DUBAI: The World Bank is increasingly focusing on microfinance and small business loans in Yemen as the spike in violence this year is making it hard to find viable projects for investment, a senior official told Reuters.
International donors are finding it harder to locate investment projects in the impoverished Arab state, crippling its efforts to diversify its economy away from hydrocarbons, said Raymond Conway, who represents Yemen at the International Finance Corporation (IFC), the World Bank’s investment arm.
"We have as much money for Yemen as we can find good yields. But this year, we have not found anything (new) to invest in," Conway said, speaking by telephone from Sanaa.
"We want to focus on value-added projects, companies that make money. There are not enough of them; there is not enough because of the investment climate."
The discovery last week of US-bound parcels carrying bombs from Yemen has added to investor concerns about security in the country which is the poorest in the Arab world. The bombs are thought to be the work of al Qaeda’s Yemen-based arm, al Qaeda in the Arabian Peninsula (AQAP).
"We don’t really feel the heat of the conflict yet…But the real implication is that a lot of the consultants are now reluctant to come to Yemen because of the recent events," Conway said.
He said the IFC is looking for microfinance investments in infrastructure, health care and education. Microfinance schemes involve loans of a few dollars to some of the world’s poorest, allowing them to grow their businesses.
"What we need to do is looking at micro financing and small and medium-sized (SME) financing," Conway said. "That means working with local banks and micro financing institutions to help them develop capacity and develop their balance sheets so that they can do more lending activities."
"We want to target small manufacturing companies that produce biscuits or juice, taking a basic value and then sell it," he added.
The IFC is also working with the Al Amal Bank and Saba Islamic Bank on advisory services for Yemen’s government.
Other Challenges
The IFC, the world’s largest multilateral investor in the private sector in emerging markets, has invested $1.6 billion across the Middle East and North Africa but has not made any new investments in Yemen this year, except for a follow-up cement project begun in 2007.
That was a $75 million investment in a cement producer with an annual capacity of 1.54 million tonnes.
But security is only one of a number of entrenched problems in the country, where one in three of the 23 million people suffer chronic hunger, according to U.N. agencies.
Donor nations have voiced support for Yemen to help contain the al Qaeda threat and tackle other security challenges such as a six-year conflict with separatist rebels.
But earlier this year the World Food Program (WFP) warned it may have to halt its operations in Yemen for lack of funds.
"The problem is that there is a disconnect between the government and the donor community in Yemen, because the government is looking for budget support, whereas the donors want specific programs to invest in." Conway said.
"The government is still pushing for a pure budget support which most donors are reluctant to provide as they have concerns about accountability."
