Ethiopia’s vibrant ecosystem of micro, small, and medium-sized enterprises (MSMEs) is a critical engine for economic growth, yet these businesses often face significant hurdles in accessing the financial services they need to thrive. To address this challenge, a powerful collaboration has emerged between Dashen Bank, Accion, and Mastercard, aiming to revolutionize financial inclusion through innovative, digitally-enabled solutions. Capital spoke with Raliat Sunmonu, Vice President, Africa & the Middle East, Accion Advisory, to delve into the intricacies of this partnership, exploring its goals, strategies, and potential impact on the Ethiopian MSME landscape. Sunmonu sheds light on the specific obstacles faced by small businesses, the transformative role Accion envisions playing, and the innovative use of AI and technology to empower women-owned businesses in particular. This interview offers a glimpse into a promising future where financial services are more accessible, relevant, and impactful for the backbone of Ethiopia’s economy. Excerpts;

Capital: Can you explain the partnership between Dashen Bank, Accion, and Mastercard? What are the main goals of this collaboration?

Raliat Sunmonu: In 2022, Accion renewed its partnership with the Mastercard Center for Inclusive Growth to improve the financial health and livelihoods of small businesses globally, using digitally-enabled solutions. Through the program, Accion works with financial services providers (FSPs, e.g., banks, fintechs, digital platforms) to accelerate digital financial inclusion for small businesses and underserved customers such as women entrepreneurs. Dashen Bank’s partnership with Accion under this program will enhance Dashen’s ability to deliver innovative, digital financial services to their customers, but particularly underserved segments like women entrepreneurs, micro and small businesses.

Capital: What specific challenges do small businesses in Ethiopia face regarding access to financial services?
Raliat Sunmonu: Simply put, small businesses have long been ignored by the major players in Ethiopia’s financial services sector. It’s always been too easy—and profitable—for banks to serve larger organizations so most existing financial products have been tailored to the needs of corporates and medium-sized businesses. Many micro and small businesses often run non-digital, manual operations that give financial institutions little visibility, making it riskier and more expensive for these FSPs to offer their services. Digital tools and solutions can address many of these challenges, however, small businesses will still require a lot of handholding and capacity-building to use these tools.

Capital: What role do you see Accion playing in transforming the financial ecosystem for MSMEs in Ethiopia?
Raliat Sunmonu: Accion has more than 60 years of experience globally, finding and using the right mix of tools to improve financial outcomes for the nearly two billion people around the world who are underserved by existing financial solutions. We bring a unique mix of tools and institutional capabilities to advance our partners’ financial inclusion priorities. In Ethiopia, our Advisory team has been active for a few years, providing technical assistance to various actors in areas including digital financial service (DFS) product design, credit risk management, and working with our partners’ end customers to improve their trust in, and ability to use, various types of financial solutions. With Dashen, we can do that at a significant scale—and impact. We are also investors, and now that the regulatory landscape is changing, there might be opportunities in the future to also invest in innovative companies that are solving financial inclusion challenges in innovative and meaningful ways, bringing not only capital but additional governance and operational expertise. Finally, we’re building the collective capabilities of the financial services ecosystem; through industry convenings such as Financial Inclusion Week and the Responsible Finance Forum (both hosted by the Center for Financial Inclusion, an independent think-tank housed at Accion) and programs such as our joint program with the Harvard Business School on strategic leadership in financial inclusion.

Accion’s combined work in Ethiopia can collectively accelerate meaningful financial inclusion, especially in markets like Ethiopia that are newly opening up. The uniqueness of Accion Advisory’s model is it allows us to operate in markets even when they are not ready for other types of engagement, and be avant-garde in building coalitions with all kinds of actors, creating useful demonstration models and deepening the local capacity to engage. We have earned the trust of multi-year partners like the Mastercard Center for Inclusive Growth to play this role for consecutive projects around the world.

Capital: How does Accion intend to leverage AI and technology to improve financial inclusion for women-owned businesses?

Raliat Sunmonu: Female-owned businesses tend to be even more disadvantaged when it comes to financial services and many financial institutions still see women as high(er) risk. Accion is leveraging AI to make financial solutions more meaningful, accessible, and relevant for women entrepreneurs. For example, to create customized customer engagement tactics that are more appropriate to how women interact with and use financial products; to leverage different types of data and create more nuanced credit-decisioning tools. We will bring this expertise and tools to support our work at Dashen Bank.

Capital: What are the expected outcomes of the innovation hub for small business owners in Ethiopia?
Raliat Sunmonu: The innovation hub will significantly enhance Dashen Bank’s ability and capabilities (skills, tools, processes) to better understand and be more responsive to evolving customer needs—whether that customer happens to be a micro-entrepreneur or a corporate entity. The end goal is for Dashen to extend its pioneering leadership in the Ethiopian financial services sector by delivering meaningful, differentiated financial solutions to the small businesses that power Ethiopia’s economy, and doing so sustainably i.e., profitably.

Capital: How will this initiative contribute to reducing the $4.2 billion financing gap in the MSME sector?
Raliat Sunmonu: One of the main goals of this partnership is to help Dashen de-risk, and scale lending to historically underserved customers: women, micro and small businesses. We’re helping Dashen do that in several ways, for example: a) introducing more nuanced credit solutions—and credit risk methodologies—that are more appropriate to the end customer segment, such as supply chain finance for last mile retailers (a majority of whom are women); b) creating better portfolio monitoring tools to provide better clarity on portfolio performance at the most granular levels and c) through strategic partnerships, make the bank’s offerings more accessible to a wider range of customers. 

Capital: What strategies will be employed to ensure that the needs of women entrepreneurs are adequately addressed through this initiative?

Raliat Sunmonu: We incorporate a gender lens in all aspects of our technical assistance support. At Dashen Bank, this will include targeted research to prioritize the highest opportunity areas for serving women customers better; improving engagement with women customers (product messaging, channels, training relationship managers, etc.); using data in more meaningful ways to quantify and improve impact on women; and designing products that intentionally reduce barriers to women’s access and adoption. The program also has specific targets for around gender performance which we’ll be monitoring closely.

Capital: How important are strategic partnerships with supply chains in developing new financial products for MSMEs?

Raliat Sunmonu: Supply chains are critical in deepening financial access for small businesses – these supply chains serve as points of access for financial products, i.e., banks like Dashen can offer more nuanced products at the point of [customer] need; they can provide data that may be otherwise difficult for FSPs to access on small businesses, such as sales turnover, inventory size, value and variety, etc.—this data can be used to enhance lending models. Supply chains, especially digitalized ones, can also catalyze new value-added services that can be especially useful for last-mile merchants as they adopt more digital services.