Posted on June 11, 2009 - by Gavin

Microcredit and microfinance the solution to Yemen’s employment problem…

Yemen Times

SANA’A, June 10 — While the percentage of unemployment in Yemen varies from one source to another, official statistics indicate that it is no less than 16 percent. Independent sources such as NGOs and research centers emphasize that such a percentage is not realistic.

“The Ministry of Planning announced in 2004 that Yemen’s unemployment rate is 37 percent, and then in 2006 Prime Minister Ba Jammal said this rate was reduced to 18 percent. But all these figures are below the realistic estimate of at least 35 percent, which means that one in three job seeking Yemenis is unemployed,” said economist Taher Mujahid Al-Salehi from the Yemeni Research and Studies Center.

Meanwhile, in a recent official report the Yemeni government admitted the failure of its employment strategy to reduce unemployment to 12 percent by 2010.

The report, issued by the Ministry of Planning and International Cooperation, said that unemployment had remained at about 16 percent between 2006 and 2007.

According to the report, limited investment opportunity hampered efforts to create new jobs and meet labor market needs. The report pinned the plan’s failure on the Yemeni economy’s inability to provide new jobs for youth.

The lack of dynamic economic activity and the low level of qualification among the national labor force were designated as main obstacles to unemployment reduction in the country.

Yet according to Mohammed S. Al-Lai, CEO of Al-Amal Microfinance Bank, microcredit and microfinance are significant solutions to the unemployment problem in Yemen and poverty in general. “Although the bank only became fully operational in January this year, we received around 3000 applications for credit; so far we have accepted 1300 proposals, 35 percent of which were for women.”

The planning ministry’s report named investment as the means to accomplish the current unemployment reduction plan which ends in 2010. It also called for enhancing production and conducting qualitative training programs for the country’s labor force.

The report demands employment offices be given the means to better advertise job vacancies and promote employment strategies.

However, according to Al-Lai, two interventions can help Yemen overcome its growing unemployment problem; one is to provide opportunities for entrepreneurs to create small businesses, such as microcredit loans, and the other is creating labor intensive projects such as infrastructure development and encouraging growth in the Yemeni banking sector.

Currently, there are only 17 banks in Yemen distributed throughout five governorates with 200 branches across the country. This sector at present provides jobs to only 2,000 employees and hence has great potential to expand.

“Bangladesh’s success story in using microcredit to reduce unemployment is a great example to follow. In ten years it was able to reduce unemployment from 75 percent to around 35 percent today. 2006 Nobel Peace Prize winner economist Dr. Mohammad Younus who founded the microcredit institution in Bangladesh 30 years ago promised that by using this policy, unemployment in Bangladesh will be further reduced to 15 percent in the next three years,” added Al-Lai.

Not having clear labor statistics in various sectors or accurate percentages is a concern to many economists because it affects the success of national strategies. Although the Ministry of Planning reported 16 percent as the unemployment rate in 2007, the Central Statistics Organizations reported it the same year at 17 percent, while UN agencies such as the International Labor Organization (ILO) indicate that Yemen’s unemployment in 2007 was no less than 18 percent. The variance in these numbers depends on the method of calculation and the accuracy of basic figures such as population, percentage of Yemenis who are of working age, percentage of Yemenis who are seeking jobs, and so forth. The official report indicated that unemployment among women had reached 46 percent, while 60 percent of women are working unpaid either on farms or at home doing domestic work.

According to Raidan Al-Saqqaf, ILO representative in Yemen, the Yemeni labor force is increasing annually by 3.3%, reflecting mainly the effect of the high population growth and the increasing readiness of Yemeni women to enter the labor market in recent years. On the other hand, the relative slow growth of labor demand reflects the limited job opportunities in the private sector as a result of the job-less growth taking place in Yemen.

He added: “The challenges ahead are enormous, not only jobs are required to meet the employment needs of new entrants to the labor market every year, but those employment opportunities need to match a minimum expectation especially to the stockpile of unemployed youth with higher levels of educational attainment.

Every year Yemeni universities produce around 30,000 graduates, at least half of which are women. Many of these graduates register with the Civil Services Authority for government jobs. Some have been waiting for more than ten years and the list of waiting job seekers has currently reached 180,000 applicants.

Each year the national government employment policy accommodates around 10,000 recruits according to specialization; 40 percent of the vacancies go to women. The private sector is doing worse in terms of employing women as it only employs 7 percent of working women across the country.

Overall statistics show that the job seeking population is around five million people. Only 800,000 of them are employed in the public sector, and according to the Wages Strategy 2005-2006 issued by the Parliament, an additional one million are employed in the army and civil security sectors, most of whom are men.

Labor in private agriculture businesses, including qat farms, is estimated at 2,300,000. This leaves 900,000 job seekers, which make the unemployment rate around 20 percent.

According to the Ministry of Planning, the rate of participation in economic activities did not exceed 39 percent in the last two years, and only 62 percent of the workforce has been to primary school.

The ministry’s report indicated a lack of investment while the expansion of random economic activities has reached 43 percent.

“Yemen is an investment repelling environment; even Yemeni capital is leaving the country because of the corruption and the lack of an adequate justice system,” said economist Al-Salehi. He added that decreasing oil investments worldwide due to the economic crisis has compounded the problem, especially since Yemen’s economy depends heavily on the oil sector.

The partnership in Yemen between public and private sectors is not clear, according to Al-Salehi. The government abandoned its role in providing job opportunities through capital investment and industry in order to concentrate on infrastructure, making space for the private sector to fill the gap.

Yet the private sector has not been able to fill this gap because of hesitation to invest in Yemen, mainly due to the fact that the country’s infrastructure is not able to sustain large scale businesses in addition to dynamic global changes and security concerns.

And although microfinance could be seen as a safe way to invest money in Yemen while at the same time helping small businesses, the private sector in Yemen is still hesitant in fully supporting this initiative.

“The private sector does not fully comprehend the concept of microcredit. It sees it as a part of companies’ social responsibility and hence providing money as grants rather than loans. Actually, the reason behind the delay in Al-Amal Bank’s full operation is this confusion with the private sector. But we are working very well now with an amazing outreach in Sana’a and soon in Taiz and Ibb governorates,” said Al-Lai.

He predicted that by 2013 Al-Amal Bank would have helped the creation of 100,000 small businesses in five governorates across the country.

Source: http://yementimes.com/article.shtml?i=1267&p=front&a=1