.
Al-Amal Bank, Soft loans and Secured Financing
Al-Amal Microfinance Bank offers financing loans targeting small and low-income projects with easy guarantees. The financing comes in accordance with the Islamic Sharia and Al-Takaful insurance, and the grace period is commensurate with the activities and sectors, and the payment is through the bank’s branches and agents.
Funding amounts in Al-Amal Bank start from 50 thousand riyals to 20 million riyals, as the bank requires the applicant to be Yemeni to grant him financing as well as holding a valid identity document. He shall be not more than 60 years old, provided that he has a good credit reputation, in addition to his ability to provide appropriate guarantees.
Al-Amal Bank provides financing for projects amounting to 20 million and with a repayment period of up to 24 months, in addition to financing employees with a salary guarantee.
The financing ceiling is up to 1.5 million riyals, with a repayment period of up to 36 months. The bank also targets the retired category with the same amount that is given to employees.
Companies for Financing Projects and Granting Loans
Regarding the National Company’s finances, Irfaq Al-Sharabi (the company’s finance specialist) says, “We finance small and large investment projects, regardless of their diversity, such as pharmacies, shops and groceries”.
Conditions are set that the applicants must abide by to grant them loans, such as the beneficiary having an electronic card and a rental contract for the property or a property contract and a price quote, and following what he offers, we go to the shop chosen by the beneficiary to buy him what he needs.
The private lending companies require the presence of a Muslim guarantor. The task of the Muslim guarantor is that in the event that the beneficiary does not receive the installment that he owes, the guarantor is the one who pays on his behalf, and if the loan is more than one million, one guarantor is required, but if the loan is more than two million, there must be several ones.
The Importance of Bank Finance
Regarding the importance of the bank finance, economist Mahad Salem says, “The bank finance is a service provided to clients where a percentage (commission) is taken for these loans, and there are types of bank finances, which are short loans with a duration of about a year and a half, and these loans are provided to clients personally, where the client requests buying electronic equipment or furniture for the home, and this is what Tadhamon Bank does”.
Salem added, “This type of loan is offered for home investments in order to obtain financial income, and it is set with a simple financial ceiling that enables the customer to repay the loan, and there are medium-term loans with a longer repayment period, perhaps up to five years, and these loans are granted to merchants and owners of financial investments, and craftsmen who can pay the money”.
He added, “As for big and long-term loans, they are granted to owners of factories and institutions, and they have a long repayment period from 10 to 15 years”.
Saleh Moeen (one of those who applied for a financing loan) says, “There are unfair conditions that precede the approval of obtaining a financing loan, as the applicant’s application cannot be accepted unless half a year has passed since his project has passed. What about the person who wants to start his project from scratch? It is necessary to pay attention to these projects and to set conditions commensurate with the capabilities of the applicant, for all successful projects were preceded by preliminary steps”.
Regarding microprojects, the finance specialist, Irfaq Al-Sharabi, explains the details of the interest in them, saying, “The financing company has funding for these microprojects, but there must be a Muslim guarantor who guarantees those who apply for the loan for the microproject, as the company contributes to providing effective and sustainable support. We pay attention to microprojects in the National Company and strengthen the role of women and give loans to business owners”.
The banking service provided by finance banks helps create good investment opportunities for people with limited income and for investors through small projects.
Given the importance of this development sector, controls must be put in place that take into account the capabilities of the borrower who wishes to establish and develop his own project, ensuring the rights and duties of both parties, facilitating the payment of installments and reducing their interest so that they do not reach the usurious limit, and setting conditions and facilities for microprojects entrepreneurs who are trying to withstand the difficulties facing investment.
Creating an encouraging environment that attracts the beneficiaries of bank loans and helps them in their projects, will contribute to reviving investment and supporting the emerging economy, as the borrowing parties and banks will benefit by increasing the borrowing rate, especially the banks that facilitate the borrowing process in proportion to the situation of the beneficiary of the loan.