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CONTENTS OF THE PRESENTATION
Introduction to ICCO Terrafina & its operation in Ethiopia
Microfinance Institutions in Ethiopia
Main features of Ethiopian MFI Sector
Players in the Ethiopian MFI sector
The capacities of Ethiopian MFIs
Constraints and future prospects for MFI
IN COLLABORATION WITH
INTRODUCTION TO ICCO TERRAFINA
Founded in January 2005 as a joint initiative microfinance
programme of:
• ICCO
• Oikocredit International and
• Rabobank Foundation
Aims to contribute to rural development and poverty alleviation
through:
• Improved access to microfinance
• Facilitation of expanded rural outreach by sustainable
microfinance providers for rural producers and entrepreneurs in
selected African countries.
ICCO Terrafina’s work IN Ethiopia
Working with Partners local MFIs
Currently works with 5 MFI’s and 11 savings and credit Unions
Facilitation of guarantee fund for MFIs
Linking producers and producers organization with MFIs
FAO- ICCO Terrafina project
IBM project
Common sense project
Sesame project
Facilitating and supporting MFI and SACCOs in
General capacity building especially for Sacco’s
Facilitation of tool developing for MFI and SACCOs
CAM tool
Agri- Scorecard development
Ware house receipt lending
Facilitating Value chain financing
Microfinance Institutions In Ethiopia
Since 1996 Ethiopian microfinance is regulated under
Proclamation No. 40/1996 (Licensing and Supervision
of Microfinance Institutions).
NBE is authorized to license, regulate and supervise
MFIs, which are required to be incorporated as
‘for-profit’ companies
wholly owned by Ethiopian nationals or
organizations owned by Ethiopian nationals
Ethiopian MFI Sector is characterized by:
Its rapid growth, an aggressive drive to achieve a broad
geographic coverage and scale
An emphasis on rural households and promotion of both credit
and savings products
A dominance of government-backed MFIs
The regional state governments and many local NGOs are
shareholders in many of the MFIs.
The three largest MFIs (ACSI, DECSI and
OCSSCO) account way more than half of the market share
in terms of borrowing clients, and loan provision (Deribie et al
2013).
PLAYERS IN THE ETHIOPIAN MFI SECTOR
National bank of ethiopia (NBE)
Association of Ethiopian Microfinance Institutions (AEMFI)
Ethiopian Agricultural transformation agency (ATA)
Financial cooperatives
Private MFI
Regional government owned MFI
WHAT ARE THE CAPACITIES OF THE MFIs?
Most common loan products MFI in Ethiopia
Loan Products:
1. Micro Loans to Large groups
2. Individual Loans to Low Income peoples
3. Small Enterprise Loans
Savings Products:
1. Mandatory Savings for borrowers
2. Voluntary Savings for all customers
3. Time Deposits
Micro Insurance:
1. Credit Life Insurance for borrowers
WHAT ARE THE CAPACITIES (Cont…) TERMS AND CONDITIONS
Group Loan Targets Smallholder farmers, Women & petty traders
Loan Purpose Working capital, agriculture and agriculture
related activities to increase productivity
Group Size 5-10
Interest rate 18% per annum, flat
Minimum loan size Birr 200
Maximum loan size Birr 10,000
Repayment modality Weekly/biweekly or monthly installment
Compulsory saving 10-15% of the loan amount
Service charge 0.3- 0.5% of the loan disbursed
WHAT ARE THE CAPACITIES (Cont…) TERMS AND CONDITIONS
Individual loan • Targets • Smallholder farmers
• Loan Purpose • Irrigation farming, small ruminant fattening,
• Guarantee • Personal guarantors
• Interest rate & calculation
method
• 18-24% per annum, flat
• Minimum loan size • Birr 1,000
• Maximum loan size • Birr 50,000
• Repayment modality • End of loan term
• Compulsory saving • 10% of the loan disbursed
• Service charge • 1% of the loan disbursed
WHAT ARE THE CAPACITIES (Cont…) TERMS AND CONDITIONS
Small Business and Enterprises Loans
Target Groups for urban and semi-urban clients
Loan Purpose Small Business and Enterprises.
Lending Methodology Individual, 5 000- 100,000 birr
Group size Around 5
Loan Size 5 000- 100,000 birr
Interest rate 15- 18% flat
Loan term Ranges from 4 to 12 months
Repayment Frequency Weekly / biweekly / monthly
Mandatory Saving 10-15% mandatory savings
Credit life Insurance 1% credit insurance is mandatory.
Options to involve MFIs in a Value Chain
Financing system
There are some efforts mostly under pilot stage
1. Malt barley value chain financing (BG and Wasasa MFI and Harbu)
2. Honey value chain finance by Harbu MFI
3. Coffee value chain finance by Wasasa MFI
4. IBM project
• Potato value chain finance by Harbu and SFPI MFI
5. Common sense program for
1. Potato value chain finance (Harbu and SFPI)
2. Onion value chain BG
3. Potentially link to sesame value chain
ICCO Terrafina’s support on value chain finance
ICCO Terrafina Microfinance has been an important catalyzer in the
chain
It facilitated the stakeholders to come together and provided
capacity building trough training, technical advice and institutional
support, especially on product development for Agricultural loans
It also supports the contract farming process (finance-related
aspects) and is involved in the monitoring and follow-up of the
projects.
It facilitates guarantees for loans from CBE to MFI’s currently more
then 4 million Euro Guarantees.
Constraints For MFI
Liquidity problem loan capital
Gap on Capacity building especially for MIS
Weak governance and management capacities
New product Design and development
In terms of value chain finance lack of viable value
chains
MFI SECTOR IN THE NEXT FEW YEARS
liquidity position: direct lending from foreign investors
Expansion in number of clients, expansion
geographically
New product development: Agri scorecard
development, warehouse receipt lending, value chain
finance and digital applications for rural outreach,
Mariel Mensink Regional Coordinator East ICCO Terrafina Microfinance P.O. Box 1578, 3500 BN Utrecht Hamburgerstraat 28a, 3512 NS Utrecht The Netherlands T +31 (0)302348200 E : [email protected] www.terrafina.nl
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