Nearly two million rural poor cannot obtain their basic food needs in Syria. Internationally funded microfinance schemes aim to change this. But are they reaching those who need them most? Sophia Hoffmann went to rural villages to find out.
Ahmad Mawas lives in a small village of around 300 houses east of Hama. The area, with rich soil and reliable rainfall, is one of the best for agriculture in Syria. But owning only a tiny plot of land, Ahmad and his wife find it hard to make ends meet and to feed their seven children, with an eighth on its way.
Last year, things began to look up. For a SYP 50 000 loan (around USD900), Ahmad bought a cow, which now lives in a small shed next to his house. Selling the cow’s milk provides a steady flow of extra income to the family, and there is yoghurt and cheese for the children. In May Ahmad expects to repay the loan to his village’s microfinance fund, which was set up by the United Nations Development Programme (UNDP). The fund is one of an increasing number of microfinance projects in Syria designed to provide help to the country’s poorest citizens.
According to a groundbreaking report published last July by the UNDP and the Syrian State Planning Commission, over 11% of Syrians are so poor that they cannot afford their basic food and housing needs. Mostly living in small villages in the countryside, such families share one or two rooms amongst ten or more people. Many do not possess their own land, so that seasonal and unreliable labour is their only income. In the most destitute villages, over 70% of individuals live on less than USD1 per day.
The good news is that in terms of overall numbers, poverty in Syria is on the decline. “If we look at the figures from 1997-2004 the average levels of poverty fell from 14% to 11.4%,” said Abdullah Dardari, Syria’s Deputy Prime Minister for Economic Affairs, at the launch of the UNDP report. Dardari said Syria’s 10th Five Year Plan, drawn up with assistance from the UNDP, had committed itself to meeting the aims of the Millennium Goals of reducing extreme poverty by half by 2015.

Largely due to money sent from Syrians living abroad and moderate economic growth, poor people’s incomes are on the rise. According to a recent survey of his projects by Ali Rida Irayyali, UNDP national programme director, who runs the microfinance projects near Hama, households increased their monthly income by SYP 1000 on average, a rise of 20%. This rise took place over the course of the one year loan period 2003-2004.

The bad news is that this trend differs widely between regions: whereas southern Syria is seeing a rapid reduction of poverty, rural poverty in the North and East is actually rising. In 2003-2004, the report found that the poorest 20% of the population consumed only 7 % of all expenditure in Syria, and the richest 20% consumed 45%.

“65% of the households in my project are below the poverty line,” says Irayyali, who blamed extremely large families for the situation and the fact that family land plots, awarded by the government decades ago, shrink every time an inheritance is divided. “Twenty years ago, each family had 2.5 hectares. Now, they have 1 hectare or less.”

The idea for microfinance, essentially banking services for the poor, arose in India nearly 30 years ago. To set up a small business or to manage in times of the year when money is scarce, poor people often just need small loans. Conventional banks do not provide services for people without assets and often do not even provide them with savings accounts for keeping very small sums. In Syria this situation is especially bad because of the ineffective banking sector. Microfinance fills the gap by setting up village or group savings and loans systems, which are controlled by the community itself.

Now, microfinance schemes are an established part of development programmes around the world. Experience has shown that loan repayment is very high, generally over 95%, resulting in sustainable projects. In India and Uganda, funds are even setting up micro-insurance schemes and often the saving of the fund-society is the only capital of the fund, so that no donor involvement is necessary.

Syrian development agencies and the government are catching up on the idea that microfinance could be a useful tool here too. Along with the UNDP, a handful of other organisations are providing micro-loans and business training in poor villages. One of the biggest is the Fund for Integrated Rural Development of Syria (FIRDOS), which was set up under the auspices of the First Lady in 2001.

“We focus on the economic empowerment of people living in rural areas and one of our tools is microfinance for small businesses,” says Nouar al-Shara, director of funds development and founding member of FIRDOS. “People have to feel that they themselves are responsible for development and that it is not just the government.” Before starting projects in a village, FIRDOS demands that village committees are elected by the inhabitants, a process that was initially difficult to communicate. “We had to do a lot of explaining!” remembers Shara. “But these elections are a very good concept, because they raise the sense of responsibility of the representatives.” In three years and through a system of sixty village committees, FIRDOS has disbursed USD3.5 million.

The organisation has had remarkable success in involving women in project activities, a feature that still eludes other organisations such as the UNDP project near Hama. Despite the creation of a separate women’s fund, complete with a separate building, only 80 loans from over one thousand have been disbursed to women. Apart from the three women leading the separate fund, all 12 UNDP village committees in the Hama area are made up of men only.

FIRDOS presents a different picture. At a workshop for village leaders in Aleppo in January, half of the delegates were female and actively discussed development issues with their male counterparts. “FIRDOS is raising the awareness of women and their participation in the public life of the village,” says Samira Shbiib, a housewife and mother of five from a village near Eidleb, deputy head of her community’s development committee and one of the participants in the Aleppo workshop.

FIRDOS requires that at least the deputy leader of a village has to be female. Markedly, nearly all the deputies are the wives or sisters of the leaders. But managing to sit an evenly mixed group around a conference table to discuss matters of social development is already a huge step in the conservative society or rural Syria. “When I first joined FIRDOS there were some difficulties – now the people know that I am useful for the village and bring funds and training programmes,” explains Samira.

Syrian policy makers are aware of microfinance and it has been integrated into the new five-year plan that begins this year. “The state planning commission has a special team for microfinance, which the government sees as one element of an overall development strategy,” says Ahmad Nawar Awad, a consultant working closely with the State Planning Commission. The Commission also has a special fund for small loans, which it distributes through state organisations and FIRDOS.

Awad acknowledges the difficult situation of development organisations. “At the moment, there is no legal framework for microfinance NGOs to operate sustainably,” he says, confirming that the government is working to change this situation. A new law on NGO registration has been drafted but is still not approved. “In the short term, we are hoping that it will be possible to register microfinance activity at the financial services authority,” adds Awad.

According to the consultant, there is a lot of interest from the private sector, NGOs and the government to provide microfinance. But a strong legal framework to prevent fraud and to include microfinance in an integrated approach to development might take years. “Microfinance is not an end in itself, but an intermediary step towards normal financing mechanisms through banks,” says Awad, adding that microfinance could also create a cushion against economic shocks that a liberalisation of the Syrian economy might initially bring to poorer citizens.

A functioning Syrian banking sector could therefore solve the need for microfinance altogether. In other countries, micro-loans do not generally exceed USD100. Larger financial operations are taken on by financial institutions with proper accountancy operations and lower interest rates. In Syria, micro-loans are often around USD1000 and, also contrary to practice elsewhere, require bailsmen as insurance. With microfinance interest rates standing at around 10%, commercial banks should be able to compete with these conditions. But the capacity is still lacking. Banking reform, begun last year, should usher in changes that would allow NGOs to focus on other areas.

“Microfinance in Syria is not reaching the poorest of the poor,” says Friederike Stolleis, Community Development Officer at FIRDOS. Stolleis hopes that in the future banks will take on the larger loans and a greater variety of NGOs can focus on those people who are still in need. The expert also points out that there are still a lot of lessons to learn for the microfinance organisations themselves. “Supporting lots of people to buy cows and sell the milk led to the collapse of the milk price in some villages,” she points out.

Providing small loans is not a magic solution to end poverty in Syria. But project involvement at village level can bring about much more than just finance. Challenging traditional attitudes towards gender and social co-operation can be an end in itself and contribute to development.

Ahmad and his wife at least are very pleased about their villages’ UNDP microfinance project and development committee. Their cow has had a calf, which the couple plans to keep to help develop their little business further. After repaying the first loan, Ahmad wants to apply for some more financing. “But the rules are very strict,” he says. “I have to see whether I fulfill them.”