Communal microfinancing brings hope to rural Yemen

June 14, 2024
Photo: UNDP Yemen

In central Yemen’s high mountains, beekeepers harvest honey, for which the country is famous. In cities and villages alike, men wear a traditional woven kilt, known as a ma’awiz. Remote communities with no connection to public power supplies rely on solar energy instead. Honey, cloth, electricity: connecting these themes are a series of community-driven projects that offer training and finance to boost incomes, drive food security, and foster community connections in villages across rural Yemen.  

The country was already one of the world’s poorest when war broke out in 2015. Nine years later, the economy continues to suffer. Conflict has affected all aspects of daily life, from education to employment opportunities, food security and the provision of even the most basic public services.

Children fetch water in Wesab Al Aali, Dhamar - Yemen.

UNDP Yemen / 2023

Financial services have collapsed. Secure employment is hard, if not impossible, to come by, and even those with work often go unpaid. The Yemeni rial has massively devalued over years of conflict, and prices of the most basic staple products have soared in a country that imports around 80% of its food. These basic economic problems make borrowing money to build a business incredibly difficult – and nearly impossible for rural entrepreneurs, who face an even more challenging environment. 

Noman helps his daughter with her homework inside their home.

UNDP Yemen / 2023

The rural deficit

Some 61% of Yemenis live outside of urban hubs, according to World Bank data, and rural life is a constant struggle against the many impacts of ongoing conflict as well as the increasing effects of climate change.

Noman helps his daughter with her homework inside their home.

UNDP Yemen / 2023

Like many services, microfinancing opportunities – designed to offer small sums that can still offer life-changing opportunities – are rarely available outside of urban areas, making it even harder for rural communities to develop the security and safety nets they need to survive and thrive.

This is where community-led projects can have an exponential impact. Through the Emergency Social Protection Enhancement and COVID-19 Response Project (ESPECRP), supported by the World Bank’s IDA, UNDP and local partner, Social Fund for Development (SFD), work with local communities to establish Village Savings and Loan Associations (VSLAs) that serve to fill a void in funding options.

Members of two VSLAs in Wesab Al Aali, Dhamar - Yemen.

UNDP Yemen / 2023

Building entrepreneurial spirit 

Entisar Qara’a, 35, is a member of Al-Tarqeya’s VSLA, where she trained in sewing – something she had enjoyed since childhood and developed to a professional level. She speaks about the challenges her family faced, including her husband’s irregular work and “the double burden of conflict and rising prices”.

Entisar stitches a dress before receiving training and funding.

UNDP Yemen / 2023

This struggle to make ends meet in the face of both conflict and economic hardship is a common experience across rural Yemen. Noman Qaed, a 35-year-old father of seven, worked as a mechanic, but talks about the difficulties in finding clients that have money to pay – a knock-on effect of widespread poverty. 

“Work slowed down dramatically,” Noman explains. “Even when I found work, people could not afford to pay what the job cost because they were struggling too.” This, he adds, made it increasingly difficult to support his family.

Noman works as a mechanic.

UNDP Yemen / 2023

Turning passion into business 

Entisar and Noman are two of many rural Yemenis in Dhamar Governorate to have benefitted from VSLAs. 

Through the VSLA programme, Entisar received a 200,000 Yemeni riyal (around US$ 377) loan to start her sewing business. This vital investment supported her to buy a sewing machine, tools, and fabrics, allowing her to turn her passion into a source of income. And her business is a success. “Our living conditions have significantly improved,” Entisar says. “With a steady income, we can now afford more groceries and essentials for our household. My husband’s work can be inconsistent, but thanks to my sewing business, I can contribute to our family’s well-being. Together, we’re building a brighter future.”

Entisar sews and earns money from selling dresses she makes at her house after receiving training and funding from her VSLA.

UNDP Yemen / 2023

Self-managed microfinance

Adel Sufyan, a consultant at Social Fund for Development (SFD), explains the core concept behind VSLAs. 

“Our goal is to revive the spirit of cooperation and cohesion within communities,” he says. “We achieve this by forming small groups – with separate groups for men and women – where members can save money regularly. These collective savings then become a pool of funds that members can borrow from to launch small businesses that benefit both the owner and their villages.”

VSLA members voting.

UNDP Yemen / 2023

The goal is to establish not just new businesses, but sustainable businesses. Each VSLA establishes a minimum monthly savings amount for members, with pooled savings accumulating for the first six months, during which time no member can apply for funding. After that, members can submit funding proposals for their businesses. The association carries out a feasibility study to determine its profitability and, and if it meets the criteria for funding, is put to a vote during the association’s monthly meeting. If approved, the member will receive a loan exceeding their saved amount, with a repayment schedule agreed by all members.

A member takes funds from her VSLA to start her own business.

UNDP Yemen / 2023

Community cohesion 

This community-led system is an approach that drives social cohesion and peacebuilding by bringing people closer, ensuring they work together for common, shared goals that benefit all and ease community hardships like food insecurity, building community resilience. It also gives members, and their communities, the tools to be increasingly self-sufficient. And with a specific focus on female groups as well, VSLAs offer opportunities to rural Yemeni women underrepresented group.

The head of the VSLA checks the savings of the participants of her VSLA.

UNDP Yemen / 2023

“Members of VSLAs identify areas where small businesses can benefit individuals and their communities,” says Adel. Common choices include sewing, beekeeping, solar energy installation and livestock breeding, or weaving ma’awiz.

Arif Masoud is the 37-year-old member of Al-Qimah VSLA and today a skilled ma’awiz weaver. Once a trainee in this traditional craft, he now beams with pride as he talks about the joy he gets sharing his creations with friends. “To promote my business, I reached out to my friends,” he explains. “It’s a great way to spread the word. In the future, I plan to sell my ma’awiz directly to people I know, as I can command better prices than at the market,” he adds.

After his vocational training, Arif makes and sells his Ma’awiz with funding from his VSLA.

UNDP Yemen / 2023

VSLAs not only train people to launch new businesses; they can provide expansion opportunities and refresh seasoned skillsets. Beekeeping offers another method to maintain an important Yemeni tradition.

Nabil Al-Quradi, a 43-year-old father of six, has been a beekeeper – producing the honey for which Yemen is famous – for many years, but still found value in being a member of the Al-Amal VSLA. “The training I received has been immensely beneficial,” he explains. “I learned new beekeeping practices, such as making bee feed to use in winter and using natural remedies to keep my bees healthy.” Having used his funding to invest in more beehives, Nabil says his honey production has increased by 30%.

UNDP Yemen / 2023

Noman, a VSLA member who learned how to install and maintain solar power equipment, maintains that training helped him support his family and brought long-term benefits to his wider community. 

“Participating feels like opening a bank account,” Noman says. “The accumulated savings provide financial security for my family.”

In a rural village with no access to the public electricity supply, his vocation provides access to vital infrastructure. “In the past, people had to hire engineers from other regions to install solar systems, which was expensive and inconvenient,” he explains. “Now, I can provide fellow villagers with high-quality services right here.”

Noman spends time with his young children.

UNDP Yemen / 2023

The Emergency Social Protection Enhancement and COVID-19 Response Project (ESPECRP) supports geographically bundled interventions of nutrition-sensitive cash transfers and temporary employment, while also improving access to sustainable livelihoods, key services, and economic opportunities for areas affected by hunger, malnutrition, and climate related shocks. The project is in line with the World Bank’s integrated approach to improve food security resilience for Yemenis. 

Funded and supported by the World Bank’s IDA, the US$ 232.9 million ESPECRP is implemented by the Social Fund for Development (SFD), the Public Works Project (PWP), and the Small and Micro Enterprise Promotion Service (SMEPS) in partnership with UNDP Yemen.