Current troubles in several Arab countries have led to serious job losses. Self-employment through micro-enterprise supported by micro-credit can provide one solution to this. But micro-credit itself is today under scrutiny.
The international NGO, Enda inter-arabe, has been operating in Tunisia since 1990. It began micro-credit in 1995 and has been specialised in supporting micro-entrepreneurs since 2001. Today, Enda inter-arabe has 60 branches throughout Tunisia and employs 770 people, of whom some 640 are young university graduates, a category desperately in need of jobs. With a portfolio of some 80 million Tunisian Dinars (41.11 million Euro), Enda currently serves 160 000 people, 73% of whom are women. With a growth rate of 30% per annum, it expects this number to rise to 300 000 by end-2012.

Having begun with grants from the European Union and the Spanish cooperation agency, Enda inter-arabe is today self-sufficient. Its income covers all costs and it is refinanced by commercial loans from Tunisian banks and international financial institutions.
     
Twenty-five per cent of Enda’s portfolio is now in rural areas and includes local shops, artisans and other categories, as well as agriculture. Enda plans to introduce loans for animal rearing and for agricultural production. There are also loans for home improvement and to assist with back-to-school expenses. These can also be used for adult training courses.
Since the “father” of micro-credit, Mohamed Yunus, won the Nobel Prize in 2006, the micro-credit industry has come under scrutiny and doubts have been raised about its ability to help the poor grow out of poverty. Many claim the cost of micro-credit is  exorbitant and this is certainly true in some cases.

So is micro-finance effective in helping the poor? Studies tend to show that access to credit at least allows the poor not to get poorer while the alternative - money lenders - costs much more. Yet there are many potential pitfalls in the microfinance industry. Serving tiny loans to multiple clients is very expensive, the risk is high, refinancing is costly, inflation eats away at capital... A lack of rigour in management and especially failing to ensure a repayment rate of at least 95% can lead to a culture of non-repayment that dilapidates capital. There is also the risk of providing loans that are too large, with the risk of over-indebtedness and, again, non-repayment.

There are, however, many examples of successful micro-credit initiatives and there is now the risk of throwing out the baby with the bathwater by lumping together the efficient with the inefficient providers.

Given the current questioning of the real impact of micro-credit on poor people, it is essential for the industry to respond. The focus must be on the many and real success stories to counterbalance the failures and weaknesses - and there are also many - that the press tends to focus on.
As Enda and many others have shown, properly managed, Micro-Finance Institutions that stress their social mission of providing the poor with access to financial services, do assist the poor and help them manage the poverty equation.
 
An important aspect of micro-entrepreneurship is empowerment of women. Once women generate even a small personal income, they gain a say in family affairs and in dignity. With rising unemployment, the female micro-entrepreneur sometimes even becomes the main family bread winner.
To conclude, it is unfair and unrealistic to expect too much from this single sector as a path out of poverty. It is most effective as a complement to efficient government poverty-relief policies. To the contrary, structural adjustment programmes, by severely reducing services to the poor, like health and education, have shown themselves to be the path into poverty.

The debate on micro-credit should be placed in context.

Michael Cracknell is British. He co-founded enda inter-arabe in 1990 with his Tunisian wife, Essma Ben Hamida. He has degrees in Arts, in Political Science and in development studies, as well as a Doctorate of laws. He was Secretary General of the Paris-based International Federation of Agricultural Producers for 12 years ending in 1985 and has worked as a consultant for FAO, IFAD and other UN organisations.

When we talk about Africa’s infrastructure finance gap it is easy to be pessimistic.  I am not.  I am an optimist.
 
Some see the gap as a problem, a major challenge. But while I agree this finance gap is a challenge, I see it primarily as an opportunity – an opportunity for the private sector to maximise returns on their investment in what is a nascent market.

The highly-regarded Africa Infrastructure Country Diagnostic study (don’t be put off by the title) recently concluded that an annual investment of over $90 billion is required over the next ten years if Africa is to bring its infrastructure to the levels of other developing regions of the world.
About half of these investment needs are currently being met through official development assistance, foreign private sector investment  and, often overlooked, domestic investment  from within Africa.  In fact, the African taxpayer is the biggest investor in African infrastructure.  So it is not all gloom.  

African governments are not only committing public resources to infrastructure development.   They are also creating an economic environment that encourages private sector investment – micro-economic reforms, institutional reforms, efficiency improvements – alongside a commitment to improved corporate and economic governance.  Further,  enabling legislation for effective public-private partnerships (PPPs) is also being introduced.   

These improvements might not be consistent across all of Africa’s nations, but they will certainly continue.  And this improving climate will increase the opportunities for private sector involvement in Africa’s infrastructure sectors.  
The pessimists say that Africa is too risky for investors.  Yet we know that no investment is without risk, in any part of the world.   Indeed, the belief that investing in Africa is a higher risk than in other regions is a myth.  A recent study by the ratings agency Moody’s, which analysed project finance loans in Africa over 20 years, found that only one of the 92 loans defaulted.
What about rates of return?  Africa is an emerging market, so returns are high for those who invest early.  Many privately financed infrastructure projects in Africa are seeing returns that compare well with other parts of the developing world.    

Africa’s infrastructure finance gap is the result of demand and real growth -- demand that comes from Africa’s recent solid growth.  Some countries in Africa have seen double-digit growth and  Africa is now one of the world’s fastest growing economies, with GDP growth rates that are often at par with China and Brazil.  That growth produces demand – for power, for water, for transport and for communications.  Projects in all of these areas are bankable.

Even the recent economic downturn has shown that Africa is not the economic basket case some would like to believe it is. Across Africa, real GDP grew by 5% from 2000 to 2008. Hitting a peak of $1.56 trillion in 2008, the financial crisis brought Africa’s collective GDP down to $1.4 trillion in 2009. The negative impact was therefore not as great as in other parts of the world.  Importantly, Africa’s growth is built on solid foundations and is rebounding. 2010 finished with growth at 4.5% and economists expect growth to reach 5% in 2011.  

Ultimately, it seems we, the optimists, have both the facts and the figures in our favour. If you are an investor, you can’t ignore Africa.  And you can’t ignore infrastructure.  You will want to back a winner.

Mr. Hassan is the Coordinator of the Infrastructure Consortium for Africa (ICA) Secretariat housed by the African Development Bank in Tunis, Tunisia. He holds an MBA in International Banking and Finance from the University of Birmingham in the United Kingdom and a Masters Degree in Economics from François Rabelais University in Tours, France. He has 18 years of experience as a Financial Analyst and Investment Officer in the infrastructure sector.