Financial Products to Mitigate Risk in the Jordanian MSME Lending Market2015
The Kingdom of Jordan is a developing economy and acts as a stable safe haven for many refugees in the surrounding area undergoing civil conflict. With an influx of refugees from neighboring countries and a high birthrate, Jordan’s population is growing rapidly. A western friendly country, Jordan has been working with organizations such as the World Bank and USAID for many years to develop its infrastructure, rule of law, and economy. As in many other countries, Jordan has a gap in lending to businesses between the Micro level and the corporate level. The Central Bank of Jordan (CBJ) is keen on finding formal banking solutions to address this gap and extend more credit to small and medium enterprises (SMEs). The primary issue preventing an expansion of credit to SMEs is a lack of risk mitigation.
The student MAP team developed a report that analyzed four different products focused on reducing risk for banks, borrowers, and investors. The goal of this project was to evaluate the economic feasibility of increasing lending to Jordanian MSMEs and to develop a profitable financial instrument that increases the access to capital made available to MSMEs for the benefit of the Jordanian economy. The MAP team spent two weeks in Jordan interviewing representatives from all over the Jordanian financial sector.