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.
MFIs given more power
Bottled water makers will stop using neck sleeves
The Ethiopian Bottled Water and Soft Drinks Manufacturing Industries Association (EBWSDMIA) based on a recommendation from the Ministry of Trade and Industry (MoTI) wrote to the National Bank of Ethiopia (NBE) to recommend that banks suspend approval of the letter of credit (LC) for partial import of input for the bottled water industry.
The association in collaboration with Food, Beverage, Pharmaceutical Industries Development Institute, which is under MoTI, Ethiopian Environment and Climate Change Commission, Ethiopian Standard Agency (ESA), and Food, Medicine and Health Care Administration and Control Authority has been working for the last year including undertaking detailed studies to suspend the use of neck sleeve packaging in the bottled water industry.
The case has been also tabled at the National Standardization Council, which is responsible for approving the national quality and standardization strategy proposed by the Ethiopian Standard Agency (ESA), at the recent meeting followed by the approval of Fetlework Gebregziabher, Minister of MoTI and chair of the council that comprised members from different ministries and agencies like Ministry of Health and Agriculture.
Due to the acceptance of the association in partnership with the stated stakeholders announced that as of Tuesday July 23 the water production should halt the use of the neck sleeve, which is mostly imported plastic.
“To realize the decision the association has written a letter to the governor of NBE, the central bank, to order banks to stop issuance of the LC for the import of the input for the water bottlers,” Ashenafi Merid, General Manager of EBWSDMIA, told Capital.
He said that the letter that copied for MoTI has asked the central bank to impose on banks to cut the hard currency allocation for neck sleeve.
“MoTI has also promised that it would support the decision and follow the illegal activity to import the neck sleeve including via contraband route,” Ashenafi added.
He said that members came voluntarily to be part of the association due to that they have to respect the decision and suspended the use of neck sleeve as of Tuesday.
Even though the association and the relevant government bodies stated that the use of neck sleeve should be halted as of July 23 the issue does not get mutual acceptance by manufacturers, according to the sector actors.
“There are three groups on the issue,” an expert in the sector told Capital. The expert, who preferred anonymity, said that that the first group expressed its concern that the public might lose its trust in the bottled water that is not sleeved by the plastic paper on the neck. “It has become a custom on the market due to that some bottlers are not interested to halt the production without neck sleeve,” he added.
According to the expert, the second group is that it has massive stock on its center and demands the decision to postpone for another period, while the third group is who supports the current decision.
Experts on the sector argued that the new decision would not have enforcement or penalty if it is by passed by any manufacturers.
“We wrote the letter for NBE due to it is one of the ways to control barring the use of neck sleeve, and MoTI has also promised that it would control the import of the product,” Ashenafi argued.
He said that the association is formed under mutual interest and the current move is also the interest of the sector, while the full applicability might takes time.
“Currently the association is developing a code of conduct that will govern the members and the sector. The code of conduct is also consider the full implementation of refusing to use of neck sleeve on the production,”
“Refusing neck sleeve packaging has all benefit than side effect on the market,” Getnet Belay (Eng), President of EBWSDMIA, said.
Traditionally local manufacturers use the neck sleeve that becomes a trend for every bottlers that are currently reached at 85. Getnet said that the using neck sleeve has made the sector vulnerable for forged producers, while refusing the use of it same production time and cost.
Ashenafi said that for instance factories whose machine for the sealing damaged should wait for days until it is maintained and sometimes the product import might be delayed, which also forced bottlers to cut their production.
They also claimed that it is pro environment. “The neck sleeve is very small and is difficult for collection and recycling,” the president said.
Recently Solomon Tadele, Director General of Food, Beverage and Pharmaceutical Industry Development Institute told Capital that neck sleeves packaging is not common in other countries and it is not mandatory on Ethiopia’s standardization rule.
Tradition pioneer water bottlers started the neck sleeves packaging followed by the late comers, but it could not be a measurement for standard or quality.
Some other bottlers like soft drink and juice manufacturers in Ethiopia are not using neck sleeve.
Solomon said that such kind of packaging is costing the factories by importing machines for the specific packaging, additional labour cost for the operation besides importing unnecessary raw material.
Based on their capacity water bottlers are allocated from USD 40,000 to USD 50,000 to import neck sleeve, which is huge sum in total, but it would be stopped as per the claim of the association.
Zay ride buys 200 new taxis targeting women drivers
Zay ride, an e-hailing taxi services is to bring 200 brand new vehicles for the city’s taxi transportation services that would be manufactured by an Italian firm.
The vehicles will be primarily delivered to women and old blue and white taxi owners in order to encourage women to provide modern transportation in the city.
Zay ride already agreed with Abyssinia Bank to cover 70 percent of the total cost of the cars while the eligible person should pay an estimated amount of 300,000 birr, which is 30 percent of the cost in a blocked account.
“The aim is beyond doing business; rather it goes to empowering women and discharging our social responsibilities”, said Habtamu Tadesse, CEO of the company.
The new vehicles are 2019 model Fiat Egea cars and should be delivered in five months.
According to Habtamu the manufacturer significantly discounted the cars so that the price would be reasonable and provided trainings for Ethiopian Mechanics.
Habtamu also promised to deliver the vehicles on time, adding that the company will pay 1,000 birr per day in case of delay.
Zay Ride, is also expanding its services to the Liberian capital, Monrovia in collaboration with the Liberian web solutions firm Hak Technologies by the end of August that will be followed in Guinea and other west African countries.
The company is exhaustively working to expand its service in secondary cities of the country such as Gondar, Hawassa and Mekele as part of short term plan.
‘The company was the first to lunch booking via an app beside text messages or calls, makes our company unique,“ he adds.
The company was established in 2016 to provide modern technology and transportation solutions across Addis Ababa for both corporate and individual customers.
It recently added delivery services to its platform and will be adding ambulance services. It also plans to launch new products and expand its tech outsourcing team.
Currently the company has over 70,000 registered customers and over 2,000 active drivers that provide 24/7 services.
There are other companies in Addis that offer smart transportation options and modernize the city’s old and rusty blue and white cabs.
Addis to host Fintech summit
Fintech is to hold its annual summit in Addis Ababa in November 2019.
The 4th edition of the Africa Fintech Summit (AFTS), the premier global initiative dedicated to financial technology in Africa, will be held in Addis in the presence of representatives with over 4.5 billion USD private equity and venture capital funding and leading innovators, investors, and policy makers from around the world.
The AFTS Advisory Board unanimously chose Addis Ababa as the 2019 host city in recognition of its rapidly growing economy, extensive infrastructure investments across the last two decades, and ambitious reform agenda that includes partial privatization of the national telecom monopoly and ongoing liberalization of the financial sector.
“I am thrilled that this great event is coming to Addis Ababa,” said Getahun Mekuria Minister of Innovation and Technology.
“I am very much pleased to welcome Africa Fintech Summit delegates to the continent’s political capital and a nexus of global events, Addis Ababa.”
The AFTS is organized by Dedalus Global, an investment and communications advisory focusing on emerging markets and emerging technologies, and by Ibex Frontier, an investment consultancy and route-to-Ethiopian-market advisory.
“We are extremely proud to bring AFTS to Ethiopia, the 2nd most populous nation in Africa that is at the inflicting point of digitalization, as e-commerce and financial inclusion are of prime focus both by the Government and the tech sector. We look forward to welcoming global investors and Fintech eco-system players with warm Ethiopian hospitality,” said Zekarias Amsalu, Founder & MD of Ibex Frontier.
The AFTS Addis Ababa will focus on the future of banking, mobile money growth and integration, policy and regulation, blockchain, digital identity, remittances, and financial inclusion.
Strategic partners for the Summit include the Corporate Council on Africa, the US State Department, the US-Nigeria Council, the Congo Business Network, and PeaceTech Lab.
The bi-annual summit occurs each April in Washington, D.C., and each November in a different African city.
