Ethiopia
The Ethiopian microfinance sector is one of the fastest growing in the world today. As per end-of-year 2005, the then 23 operational MFIs serviced 1,277,939 borrowing clients with an aggregated portfolio of EBR 1,622 billion or EUR 177 million. Most of these MFIs are still mainly working in rural areas with a focus on agricultural activities.
The two largest service providers, DECSI and ACSI, service the bulk of the clients at 424,000 and 435,000 respectively and there is only one other MFI that had managed to reach the 100,000 client mark by late 2005.
A third characteristic is differentiation of background and ownership. The largest services providers are closely linked to their respective regional governments. The mid-size NGOs are predominantly related to NGOs that are genuine civil society organizations. A third and small category is represented by the newly established privately owned MFIs that could not avail of NGO or donor support.
Ethiopia is one of only few countries that have prominently included microfinance in their Poverty Reduction Strategy Paper. Already in the old SDPRP the provision of micro-loans was considered crucial for rural development, particularly to support subsistence farmers accessing farm inputs such as seeds, fertilizer and production tools. It expected Microfinance Institutions (MFIs) to focus on that, and in fact, a regulatory framework was already designed in 1996 to ensure the microfinance industry’s allegiance to this national objective.
Since 1996 Ethiopian microfinance is regulated on the basis of Proclamation Nr 40/1996 for Licensing and Supervision of Microfinance Institutions. The National Bank of Ethiopia (NBE) is authorized to license, regulate and supervise MFIs, which are required to be incorporated under Section 304 of the Commercial Code of the country as for-profit share companies, wholly owned by Ethiopian nationals or organizations owned by Ethiopian nationals.
Ethiopia has a strong MFI network. The Association of Ethiopian Microfinance Institutions (AEMFI) is the network of all registered MFIs in Ethiopia. It’s objectives are to provide a forum and structure through which MFIs can share their experiences and exchange information, to enhance the capacity of the member MFIs through offering training and negotiation for alternative funding resources from both local and international sources and to strengthen the entire MFI sector development through undertaking research, advocacy, promotion of the industry, engage dialogue with the government and other relevant international institutions with to view to positively influence MFI policy and practises.
The MicroNed members active in Ethiopia are Cordaid (1 partner), Oxfam Novib (4 partners), ICCO (7 partners) and Rabobank Foundation. Together, in 2005, they provided EUR 460,375 in grants whereas they had loans outstanding with three MFIs to the equivalent of EUR 848,830.
Oxfam Novib is the general MicroNed country coordinator for Ethiopia with input from ICCO for the Cooperative microfinance sector.