VZCZCXYZ0000
PP RUEHWEB

DE RUEHTU #0991/01 2481515
ZNR UUUUU ZZH
P 041515Z SEP 08
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 5566
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY
RUCNMGH/MAGHREB COLLECTIVE

UNCLAS TUNIS 000991 
 
SENSITIVE 
SIPDIS 
 
STATE FOR NEA/MAG (STEWART) 
STATE PASS USTR (BURKHEAD) AND USAID (MCCLOUD) 
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR 
(REITZE), AND CLDP (TEJTEL AND MCMANUS) 
CASABLANCA FOR FCS (ORTIZ) 
CAIRO FOR FINANCIAL ATTACHE (SEVERENS) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD TS
SUBJECT: MICRO LENDING IN TUNISIA 
 
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Summary 
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¶1. (U) The Ambassador recently visited Tunisian micro-lender 
and success story, "ENDA inter-arabe", to discuss 
micro-lending in Tunisia and how economic conditions are 
affecting micro-entrepreneurs.  The micro-lender has more 
than 78,000 clients, a 99 percent payback rate and an annual 
growth rate of 50 percent. GOT imposed regulatory controls 
and the rising cost of living present challenges for the NGO 
and for micro-businesses, however.  There are more than 
500,000 small and medium sized enterprises in Tunisia, and 
countless more micro-entrepreneurs.  Insofar as access to the 
traditional banking sector remains out of reach, ENDA 
anticipates continued growth, particularly as it moves into 
the rural areas of Tunisia, and makes the conversion from NGO 
to bank.  End Summary. 
 
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Micro Lender NGO 
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¶2. (U) "ENDA inter-arabe", the Tunisian branch of ENDA 
international, a non-profit micro-lending organization, is a 
source of financing for micro-entrepreneurs in Tunisia.  It 
offers its clients training resources, financing, and 
business development assistance.  Between 2005-2008 ENDA went 
from having 21 branches, 25,000 active clients and 8 million 
TD (approx US $6.4m) in active outstanding loans to more than 
50 branches, 78,000 active clients and 35 million TD (approx 
US $28.1m).  ENDA expects to maintain 50 percent growth for 
2008 despite its intentions to open offices in rural areas, 
which are riskier.  For this expansion, ENDA management has 
already started hiring an additional 200 loan officers.  The 
typical ratio of loan officers to active clients is about 1 
to 300.  As it continues to grow, ENDA hopes one day to 
become a full service bank for its clients. 
 
¶3. (U) During a recent visit to their headquarters, the 
Ambassador was able to meet ENDA staff and learn about 
micro-lending in Tunisia.  Director Essma Ben Hamida and 
co-Director Michael Cracknell explained that GOT regulations 
are preventing the micro-lender from meeting the financial 
needs of its more sophisticated clients.  Government 
restrictions prohibit it from authorizing loans over 5,000 
TD.  This limitation slows the capitalization and expansion 
of successful micro-entrepreneurs.  According to Nazah Ammar, 
a textile machine supplier who sells equipment to SME 
companies, traditional banks will often require up to 140 
percent of the loan for collateral, which for a start-up 
business is nearly impossible to secure. 
 
¶4. (U) A roundtable discussion with ENDA clients highlighted 
how the rising cost of living in Tunisia is negatively 
affecting small business owners who survive on thin margins. 
One roundtable participant, who owns a perfume shop, 
complained that even railway ticket prices had recently 
increased from 18 TD to 23 TD.  (Note: Earlier this month the 
GOT ratcheted-up inflation forecasts for 2008 to 5 percent, 
up from 3.1 percent in 2007.  Two principal contributors to 
the inflation gauge rose, food prices by 6.1 percent and 
transport prices by 5 percent.  Business experts estimate 
inflation to be closer to 10 percent, and blame the 
discrepancy on the use of an antiquated basket of goods by 
GOT statisticians. End Note.) 
 
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Alternatives 
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¶5. (U) There are a handful of alternatives to ENDA.  The 
largest and oldest institution, Tunisian Solidarity Bank 
(BTS), was founded in 1997.  Another alternative is the 
Finance Bank for Small and Medium Enterprises (BFPME) which 
was founded in 2005.  Both BTS and BFPME have similar 
missions to ENDA, servicing a segment of business not yet 
able to access the traditional banking sector.  Unlike BTS 
which has a repayment rate of 60 percent, BFPME has a 
reported repayment rate of 94.7 percent which is close to 
that of ENDA, 99.6 percent. 
¶6. (U) ENDA attributes its success to the investment it makes 
in new loan officers.  According to ENDA borrowers and 
management, ENDA loan officers become part of the fabric of 
the community and are able to better leverage social 
pressures to encourage repayment.  ENDA management explained 
that loan officers are given several months of training and 
then shadow a more experienced officer before they assume 
their duties.  Additionally, this hands-on approach by ENDA 
allows loan officers to gauge training and business 
development needs, solidifying the partnership between ENDA 
and the loan recipient. 
 
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Comment 
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¶7. (SBU) ENDA complains about difficulties with BTS, problems 
that recently led the Ministry of Finance to call a meeting 
between the two during which it served as arbitrator.  With 
more than 500,000 SMEs and countless micro-enterprises, there 
is room for both the non-profit and the government bank, BTS. 
 BTS could use its connections within the government to 
support ENDA's efforts to expand both service offerings and 
access to international capital.  Rather than guard its 
current niche, BTS could reposition itself to serve as a 
stepping stone between the non-profit and the traditional 
banking sector, which continues to remain outside the reach 
of companies ready to graduate from ENDA's lending programs. 
In a country where internal investment is hovering at 20 
percent and employment generation is a key concern, 
micro-lenders like ENDA should be encouraged.  End Comment. 
 
Please visit Embassy Tunis' Classified Website at: 
http://www.state.sgov.gov/p/nea/tunis/index.c fm 
GODEC