Exploring the Roles of Informal, Formal, and Semiformal Microcredit in Jordan

Abstract: As the title suggests, this thesis is an exploration of the roles of different sources of microcredit in Jordan. These sources include the informal, formal, and semiformal sectors of microcredit. The theoretical part looks into developing financial markets with a focus on microcredits, common topics of the roles of microcredit providers, and two relevant contextual features. Then the case study introduces the Jordanian economy and microcredit market, and puts the common topics to a test keeping the context in mind. The results above all confirm that traditional informal sources of credit are highly relevant in Jordan for many people; that the characteristics of the formal and informal sectors of credit providers are perceived to broadly, but not strongly, conform with empirical findings elsewhere; that the semiformal MFIs are focused on sustainability and access to credit for poor individuals; that it is principally the semiformal sector that directs the purpose of their credits towards business; that simultaneous borrowing is not unusual; and that there is potential for substantial improvements in outreach. Moreover, the religious factor is highly relevant as Islamic financial principles seem to determine borrowing behaviour for many Jordanians and thus affect the roles of microcredit sources. The results lead to a few suggestions to promote Islamic microcredits, knowledge spread, and the linking of borrowers and lenders.