The National Bank of Ethiopia (NBE), which supervises financial institutions, disclosed that it is drafting a directive to allow Microfinance Institutions to change their activities to regular banks Capital learnt.
Currently the activities of micro finances that are formed in different parts of the country as public enterprises or private ownership are contributing significantly to address the low income society.
From time to time their operation has also been growing significantly.
A published article under the title ‘performance of microfinance institutions in Ethiopia: integrating financial and social metrics’ in April 2019 indicated that overall, Ethiopian MFIs have good performance with respect to outreach compared with both the regional average performances and those of the 10 biggest economies in Sub-Saharan Africa.
“The financial performance measure also shows that MFIs in Ethiopia have the highest operational self-sufficiency compared with all the regional averages,” the article prepared by Solomon Bizuayehu, Hitoshi Kusakari, and Masahiro Sumimoto reads.
According to latest data of NBE the total number of clients, who access loans, has reached five million.
The data of NBE indicated that the total assets of the MFIs, which are 38, has reached 76.5 billion birr, while the total loans stands at 51.7 billion birr. The asset growth in 2018 is a 26 percent increase compared with the preceding period.
According to Frezer Ayalew, Micro Finance Director at NBE, the deposit mobilization for micro finance firms has climbed to 38.4 billion birr.
At the same time their total capital also sits at 15.5 billion birr.
Frezer, who briefed media about the sector activity this week, said that even though the sector is considered to be small or micro it is playing a significant role as a pro poor program and is performing very well in its contribution to the economy.
Frezer said that NBE is conducting a study to facilitate a transition for MFIs that have graduated from the micro level to the upper stage. “The legal framework that would allow MFIs to become banks is under development,” he explained.
The micro financing business proclamation no 626/2009 indicated that the main purpose of a micro financing institution shall be to collect deposits and extend credit to rural and urban farmers and people engaged in other similar activities as well as micro and small scale rural and urban entrepreneurs.
Minimum capital requirement directive no. MFI/27/2015, issued in 2015 to replace the 2013 directive, of the NBE has ordered the MFIs minimum paid up capital to be reached 10 million by June 2021. The 2013 directive has been indicated the MFIs paid up capital to be reach two million by 2018.