CBO, Kifiya introduce collateral free digital lending

(CBO) and Kifiya financial technologies pen agreements to start providing finance through a collateral free digital lending system called Michu, which is a first of its kind for the country.
During the ceremony which was held on January 12, 2022 at Hyatt regency hotel in Addis Ababa, the heads of the two companies, Deribie Asfaw, President of Cooperative Bank of Oromia and Munir Duri, CEO of Kifiya Financial Technologies PLC inked the revolutionary deal.
The platform is the first kind of uncollateralized digital product powered by Kifiya’s Qena, an Al-driven digital lending platform.
The partnership allows Coop bank to tap into Kifiya’s digital lending technology and gives Kifiya the ability to leverage Cooperative Bank of Oromia’s distribution and financial capacity. It is said that CBO will offer lending solutions targeting Micro, Small, and medium businesses (MSMEs), providing access to credit, through groundbreaking and cutting-edge credit scoring systems.
Michu’s ease of access enables users to apply for loans and receive decisions based on credit scoring logic. The loan application process from eligibility and verification to analysis, scoring, and loan disbursement gets completed within a few minutes.
The Michu platform will have different offerings for Micro, Small, and Medium Businesses both in the form of loans and overdraft facilities. The Microloan is aimed towards the working capital needs of roadside traders and micro businesses with a maximum loan amount of 30,000 birr and has a repayment period of 1-4 months.
Whereas, SME loans targets traders at small and medium levels with a maximum loan amount of 150,000 ETB and has a repayment period of up to one year. Similarly, SME loans are intended to cover the working capital of SMEs. In addition, Michu also offers a consumer loan targeting employees of various organizations.
The non-collateral digital lending platform is believed to be an attractive loan that makes loan provision process swift and easy to access at anytime and anywhere as the solution is able to determine credit worthiness as well as avail a flexible payment method. Michu digital lending application is launching this month and is expected to increase Coop Bank borrowers’ base by 30% during the pilot period.
Research shows that Ethiopia’s MSME Financing to GDP Ratio was 2% in 2020. This ratio is lower than South Africa’s 14% and Kenya’s 6% in 2020. Ethiopia’s poor ratio is attributed to the crowding-out of credit by the public sector and high requirements for a loan to MSMEs by Micro-Finances and Commercial Banks. Financial institutions place high requirements partly due to a lack of credible credit ratings.