MICROCAPITAL BRIEF: Bank of Abyssinia to Loan $13m to 4 Microfinance Institutions in Ethiopia for Lending to MSMEs Based on Movable Collateral

Bank of Abyssinia (BOA), a financial services provider in Ethiopia, recently agreed to loan ETB 600 billion (USD 13 million) to four Ethiopian microfinance institutions (MFIs) to increase financial access for micro-, small and medium-sized enterprises (MSMEs) by harnessing moveable collateral such as machinery, vehicles, livestock and accounts receivable. Dynamic MFI, Harbu MFI, Metemamen MFI and Nisir MFI are to access the funds in unspecified portions. The loan program enjoys unspecified support from the Bridges program, which is funded by the Canada-based Mastercard Foundation and implemented by Ethiopia’s First Consult and the US-based consultancy DAI.

The agreement helps BOA meet a requirement of the country’s central bank, the National Bank of Ethiopia (NBE), to support the use of moveable collateral. NBE has declared that banks in the country either must “disburse funds to individuals in the agricultural sector, including cooperative unions and MSMEs” directly or do so via wholesale lending to MFIs.

BOA, established in 1996, is held by 2,400 shareholders as of 2021. It serves 5 million customers through a network of 610 branches. As of June 2020, the bank reported total assets of ETB 56.9 billion (USD 1.24 billion), net deposits of ETB 47.6 billion (USD 1 billion) and an outstanding loan portfolio of ETB 37.2 billion (USD 811 million).

Established in 2006 with a donation from MasterCard, a US-based financial services corporation, the Mastercard Foundation aims to support young Africans in moving out of poverty via improved “access to education, financial services, and skills training.” The organization works in 26 African countries and is in the process of tightening its focus to just 10 of these. For the year 2018, the organization reports expenditures of USD 298 million and total assets of USD 17.4 billion.

By Arin Atluri, Research Associate

Sources and Additional Resources

AllAfrica article
https://allafrica.com/stories/202107260844.html

Bank of Abyssinia homepage
https://www.bankofabyssinia.com/

Bank of Abyssinia financials
https://www.bankofabyssinia.com/about-bank-of-abyssinia-first-bank/

Dynamic MFI homepage
http://www.dynamicmfi.com/

Harbu MFI profile on Facebook
https://www.facebook.com/pages/category/Community/Harbu-Micro-Finance-Institution-221482044603859/

Metemamen MFI profile on Facebook
https://www.facebook.com/pages/category/Financial-Service/Metemamen-Micro-Financing-Institutions-Sco-415680035579268/

Nisir MFI homepage
https://nisirmfi.com/

Mastercard Foundation homepage
https://mastercardfdn.org/

DAI profile on Bridges
https://www.dai.com/our-work/projects/ethiopia-bridges

National Bank of Ethiopia homepage
https://nbebank.com/