Note from Egypt: MEDA Empowers Youth in Microfinance

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An innovative program aims to improve the working conditions and learning opportunities of youth in Upper Egypt

While most Notes from the Field feature USAID-supported work, occasionally we post Notes on work that does not receive USAID support but that represents interesting innovation, good practice, fodder for discussion, or all three. The Note that follows does not receive USAID funding but we feel that our users will benefit from learning about it. Mennonite Economic Development Associates (MEDA) receives USAID funding for another program featured as a Note from the Field, the Behind the Veil program.

Zakareya Rekaby is a 14-year-old boy who lives and works in Ezbet El Asker in Aswan (Upper Egypt). Zakareya used to work as a street vendor of koshary, a noodle dish. With a loan from the Egyptian Association for Community Initiatives and Development (EACID), Zakareya’s family set up a kiosk and can now buy supplies in bulk at a cheaper unit price. Zakareya no longer has to worry about harassment and bullying from older boys in the street. The loan allows Zakareya to sell in a safe environment and focus on his studies. Access to the loan has also increased the family’s income, giving them more flexibility as well as the ability to pay their children’s educational fees.

Improving the working conditions and learning opportunities of youth is just one of the goals of EACID, a non-regulated financial institution in its eighth year of operation. EACID is one of the larger non-bank organizations delivering financial services to unserved markets in Egypt. EACID was created in 1998 by Dr. Mamdouh Foad in Aswan (Upper Egypt) with support from the Canadian International Development Agency (CIDA). Seed capital from CIDA was used to develop the self-employment capacity of low-income women and to support them in the start up of women-led businesses through a project called the Women’s Initiative Fund (WIF). EACID started off as a small-scale lending institution offering WIF microcredit products to a defined market—poor women entrepreneurs.

As a result of the profitability of WIF services, EACID expanded financial services from Aswan to Doweika (Cairo). EACID has achieved operational self-sufficiency and has earned a profit since 2001. EACID only offers credit and cannot by law mobilize savings.

After years of working with WIF clients, EACID found that 50 percent of its clients had working children in their businesses. As part of its expansion, EACID began working with youth and designed the Promoting and Protecting the Interests of Children who Work (PPIC-Work) project. Through PPIC-Work, EACID provides financial services to business owners who employ children and also to family-run businesses to improve the working conditions and learning opportunities for children and youth.

PPIC-Work is a three-level socio-economic development project that aims to (1) improve the working conditions and learning opportunities of children who work at the enterprise/business level; (2) influence SME policy created by the Government of Egypt; and (3) engage debate at the international level with donors, international organizations, and interested parties. In all project activities, PPIC-Work aims to empower its main stake-holders—children, families, and business owners—by promoting children’s rights.

Through microfinance, EACID found an opportunity not only to contribute to increasing the income of microenterprises, but to have a positive impact on the lives of children and youth who work in these businesses. Eligible clients of the PPIC- Work loan adhere to the following guidelines: (1) provide evidence of the employment of children either on a part-time or full-time basis; (2) utilize the loan to improve technology and the work environment (mitigating hazards); and (3) demonstrate interest in improving the learning opportunities and skills capacity of younger workers. In the third quarter of 2005, EACID provided PPIC-Work loans to 360 businesses, which has the potential to impact more than 700 working children and youth.

A recent efficiency analysis determined that the current disbursement of new PPIC-Work loans takes approximately twice as long to process and costs 14 percent more than a similar WIF product. EACID believes that these financial costs are affordable relative to the social costs. In addition, EACID is building a younger client base, which can potentially attract long-term business.

PPIC-Work is EACID’s newest loan product. In 2005, EACID offered other financial products, including Access to Financial Services and the Women’s Initiative Fund. Despite being smaller than many Egyptian microfinance organizations, EACID has grown significantly over the past eight years and is established as a profitable microfinance organization in Upper Egypt. From 1998, EACID grew from 720 clients to reaching 2,946 clients with an outstanding gross loan portfolio of 5.8 Million LE (ap-proximately US $1 million) in 2005. EACID is reaching a broad target market and the majority of its client households fall well below the poverty line of a typical family earning less than US $120 per month.

EACID’s results present enormous potential for other non-bank organizations in Egypt and the Middle East to innovate in the financial services sector while meeting the bottom line. EACID has demonstrated the capacity to offer quality financial services to niche markets including taxi drivers, women and working children, and youth. During its eight years of operation, EACID’s commitment to combining social and financial objectives has proven effective. EACID is also able to deliver strong non-financial programs such as information technology and female genital mutilation education, awareness, and eradication, while maintaining and improving its financial performance.

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Institutional Author
Mennonite Economic Development Associates (MEDA)

Publication Date
12/21/05