MSMEs in Ethiopia to Access ETB 1.

5 billion through a New

Agreement between Awash Bank and Nine Micro Finance
Institutions (MFIs)
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Mastercard Foundation
Samuel Yalew Adela, Ethiopia Country Head, Mastercard Foundation, addresses the audience at
the event on Thursday, July 28, 2022.
28 July 2022
Content from our Premium Partner
Mastercard Foundation (Africa)

Addis Ababa — Today, Awash Bank signed a loan agreement with nine private commercial
Microfinance Institutions (MFIs) – Vision Fund, Nisir, Kendil, Metemamen, Meklit, Dynamic,
Wasasa, Harbu, and Peace MFI to unlock access to finance for micro, small, and medium
enterprises (MSMEs) in Ethiopia.
The ETB 1.5 billion agreement is facilitated through the BRIDGES Programme, which is part of
the Mastercard Foundation’s Young Africa Works strategy in Ethiopia and is being implemented
in partnership with First Consult.

Today’s agreement is part of the ETB 5.5 billion the Bank has committed to disburse over the
next three years on flexible terms and conditions such as low-interest rates, relaxed repayment
terms and flexible collateral options, including clean loans (no collateral) as part of its
commitment to serve young entrepreneurs and MSMEs in Ethiopia and which is expected to
benefit over 110,000 MSMEs and support close to 220,000 jobs.

In Ethiopia, banks’ lending is highly collateralized, generally requiring fixed property collateral
valued up to 200% of the loan amount requested. Banks also do not have an effective business
model to serve the credit needs of young entrepreneurs and MSMEs. This limits young
entrepreneurs and MSMEs to access formal credit services from banks because they do not own
assets that could be used as collateral to obtain loans.

On the other hand, microfinance institutions (MFIs) have business models with alternative and
flexible collateral options such as group guarantee systems, personal guarantees, land
certificates, vehicles/bajaj, machinery, and other movable properties to provide loans for
enterprise in the agriculture and MSME sectors. In Ethiopia, MFIs have more than 5.5 million
active borrowers. As such, they are best placed to reach small enterprises with credit services.
However, they are severely challenged by the lack of loanable funds/liquidity to reach more
individuals and MSMEs in Ethiopia.

In 2020, the National Bank of Ethiopia (NBE) introduced a movable collateral registry directive
to increase the flow of finance to individuals in the agriculture and MSME sectors.  The directive
obliges all banks to allocate at least 5% of their annual credit disbursement to individuals in these
sectors against movable property as collateral. Banks may disburse the loan directly to borrowers
or to MFIs on a wholesale basis so that MFIs retail the loan to individual entrepreneurs and
MSMEs against movable collateral. While this directive is believed to bring fundamental change
to the flow of capital to enterprises in agriculture, which is the most credit-constrained sectors in
the Ethiopian economy, and addresses a major bottleneck for MFIs to acquire loanable fund,
compliance to the directive is slow and reluctant

In one of its interventions, the BRIDGES programme works to support partner banks and MFIs
to establish and operationalize wholesale credit facilities in which MFIs use loans from banks to
lend to MSMEs using movable property as collateral. BRIDGES has facilitated the linkages
process of banks to MFIs by conducting thorough due diligence of private commercial MFIs on,
among other things, their risk category, debt absorption capacity, governance structure,
experience in financing against movable collateral, and branch network. BRIDGES also provides
technical support to MFIs in their loan utilization efforts, monitoring whether they have lent the
loan against movable collateral and providing other technical support, such as financial product
development and portfolio management training for the effective utilization of the fund from
banks.
Mastercard Foundation
The event was attended by higher government and financial institution officials. On the right,
H.E Muferiat Kamil, Minster at the Ministry of Labor and Skills and in the middle Mr. Tsehay
Shiferaw, CEO, Awash Bank

Today’s agreement between Awash Bank and the MFIs will establish longer-term business
relationships between the commercial banks and capable MFIs not only for funding sources, but
also to build potential collaboration in areas such as SMEs graduating from MFIs.

"Vision Fund MFI is so grateful for the BRIDGES programme for creating the opportunity in
unlocking the credit facility for young people,” said Taye Chimdessa, CEO, of Vision Fund MFI.

“The facility will address liquidity issues MFIs face and will help them to satisfy the growing
credit demand from MSMEs,” noted Amsalu Alemayehu, CEO, at Wasasa MFI.

“Awash Bank has been financing small enterprises engaged in different sectors of the economy.
In its concerted efforts to support further MSMEs, we have committed 4 billion Birr in addition
to the 1.5 billion we signed today. I look forward to seeing the impact this will have on the
enterprises MFIs work with,” said Tsehay Shiferaw, CEO, Awash Bank Share Company

“We are very pleased about this partnership between commercial banks and MFIs to provide
affordable access to finance for MSEs. This will respond to structural challenges such as poor
access to finance by addressing the problem of limited loanable funds at MFIs’ disposal. The
solution is sustainable and opens doors for more collaboration between the sectors,” explained
Henok Tenna, Team Leader, at BRIDGES Programme.

“The Foundation is observing promising results from our partnership with financial institutions.
We will continue to partner with private financial institutions and other service providers to
create access to affordable capital for small-scale lenders. Today's partnership testifies that
Young Africa Works is on the right track not just only to enabling young people to secure work
but supporting institutions to replicate and scale working models using their own resources. The
partnership with MFI will create the path to meeting young people, particularly young women
where they are,” said Samuel Yalew Adela, Country Head, Ethiopia, at the Mastercard
Foundation.

About Awash Bank

Awash Bank, the leading private commercial bank in Ethiopia was established in 1994 as a
shareholding company. Currently, the number of shareholders has reached 5,745 and its paid-up
capital is over Birr 10 billion as of June 2020/21. It operates through a network of over 725 bank
branches and more than 565 ATMs and 1,406 PoS terminals across the country. Awash Bank is
the first private bank in Ethiopia to exceed the billion Birr profit mark in the history of Ethiopian
private banks in the financial year 2019. For more information about Awash Bank, please visit
www.awashbank.com
Mastercard Foundation
Awash Bank signed a loan agreement with nine private commercial Microfinance Institutions
(MFIs) to unlock access to finance for micro, small, and medium enterprises (MSMEs) in
Ethiopia. The ETB 1.5 billion agreement is facilitated through the BRIDGES Programme, which
is part of the Mastercard Foundation’s Young Africa Works strategy in Ethiopia and is being
implemented in partnership with First Consult.

About the Mastercard Foundation

The Mastercard Foundation works with visionary organizations to enable young people in Africa
and in Indigenous communities in Canada to access dignified and fulfilling work. It is one of the
largest private foundations in the world with a mission to advance learning and promote financial
inclusion to create an inclusive and equitable world. The Foundation was created by Mastercard
in 2006 as an independent organization with its own Board of Directors and management. For
more information on the Foundation, please visit: www.mastercardfdn.org

About First Consult

First Consult is a leading development consulting organization specializing in economic

development in Ethiopia. With a focus on private sector, financial sector and human capital
development since 2005, First Consult has built and worked in over 500 partnerships that span
private sector, government and development actors. First Consult strives to solve the most
critical development challenges of our time by supporting the building of strong local institutions
and the implementation of national strategies. The core focus on youth development and
women’s economic empowerment is central to the mission of First Consult, which is to realize
an inclusive and sustainable development that benefits all. For more information about First
Consult, please visit: https://firstconsultet.com/main/home

About the BRIDGES Programme

The BRIDGES Programme,a five-year initiative, aims to create employment opportunities for
young women and men by unlocking the job creation potential of industrial parks (IPs), other
large enterprises, and their surrounding ecosystem including micro, small, and medium
enterprises (MSMEs). Through the programme, BRIDGES works to support the creation of close
to 600,000 jobs for young people (80% women) and 15,000 micro, small, and medium
enterprises (MSMEs). The BRIDGES Programme is comprised of four focus areas: Employment
Linkage, Enterprise Development, Enterprise Competitiveness, and Access to Finance. Follow
the BRIDGES Programme on: https://twitter.com/BridgesEthiopia|
https://www.facebook.com/BridgesEthio

Contacts:

Awash Bank

Ebisa Deribie, Director, Marketing and Communications

Telephone: +251 944733463
Email: ebisad@awashbank.com

First Consult

Getachew Mekonin, Lead, Access to Finance

Telephone: +251 114 401 473
Email: gmekonen@firstconsultet.com

Mastercard Foundation

Simret Yasabu, Lead, Program Communications

Telephone: +251 988 80 57 66