The GCC region has made significant strides in microfinance as a way of offering individuals, entrepreneurs, and small businesses access to essential financial services. In a report by the World Economic Forum, the GCC was identified as a region with immense potential given the needs of aspiring business owners, workers sending remittances, and families excluded from conventional financing. The region’s technological advancements have further facilitated this GCC internet and smartphone penetration amongst the best in the world.
Microfinancing involves providing small loans and financial services to individuals or businesses without access to traditional banking, aiming to promote economic inclusion. This is often achieved through specialised institutions using group lending, mobile banking, and community-based models, offering flexible terms and minimal collateral requirements.
This model is likely to appeal not just to entrepreneurs and small business owners but students and the region’s young, educated population more broadly. Importantly, it can be a vital lifeline into financial independence for low-income communities.
Ensuring these microfinance services adhere to Sharia principles while meeting international standards has also been key to their adoption. In 2011, account ownership in Saudi Arabia was at 46% with the UAE at 60%. Ten years later, Saudi Arabia was at 74% and the UAE at 85%. Integrating the 1.4 billion unbanked people worldwide into the financial system is a critical goal for many governments and the GCC has made financial inclusion central to its economic policy, with microfinancing playing a significant role.
Gulf Economist Staff Writer