Reef Finance

About Reef Finance

Reef Finance is a microfinance institution based in the city of Ramallah in the Palestinian Territories. It has branch offices in Hebron, Nablus, and Gaza with smaller offices in Jenin, Tulkarm, Yatta, Qalqilyah, Salfit, and Khan Younis. Reef means 'rural' in Arabic and the organisation was registered as a not-for-profit company in 2007 with the Ministry of National Economy. It began providing loans in 2008, primarily to small-scale farmers although it also finances a small number of agricultural co-operatives.

What is Reef Finance's mission?

Reef Finance's mission is 'to improve the living conditions of rural Palestinians' through providing 'high quality financial services to both individuals and co-operatives'. It estimates that almost all of its clients are rural - a higher proportion than any other microfinance institution in the Palestinian Territories.

What types of financial services does Reef Finance provide?

Reef Finance provides agricultural, trade, housing, and personal loans to individuals. The largest loans are only given to agricultural co-operatives or partnerships of two or more borrowers. Slightly more than half of all loans, 56% are provided for agricultural activities, typically the construction of greenhouses, and the purchase of sheep, cows, and poultry. Approximately 26% of borrowers are women and one-third of loans are given in kind rather than in cash. Reef Finance supports this methodology, especially for agricultural loans because it considers that by purchasing and delivering equipment, inputs, or other items there is a greater chance that the loan will not be diverted for non-productive purposes. This method also enables Reef Finance to obtain discounts with suppliers, which it passes on to borrowers.

How much interest does Reef Finance charge?

Microfinance institutions (MFIs) charge higher rates of interest for several reasons. Firstly, the administrative costs of making many small loans are much higher than making fewer larger loans; secondly, they take more time assessing the feasibility of applications and thereby reducing risk because borrowers cannot offer traditional forms of collateral nor do they have salaried incomes; thirdly, MFIs often operate in geographically remote areas with low population densities and this means that they incur greater operational costs; and fourthly they often accompany loans with a range of training and technical advice.

The most representative loan product of Reef funded by Lendwithcare attracts an Annual Percentage Rate (APR)* of 21.58%.

*The Annual Percentage Rate (APR) is a standard way of expressing the cost of a loan that allows for comparison between loans. It includes annual interest, insurance, and fees that the borrower must pay, and is expressed as a percentage of the amount borrowed.

Does Reef Finance provide any training?

Reef Finance does not provide any training to borrowers.

Where can I find out more information about Reef Finance?

Further information about Reef Finance is available from the organisation's website here.

*PAR30 is a commonly used metric that provides an insight into the quality of an MFI's loan portfolio, which is generally its major asset and therefore its greatest source of risk. It is computed by dividing the amount of delinquent loans greater than 30 days over the total amount of the loan portfolio.

Sources: *World Bank **United Nations Development Programme ***World Population Review