Flip through the latest issue of Gulf Weekly.
When the global financial system fails, everyone suffers. Over the past 22 months the shock has spread from American housing, sector by sector, economy by economy.
Some markets have seized up; others are being pounded by volatility. Everywhere good businesses are going bankrupt and jobs are being destroyed.
For the first time since 1991 global average income per head is falling. Even as growth in emerging markets has come to a halt, the rich economies look set to shrink.
Amidst all these chaos, Bahrain has become the first country in the Gulf to set up a community bank that provides loans to help low income families start their own businesses.
Bahrainis on low incomes are set to benefit from the $5-million project. The Ibda'a (Creativity) Bank was launched by Shaikha Sabeeka bint Ibrahim Al Khalifa, His Majesty King Hamad's wife and Supreme Council for Women chairwoman, and Arab Gulf Programme for United Nations Development Organisation president Prince Talal bin Abdulaziz Al Saud.
The project aims to help 5,000 people within the next three years.
It will be financed by the Agfund, the Housing Bank and Bahrain's private sector.
Agfund, a non-profit organisation founded by Prince Talal in 1980, has financed more than 1,000 projects in 131 countries, including Yemen, Jordan, Palestine and Lebanon.
It offers small loans to enable people to set up projects and improve their standard of living.
Bangladeshi Nobel Laureate Professor Muhammad Yunus, who set up the Grameen Bank to offer loans to poor Bangladeshis in 1976, spoke at the event via a recorded message by video link.
He was awarded the Nobel Peace Prize after setting up the bank after discovering financial institutions were unwilling to take on the risk.
"We are creating an institution that will be devoted to people in poverty and will help them earn income and improve their quality of life, particularly women," says Prof Yunus.
"It opens a completely new dimension to people who are energetic and creative. This can be an example for the whole of the Arab world."
Microfinance is not a new idea. Lending small amounts to entrepreneurs too poor to qualify for traditional loans - has been traced back in one form or another as far back as feudal times. What is groundbreaking about its most recent incarnation is a fundamental understanding that people on low incomes are bankable: or, in the words of Dr Muhammad Yunus, that "poor people can, and do, repay loans".
Yunus is largely credited with making microfinance a socially responsible and viable business model.
His Grameen Bank has issued $6.38 billion to 7.4 million borrowers. Yunus says the sustained success of Grameen lies in the fact that "we have made the system easy for borrowers to access, with a no-hassle, no-documents, no-credit-check policy. There is nothing threatening about the Grameen methodology."
Opportunities to invest in funds geared towards microfinance have thus increased over the last few years, particularly focusing on investments that support sustainable development activities at the local level.
Interest has also been focused on decentralised investment - where the local economy is emphasised, and local profits and benefits go back to the local economy.
Today, there are more than 100 MFI (microfinance initiatives) in the Arab region providing financial services to approximately 3.5 million Arab micro-entrepreneurs.
Over the past five years, these MFIs have achieved exponential growth and strong performance. Together, MFIs from Morocco to Yemen, from Egypt to Saudi Arabia have an outstanding loan portfolio of $1.5 billion (as of year-end 2007).
The International Finance Corporation (IFC), a member of World Bank Group, has dispersed almost $600 million in the greater Middle East region, while working with 11 microfinance institutions (MFIs).
IFC has invested $72 million in the institutions based in countries in the region that have low access to finance, especially Morocco, Pakistan and Afghanistan. The institutions have provided microfinance to 1.25 million clients.
Most people have not had access to financing before. In the case of Muslim countries, almost 60 per cent of the clients are women.
The MFI model is small but sound. But there are issues to be addressed there also. Western banks lend far too much. But MFIs lend far too little. Rural studies suggest that poor rural households need more credit per year. MFIs provide far less. The balance is made up by borrowing from relatives and moneylenders. MFIs should therefore provide more credit.
