Challenges

According to the National Impact Survey of Microfinance in Egypt and a market assessment by the International Finance Corporation (IFC) in 2009, 2.1 to 3 million MSEs did not have any access to finance, while only an estimated 250,000 had access to some financial services. Hence, about 85% of enterprises need access to financial services. A survey conducted by UN Women showed that the level of economic activity among female youth in Egypt is strikingly low relative to their male peers.  82.1% of nonstudent female youth are out of the labor force, compared to only 13.6% of nonstudent male youth.

For young Egyptian women, this disadvantage is intensified by the difficulties faced by all new labor market entrants, including delayed school-to-work transition and low-quality jobs (Assaad 2008). In other words, female youth face challenges in finding decent work both as women and as young people.

Toward a Solution

For the first time, IsDB provided Restricted Mudaraba financing under a special program dedicated to creating employment for youth. The Youth Employment Support (YES) program provided USD 50 million to Egypt through the Social Fund for Development (later renamed as Micro Small and Medium Enterprise Development Agency or MSMEDA). The program provided Unemployed Potentially Active Youth (UPAY) men and women, particularly heads of households, with opportunities to be more self-sufficient by establishing income-generating activities.

Ard El Khair is an Egyptian joint-stock company, one of Misr Elkhair Foundation companies established in 2009. The company focuses its activities on animal livestock production and has gained extensive experience to the point that they have improved the Egyptian buffalo breed. Ard El Khair locates its farms in the poorest governates of the country and provides job opportunities to the people in those regions. The Micro Small and Medium Enterprise Development Agency (MSMEDA) as the Executing Agency of the YES program approached Ard El Khair and informed them about the Islamic microfinance program and the Murabaha product that they have developed. Instead of creating standalone farms and hiring staff to run them, a feasibility study was developed to create an incubator based on the expertise of Ard El Khair. The company will run the incubator program for the poor, young women for about 9 months to develop its capacity in cattle fattening.

Ard El Khair adopted an innovative financing contractual structure linking MSMEDA, Ard El Khair and the young women partners. The objective was to provide the young women with an adequate income in a low-risk environment while providing them with the required expertise in cattle fattening. At the end of the incubation period, the young women would also receive a certification for the expertise they have gained on cattle fattening while earning some income in the process. Ard El Khair would benefit from low-cost loans provided by the YES program that are used to purchase cattle for the women to fatten under the incubation program. The company would also receive a share of the profits in exchange for selling the cattle and providing training to young women. Below are the key activities under this initiative:

• The actual sourcing of the ruminants would be done by Ard El Khair and in bulk to ensure a low price;
• Ard El Khair would provide the technical know-how on fattening the cattle to the client;
• Ard El Khair would arrange for the sale of the end beneficiary’s fattened cattle to the market;
• Ard El Khair would also enter into a partnership agreement with the end beneficiary; Ard El Khair would facilitate in the process of getting a loan for the beneficiary by acting as the guarantor while the end beneficiary would commit to the incubation program and work in the farm for 12 hours per week during the incubation period of 9 months.

The economic empowerment model of Ard El Khair facilitates partnership between private and public-sector entities with underprivileged segments of society. The young women who were incubated were treated as partners and not as debtors. Each received capacity building during the incubation and graduated as a partner of Ard El Khair. Coming from a poor and low education background, it is very important that young women be well trained, while being protected from unknown risks and costly mistakes. Over the incubation period of 9 months, she was given the opportunity to prepare herself for starting a small cattle fattening business upon graduation.