The School of Business

Master's Degree of Business Administration

Strategic management

Final Project

Strategic Analysis for Tadhamon

Microfinance

Prepaared by:
- Ameera Al-areeqi
- Ala’a Al-Sultan

Supervised by:
Prof. Ahmed Al-Hadramy

Spring 2019-2020
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Contents
1.0 EXECUTIVE SUMMARY .................................................................... 4
2.0 COMPANY OVERVIEW ...................................................................... 4
3.0 INDUSTRY ANALYSIS ........................................................................ 5
3.1 INDUSTRY OVERVIEW ................................................................................................................................. 5

3.2 ANALYSIS OF COMPETITIVE........................................................................................................................ 7

4.0 ENVIRONMENT SCAN ..................................................................... 12

4.1 OPPORTUNITIES ......................................................................................................................................... 12

4.2 THREATS .................................................................................................................................................... 12

5.0 COMPANY SCAN ............................................................................... 14

5.1 STRENGTHS ................................................................................................................................................ 14

5.2 WEAKNESSES ............................................................................................................................................. 14

6.0 STRATEGY RECOMMENDATION .................................................. 15

REFERENCES 16

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1.0 Executive Summary

Microfinance is that wing of providing finance which deals with providing financial

services to the poor such as the supply of loans, savings etc.Yemen has witnessed a rapid

growth over the last few years in microfinance sector. In this paper, attempt has been

made to analyze Tadamon Microfinance bank and its competitors strategically. Attempt

has also been made to study Microfinance through Porter‟s five forces analysis.

Keywords: Microfinance, Michael Porter five forces, Microcredit, MFI.

2.0 Company Overview

Tadhamon MF has been working to provide financing services in Islamic Murbaha types

through a network of 16 branches in 9 governorates since its establishment at Tadhamon I

nternational Islamic Bank in 2006.

TMF financial services to low-income people. It refers to a movement that envisions a

world where low-income households have permanent access to high quality and

affordable financial services to finance income-producing activities, build assets, stabilize

consumption, and protect against risks. Initially the term was closely associated with

microcredit—very small loans to unsalaried borrowers with little or no collateral—but

the term has since evolved to include a range of financial products, such as savings,

insurance, payments, and remittances.

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3.0 Industry Analysis

3.1 Industry Overview

The Market

There are three microfinance banks and 7 additional MFIs operating in almost every

major city in addition to several areas in rural Yemen, serving more than 85,097 active

borrowers women constitute over 47% and 1,082,034 savers as at the end of June 2019

According to the study of the microfinance market in Yemen carried out by LFS and the

Social Fund for Development, the potential market size for financing micro and small

enterprises in Yemen is about 1.72 million micro enterprises and 85,000 small

enterprises.

Competition

There are 10 main microfinance providers in Yemen; three microfinance banks and seven

additional MFIs operating in almost 12 major cities in addition to several areas in rural

Yemen, serving more than 85,097 active borrowers women constitute over 47% and

1,082,034 savers as at the end of June 2019.

Risk/Opportunity

The greatest risks associated with our business today are:

- Unstable situation in Yemen

- Inflation and currency fluctuation

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 - Absence of unified authority

- Declining of purchasing power of the population

- Lack of basic infrastructure and other services

- Lack of community awareness about Microfinance

- Provisions imposed by CBY

While the opportunities are:

- Huge potential market size for microfinance in Yemen

- There are many uncovered and unserved areas in Yemen

- Lack of innovation in designing new products or developing existing products

provided by MFIs.

Operations

TMF providing our products directly to the potential clients through our 16 branches

located at 10 governorates in Yemen. Also, TMF have five branches under construction

will start operating form the first quarter of 2020 at five governorates (three of them are

new).

In addition, TMF have agreement with Tadhamon Bank to use their branches to provide

our services

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3.2 Analysis of Competitive

Competition

There are 10 main microfinance providers in Yemen; three microfinance banks and seven

additional MFIs operating in almost 12 major cities in addition to several areas in rural

Yemen, serving more than 85,097 active borrowers women constitute over 47% and

1,082,034 savers as at the end of June 2019.

Table 1: Microfinance sector in Yemen until the end of June 20191

Market
The active number of clients
Outstanding Share
MF loan portfolio
Program Establishment Branches Borrowers Savers (%)
Category – Million
Women YER
Total Total
(%)
Al Amal
2009 15 33,461 38 132,915 3,128 20.72
Microfinance Bank
Alkuraimi Islamic
2010 65 4,504 9 906,055 3,738 24.76
Microfinance Bank
Banks Tadhamon
Microfinance 2006 15 4,428 27 1,672 11.07
Program
Total of Banks 95 42,393 51 1,038,970 8,538
National MF
2003 19 12,350 26 25,746 2,591 17.16
Foundation
Aden MF Foundation 2005 5 9,802 66 7,065 666 4.41
Foundation Nama’ MF
Development 2000 12 5,535 38 130 1,021 6.76
Program
Total of Foundations 36 27,687 43 32,941 4,278
Al-Etihad MF
2003 7 3,601 77 498 3.3
Program
Sana'a MF – Azal 2001 7 3,330 35 4,437 811 5.37
Programs
Wadi Hadhramaut 2000 7 6,795 31 5,686 927 6.14

Total of Programs 21 13,726 16 10,123 2,236

Al-Awa'el MF
Company 2000 2 1,291 78 46 0.3
Company
Total 154 85,097 47 1,082,034 15,098

Figure 1: Microfinance portfolio market share

1 Social Fund for Development, June 2019

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 Microfinance portfolio market sharer
6% 0%
5% 21%
3%

7%

5%

25%
17%

11%

Al Amal Kuraimi Tadhamon National Foun. Aden

Nama Al-Etihad Azal Hadhramaut Al-Awa'el

Figure 2: PAR June 2019

PAR June 2019

120%
100%
100%

77%
80%
66%
60%

40%
21% 19% 19%
20% 13% 12%
3% 3%
0%

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Analysis of Competitive Forces – Porter’s 5 Forces

1- The Threat of Substitute Products

The government, in the draft Microfinance Bill, have mentioned that the life insurance

products have to be provided under microfinance category. The insurance industry

already has a lot of players. In addition, some private and nationalized banks were

providing insurance products. They are popularly known as bancassurance. These

substitute products may pose a threat to the insurance products of the

microfinance entities because of their expertise in the insurance domain and of the fact

that microfinance institutions have negligible experience in providing insurance services.

2- The Threat of Existing Rivals

In general, intensity of competition depends upon the size of the firms in the game. As far

as microfinance industry is concerned the major operators are SHGs directly or through

MFIs/NGOs. Apart from them there are moneylenders, which, with negligible

administrative cost and enormous wealth, may pose a threat to microfinance entities.

More and more organizations are taking up corporate social Responsibility (CSR)

activities, which doesn’t directly involve in money lending but provide all support, both

technically and financially, for the development programmes in association with the local

organizations. This makes them virtual competitors in the microfinance arena.

In rural areas people have the mindset that co-operative bank and regional rural banks

(RRS) are their only source of money and for which they need collateral. As MFIs are a

part of formal financial system, people still perceive MFIs as banks which provide money

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without security leading to these co-operative banks becoming the competitors of

Microfinance Institutions.

3- The Threat Of New Entrants

Currently in Yemen the suppliers of micro finance may be classified into three categories

as follows

• Formal sector which includes banks

• Semi formal group which comprises of MFIs

• Informal providers which are not legal entities and includes money lenders, chit

funds, pawn brokers, employers, relatives and friends.

Banks with a large capital base and less cost of funds may turn out to be a major threat to

the microfinance entities. The flood of more and more companies in the industry will put

more pressure on margins of the microfinance institutions.

4- The Bargaining Power of Customers

In any industry, the bargaining power of the customer depends upon

• Concentration of buyers,

• Number of suppliers providing similar services

In microfinance industry, most of the buyers are in groups or in clusters like SHGs. A

group of buyers have more bargaining power than an individual has. These groups can

exercise their power through the MFIs/Banks that they are affiliated to. The presence of

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lots of options for them also make them influential. As an institution, they can influence

the decisions of the supplier

Microfinance institutions are already facing tough competition within the industry as

there are large number of players, including local money lenders providing microfinance

services. The presence of large number of options for the customers gives them the

bargaining power.

Another factor is availability of the substitute products and various sources for the same.

In remote villages, people prefer taking loans from the local money lenders as they are

accessible more easily. Hence, availing a loan from MFIs automatically, become a

second priority for the people, giving them an upper hand on the pricing of the credit.

5- The Bargaining Power of Supplier

Barring a few states, most of the rural areas are still untouched and the concentration of

MFIs in some areas is very high. Hence, the MFIs, ideally, should have negligible power

in dictating terms in the business. But, due to widely prevailing financial illiteracy in the

rural areas of Yemen, most of the MFIs charge the poor very high interest rates, ranging

from 20-30%.

The government has acknowledged the fact that the microfinance institutions are taking

advantage of the financial illiteracy of the rural population. Hence, the issue of charging

high interest rates has been addressed in the recently introduced RBI guidelines. The cap

of 12% on the margin of the MFIs will, eventually, lead to lower rate of interest on the

loans disbursed to the poor.

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4.0 Environment Scan

4.1 Opportunities

 Huge potential market size for microfinance in Yemen; the potential market size

for financing micro and small enterprises around 1.8 million SMEs while served

client are 85,000.

 There are many uncovered and unserved areas in Yemen; there are around 9

governorates uncover and unserved by MFIs.

 Lack of innovation in designing new products or developing existing products

provided by MFIs; Almost all the MFIs provide the same type of products. There is

no innovation to discover or establish new products. However; TMF started

developing innovative products such as Tadhamon Education Product and these days

they are working with specialized Garman company to develop Agree-loan sub-

products based on agriculture value chain.

 Donors interested in supporting microfinance sectors and deliver their assistance

through MFIs.

 Yemen Loan Guarantee Programme (YLG); YLG was established under SFD last

year to guarantee the microfinance loans in Yemen.

4.2 Threats

 Unstable situation in Yemen;

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Instability which Yemen wetness since 2011 has affected its economy negatively,

investments left the country, the unemployment rate increased dramatically which led to

poverty at high levels. This situation add responsibility to MFIs institutions.

 Inflation and currency fluctuation;

Economy was one of the sectors which suffering due to the fact that country is passing

through crises never been like before, therefore currency fluctuations exist as a result of

the inflation which make the situation even worse & difficult to work under for MFIs.

 Absence of unified authority;

Many parties have taken the lead due to the fact of absence of Central authority, those

parties started to act as authority at the geographical area they are governing , starting to

issue a regulations which means that MF’s have to adopt it Self to new changes & to

coordinate with all parties in order to maintain its activities.

 Declining of purchasing power of the population;

After a while from the date of crisis government was unable to pay the salaries to people

due to stop country export of oil and gas which used to provide country with foreign

currencies, supporting national currency & providing the economy with the power to

continue. Therefore; people are not able to purchase goods/materials as that used to, and

merchants (MFIs client) are not able to be financed by MFIs.

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5.0 Company Scan

5.1 Strengths

 Varity of products; there are many types of microfinance products and forms which

Distinguish TMF from their competitors.

 Good outreach; TMF has a strong network contain 19 branches operating in 10

governorates (urban and rural areas).

 Qualified staff; TMF has well-trained stuff capable to achieve their duties

professionally.

 Lowest interest rate (profit rate) in market; TMF has set lowest profit rate in the

market (10% - 18%).

5.2 Weaknesses

 TMF has no separated legal entity from Tadhamon Bank; TMF is a unit working

under Tadhamon Bank umbrella. There is no independent identity.

 There is no marketing strategy;

 Lack of basic infrastructure and other services;

 The country's infrastructure shortage such as highway, transportation, electricity,

telecommunications, and other operational services creates another problem for

Microfinance institutions and restricts their unserved community outreach.

 Lock of community awareness about Microfinance;

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 Microfinance activities started on 1997 in Yemen, which considered as new for the

community at that time & due to the lack of awareness actions, majority of the

population still have no idea about it which make MF’s duties harder & challenging.

 Provisions imposed by CBY; CBY issued regulations in December 2015 which

enforced microfinance banks and units to keep 5% of their good distributed

portfolio.

6.0 Strategy Recommendation

To overcome the threat, microfinance industry has to develop expertise and redesign its
strategy for developing new products, based on the needs of the poor as follow:
 As most of the borrowers of the microfinance Institutions are women, the financial
services can be designed to cope up their widowhood
 As a woman depends totally on the man of her family for her survival and sudden
unexpected demise of the man puts the women in the perils of social evils.
 The products have to be developed to suit the abandon old age couples and singles
survival.

 First of all MFIs and the government have to educate the public, particularly the
illiterate and ignorant, about this new social phenomenon. They should conduct
literacy campaign that can give basic verbal knowledge to adults.

 Microfinance entities should innovate themselves with specialized products for the
target population, try to reduce administrative costs by improving operational
efficiency to meet the challenge posed by potential new- entrants in the industry.
 A matter of concern for the people, and the government is that not many people are
aware of the range of options available for them for availing loans. Moreover, most
of the people in the rural areas are financially illiterate, which give the MFIs the
opportunity to advantage of the situation.

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 References
Microfinance, T. (2020). About. microtiib: https://www.microtiib.com/en/about

Microfinance, T. (2020). Projects. microtiib: https://www.microtiib.com/en/products

Cooperation, M. o. (2018). Microfinance Industry in Yemen. Yemen Socio-Economic Update, 2

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