Micro-Financing of Small Businesses in Ethiopia

icro Financing helps people start their own small business by providing loans which will be difficult to get from the main banking system. Small Enterprises are growing in Ethiopia and oftentimes people who start small businesses do not know where to go and what to do. 

  1. Licensing and Supervision of Micro-Financing Business Proclamation No. 626/2009 (Download)

This article presents the legal frame work for Micro-financing Institutions, procedures for getting loan by a sample micro-financing institute, and the addresses of various micro-financing institutes in Ethiopia.

  • Legal frame work for Micro-financing Institutes in Ethiopia
  • Procedures for getting loan from Addis Micro-financing Institute
  • Addresses of various micro-financing institutes in Ethiopia

Legal frame work for Micro-financing Institutions in Ethiopia

The legal instrument which regulates Micro-financing institutions in Ethiopia is Licensing and Supervision of Micro-Financing Business Proclamation No. 629/2009.

Micro-Financing Institution is established to carry out the following activities:

  • Accepting both voluntary and compulsory savings as well as demand and time deposits;
  • Extending credits for rural and urban farmers and people engaged other similar activities as well as micro and small-scale rural and urban entrepreneurs,
  • Drawing and accepting drafts payable within Ethiopia,
  • Micro-insurance businesses as prescribed by directive to be sued by the National Bank,
  • Purchasing income-generating financial instruments such as treasury bills and other short term instruments such as the National bank may determine as appropriate,
  • Acquiring, maintaining and transferring any movable and immovable property including premises for carrying out its businesses,
  • Supporting income generating projects of urban and rural micro and small scale operations,
  • Rendering managerial, marketing, technical and administrative devise to customers and assisting them to obtain services in those fields,
  • Managing funds for micro and small scale businesses,
  • Providing local money transfer services,
  • Providing financial leasing services to peasant farmers, micro and small scale urban and rural entrepreneurs,

Article 5 of Proclamation Number 626/2009: Condition of Licensing

The following condition must be fulfilled to secure a micro-financing business:

  • A duly completed application in the prescribed format and other accompanying documents as specified by the National Bank,
  • An investigation fee at the time of application,
  • The institution shall be formed as a company and its memorandum and articles of association shall be approved by the National Bank of Ethiopia,
  • All its shares shall be subscribed and, at a minimum, a quarter of he subscribed shares shall be fully paid in cash;
  • The minimum paid-up capital prescribed by the National bank shall be paid in cash and deposited in a blocked account in a bank in the name of the prospective micro-financing institution,
  • The directors and the chief executive officer of the institution shall meet the qualification of competency prescribed by the National Bank and their appointment shall be approved by the National Bank.

Procedures for getting loan from Addis Micro-financing Institute (taken from their brochure)

There are various micro financing institutions in the country, and accordingly they have different focus areas and procedures. Here in this website Addis Micro financing is nominated as a sample to address the following points:

Types of loans provided by the institution

  • Loans for small and micro finance activities
  • Loans for agriculture
  • Loans for materials lease
  • Loans for personal cases
  • Loans for construction works Entrepreneurs
  • Loans for short period of repayment

Beneficiaries

  • Individuals who reside in Addis Ababa and are participating (or wish to participate) in small and micro finance activities.
  • Residents in Addis Ababa who are  above 18 years of age.
  • Business group
  • Social institutions with legal personality like edir and cooperative societies and joint ventures.

Conditions to get a loan

  • An identification card which shows that the applicant is a resident of Addis Ababa
  • If the applicant is a business group, PLC, Social Institution like Edir, Cooperative Society or any other organization must present a document which shows it has a legal personality and it is located in Addis.
  • If the applicant, excluding a business group, is requesting for a loan greater than 5000 Birr, it has to produce trade license.
  • The applicant shouldn’t have any unsettled loan from any institution including Addis Micro financing.
  • Procedures for loan
  • Group loan
  • Individual loan
  • Loans for cooperative societies
  • Joint venture
  • Short term loans

Repaying of the debt

For all business loans, except short term loans, the debt should be fully settled in 36 months.

  • Short term loans should be settled in six months.
  • Loans for personal cases should be fully settled in 24 months.
  • Loans for construction related should be fully steeled in 60 months.

Grace period

The institution will give grace period for persons participating in new small and micro financing activities. Accordingly,

  • Persons working on selected focus areas will get 4 months grace period.
  • Persons participating in other business activities will be given one month grace period.
  • Those who are working on construction and related activities will not be iven an grace period.

Loan insurance

The institution gives three kinds of insurances for the loan it provides:

  • Life insurance
  • Property insurance
  • Business insurance

Guarantees

The institution accepts the following forms of guarantees alternatively:

  • Group guarantee
  • Salaries of permanent employees
  • Customers of the institutions
  • Savings in various saving institutions
  • Money paid for “equb”
  • Persons and machineries joint guarantee
  • Television, jewelries and other movables 
  • Land lease


Addresses of various Micro-Financing Institutions in Ethiopia

  • Addis Credit and Savings
    Place: Addis Ababa: Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-157 27 20
  • Amhara Credit and Savings
    Place: Bahir dar, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 058-220 16 51
  • Africa Village Financial Services
    Place: Addis Ababa, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-011-320 47 32
  • Asser Micro Finance
    Place: Addis Ababa, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-439 11 34
  • Benishangui-Gumuz Micro Finance
    Place: Assosa, Email: This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 057-775 0 666
  • Bussaa Gonofa Micro Finance
    Addis Ababa, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-465 32 83
  • Dedebit Credit and Savings
    Place: Mekelle, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 034-440 93 06
  • Eshet Micro Finance 
    Place: Addis Ababa, Email: This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-543 18 91
  • Gasha Micro Finance
    Place: Addis Ababa, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-213 18 91
  • Meklit Micro Finance
    Place: Addis Ababa, Email: This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-550 79 64
  • Metemamen Micro Finance:
    Place: Addis Ababa, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-662 34 78,
  • Omo Micro Finance
    Place: Hawassa, Tel: 046-220 49 47
  • Oromia Credit and Saving Company
    Place:  Addis Ababa, E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel. 011-5534870/72,
  • PEACE Micro Finance
    Place: Addis Ababa, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-466 32 80
  • Shashemene Iddirs Yelimat Agar Micro Finance
    Place:Shashemene, This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 046-110 59 52
  • SIDAMA Micro Finance 
    Place: Hawassa, Email: This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 046-220 08 50
  • Specialized Financial and Promotional Institution S.CO
    Place: Addis Ababa, Email: This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-661 48 04
  • Wasasa Micro Finance
    Place: Addis Ababa, Email: This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-123 41 81
  • Wisdom Micro Finance
    Place: Addis Ababa, Email:  This email address is being protected from spambots. You need JavaScript enabled to view it. , Tel: 011-651 14 35

 

 

Exchange Rates

Selling Buying
USD US 23.0742  22.6218 
EUR EU 24.341  23.8637 
GBP UK 28.7482  28.1845 
CAD CA 17.5417  17.1977 
CHF CHE 22.8435  22.3956 
AED UAE 6.2818  6.1586