Stakeholders Come Together to Participate in Second Knowledge Series on Data-Driven Digital Lending for Ethiopia’s MSMEs

Samuel Yalew Adela, Ethiopia Country Director, Mastercard Foundation, addresses the audience at the event on Wednesday, May 3, 2023.

Addis Ababa, Ethiopia, May 3, 2023 – The National Bank of Ethiopia, together with the International Financial Corporation (IFC), Financial Sector Deepening-Ethiopia (FSD-Ethiopia), Kifiya Financial Technology, and the Mastercard Foundation participated in a second knowledge series entitled “Data-Driven MSME Digital Lending for an Inclusive Economy.” 

The knowledge series aims to:

• Bridge the knowledge gap in uncollateralized digital lending and credit scoring.
• Show how uncollateralized digital lending addresses the access to finance challenges faced by Micro, Small, and Medium Enterprises (MSMEs) in Ethiopia.
• Bring stakeholders together to drive disruption in leveraging digital financial services for MSMEs’ digital lending.
• Share insights and experiences on the role of digital lending and job creation.

The first knowledge series, held in February 2022­, focused on a collateral-free digital lending platform for MSMEs following the Cooperative Bank of Oromia’s launch of Michu, a credit score-based digital lending platform for MSMEs. By bringing together leading industry experts, researchers, senior bank officials, entrepreneurs, regulators, policymakers, government, and other key stakeholders, the first knowledge series served as a platform to discuss and pave the way to accelerate digital lending solutions and enhance access to finance for MSMEs in Ethiopia. More information.

MSMEs are the strongest economic development, innovation, and employment drivers. However, access to finance is frequently identified as a critical barrier to their growth.

An IFC study, with insights from several other market studies, suggested that the working capital finance gap for MSMEs in Ethiopia was estimated to be $4.9 billion in 2019, with SMEs accounting for 91 percent of the figure. This much larger finance gap for small to medium enterprises is due to a need for capital investment, machinery requirements, a general backlog of foreign currency, and much larger working capital requirements, all of which contribute to the exponential increase in the finance gap.

Stakeholders discussed Data-Driven Digital Lending for Ethiopia’s MSMEs

It is critical that conversations need to continue to create opportunities for MSMEs in emerging markets to advance economic development and reduce poverty.

The knowledge series, therefore, provides an opportunity for policymakers, financial institutions, ecosystem leaders, development partners, NGOs, and associations promoting financial inclusion and digital financial access to avail credit to underserved and unserved segments in Ethiopia.

In his welcoming speech at the second knowledge series, Samuel Yalew Adela, Country Director for Ethiopia at the Mastercard Foundation, said, “The Mastercard Foundation is committed to unlocking affordable access to financial services for enterprises with a view of enabling job creation at scale. In alignment with country priorities, we are working with the private sector, mandated institutions, civil society organizations, and young people to support solutions that create an environment where a pipeline of investable young people-led enterprises can be created. We believe financial products and services must address the needs of micro, small, and medium-sized enterprises and serve the purpose they want the capital for. Use of technology, innovative processes and products are key to democratizing financial services.”

“I am a firm believer that collaborative learning and knowledge sharing among the financial and digital ecosystem is lacking in Ethiopia. In today’s world, knowledge is no longer confined to a select few; it is to be available to anyone who seeks it. This democratization of knowledge is meant to level the playing field for stakeholders as well as enhance the entire sector in order to provide the best viable solutions to consumers. In this knowledge series, we have collaborated with many stakeholders to bring together learnings from different perspectives in the private and public sectors and across various markets in Africa. Focused on utilization of data-driven digital lending, these learnings will inform provisions of data-driven digital credit to the underbanked,” said Munir Mohammed Duri, Founder and CEO of Kifiya Financial Technologies.

The IFC shared lessons learned and benchmarking experiences from similar markets in Africa, where digital technology has given many MSMEs and smallholder farmers access to financial services. They looked at what made these markets successful and pointed out what Ethiopia could learn within the context of current developments.

The Cooperative Bank of Oromia and Telebirr also shared insights, success, and challenges, including understanding the impact of their respective digital lending platforms.

The fireside chat with Mr. Hartnel K. M. Ndungi, the Chief Data Officer at Absa Bank Kenya, provided additional opportunities to share experiences and present case studies of expanding financial services to MSMEs and farmers.

Participants also highlighted the potential of the digital financial inclusion of MSMEs, underscoring their commitment to expanding products and services to include these essential engines of the economy.

About the National Bank of Ethiopia

The National Bank of Ethiopia was established in 1963 by Proclamation 206 of 1963 and began operation in January 1964. With the Vision To be one of the strongest and most reputable central banks in Africa, and the mission to maintain price and exchange rate stability, foster a sound financial system and contribute for the rapid and sustainable economic development of EthiopiaNBE was entrusted to regulate the supply, availability and cost of money and credit, to manage and administer the country’s international reserves, license & supervise banks & hold commercial banks reserves & lend money to them,  supervise loans of commercial banks and regulate interest rates, issue paper money and coins, act as an agent of the Government, and fix and control the foreign exchange rates.

About Kifiya Financial Technology

Established in 2010, Kifiya Financial Technology is a technology and services company developing scalable and secured technology platforms over the past twelve years. The company has a distribution network covering the whole of Ethiopia through 16 regional offices. In 2019, Kifiya transitioned into a technology ventures holding company focused on launching an ecosystem of vertically integrated digital businesses across various sectors.

Kifiya has over 11 innovative products and services that can bring value to consumers, cooperate entities, and the government. Over the past 7 years, Kifiya has been developing AI-based credit scoring and digital lending platform called Qena to enable financial institutions to provide credit to individuals, micro, small and medium enterprises. The platform enables MSMEs, and individuals to apply and manage their credit through mobile or web and get responses in a timely manner.

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. It was established in 2006 through the generosity of Mastercard when it became a public company. The Foundation is an independent organization and its policies, operations, and program decisions are determined by its own Board of Directors and senior leadership team. It is a registered Canadian charity with offices in Toronto, Kigali, Accra and Nairobi, Kampala, Lagos, Dakar, and Addis Ababa.

About International Financial Corporation

IFC is a member of the World Bank Group which is the largest global development institution focused on the private sector in emerging markets. We work in more than 100 countries, using our capital, expertise, and influence to create markets and opportunities in developing countries. In fiscal year 2022, IFC committed a record $32.8 billion to private companies and financial institutions in developing countries, leveraging the power of the private sector to end extreme poverty and boost shared prosperity as economies grapple with the impacts of global compounding crises.

About Financial Sector Deepening Ethiopia

Established in 2021, FSD Ethiopia is an agency that aims to support the development of accessible, inclusive, and sustainable financial markets for economic growth and human development.

FSD Ethiopia’s role is to identify the underlying causes of financial system failures, facilitate market actors to address these constraints, and help build a functional and effective financial sector that generates economic gains for a wide cross-section of Ethiopian individuals and businesses.

For further information, please contact:

Kifiya Financial Technologies

Yeabira Kefelegn, Communications Manager

Tel: +251922870840

Email:  ykefelegn@kifiya.et

Lewam Assefa,

Head of Marketing, Qena Digital Lending

Tel: +251 913028610

Email: lassega@qena.ai

Mastercard Foundation

Simret Yasabu: Lead, Program Communications, Ethiopia

Tel: +251 988805766

Email: syasabu@mastercardfdn.org