MSEs in Jordan

The development of micro and small enterprises (MSEs) is viewed as one of the sustainable ways of reducing the levels of poverty and improving the quality of life of households through wealth and job creation.

Developing MSEs should be one of the top priorities of the Jordanian government, stemming from their significant role in job creation, economic inclusion and poverty alleviation.

Promoting MSEs in Jordan shall contribute to reducing unemployment especially among youth and women, in addition to positively contributing to financial inclusion through reaching out to marginalised groups in different geographical regions.

MSEs constitute 98 per cent of all enterprises in the country and employ over 60 per cent of the Jordanian workforce. At the same time, it is estimated that more than 50 per cent of overall employment in Jordan is informal, the majority of which consists of low-income, unskilled labour, lacking any legal protection.

A research paper presented specific insights into the growth of MSEs in Jordan. 

The study sought to investigate the role of microfinance institutions on the growth of micro enterprises into small- and medium-size enterprises.

The paper developed certain graduation criteria, namely: finishing three loan periods with excellent credibility and commitment to re-payment, a continuous profit growth rate obtained as a result of activities (sales) expansion, formalising the business by officially registering it and creating jobs for local employment.

The paper made use of a sample of 8,000 clients who took productive loans and had accessed the normal non-financial services provided by microfinance institutions during a period of six to 18 months.

With the use of data analysis against graduation criteria, the study found that these institutions influenced the performance of few MSEs entrepreneurs; only 13.7 per cent of clients grew.

This is far below the international practices, which indicate that 50 per cent and 60 per cent of modern MSEs in Asia and Latin America, respectively, grew from low entrepreneurship.

Even in African countries such as Nigeria, enterprises that grew naturally from micro to small make up 43.7 per cent.

The situation in Jordan was found to be similar to that in other low-income African countries, such as Rwanda (11 per cent) and Botswana (20 per cent).

Based on these results, it can be concluded that a cornerstone of institutions’ business strategy would be the design and delivery of more comprehensive and innovative financial and non-financial services to their clients.

Every non-financial service — consultancy, training and information sharing — should be designed to achieve the greater goal of supporting clients to strategically start and grow their business. 

The writer, a component manager at GIZ, is an external consultant at AGFUND, supporting several microfinance activities in the MENA region. He contributed this article to The Jordan Times.