By FRANCESCA COLELLA
Credit access in Tunisia has recently helped to boost the country’s struggling economy by fostering the development of small businesses. Still, investment in improved credit access remains an active task.
Currently, obtaining credit in Tunisia as an individual or as a small business consists of a lengthy, arguably difficult process.
“The overall offer of inclusive financial services in Tunisia remains fragmented, incomplete, and difficult to access,” according to a 2015 World Bank report.
Very small, small and medium enterprises (VSSME) face various obstacles in obtaining credit, including “a heavy reliance on collateral, insufficient financial products, and a lack of SME transparency,” a release by the Middle East Investment Initiative (MEII) reported.
Franchises have also begun popping up throughout the country, after the overhaul of the old regime that stifled the ability to create them. Former President Zine El Abidine Ben Ali’s policies discouraged foreign countries from opening enterprises in Tunisia, making it nearly impossible for franchises to exist. Now that these policies have changed, franchises have a chance to flourish in the Tunisian market.
Individuals seeking credit may also find it difficult to obtain, even though studies have found that between 950,000 and 1.4 million people have a demand for it. This has led to most Tunisians relying on personal, often unstable lending methods, such as borrowing from friends or family.
In fact, only about 36 percent of the adult population finances through formal lending methods. A 2015 study by the World Bank and the Center of Arab Women for Training and Research (CAWTAR) found that 64 percent of the population has little to no access to formal financial services.
For families, expanding credit access in Tunisia directly affects household consumption and employment. It also gives VSSMEs and developing franchises a boost, allowing them to grow their businesses. This in turn creates jobs and stimulates the economy.
Partnering organizations have worked to expand credit access among Tunisian businesses through projects designed to ease the process of credit access in Tunisia. MEII and the U.S. Overseas Private Investment Corporation (OPIC) established the Tunisian Credit Guarantee Facility (TCGF) to help provide sustainable lending to Tunisian VSSMEs and franchises. With a $1 million loan size limit, $50 million guarantee facility, and 70 percent loan principal guarantee plus up to six months’ interest, TCGF intends to boost cash-flow lending. Participating banks also receive technical assistance.
International donors supporting the expansion of credit access in Tunisia include the African Development Bank, the European Investment Bank, the World Bank Group/IFC, the French Development Agency/Proparco Group, German development aid and the European Union.
Although improving credit access in Tunisia will not directly eliminate poverty, it does play an important role in stimulating social and economic growth. By investing in the increase of accessible credit, the Tunisian government and supporting organizations can help to improve the quality of life of the population and foster economic growth throughout the country.