ASSOCIATION OF ETHIOPIAN MICROFINANCE INSTITUTIONS (AEMFI)

AEMFI is a network of 31 MFIs established in June 1999

AEMFIS VISION

AEMFIs vision is to be a world class innovative network providing value added services in building an inclusive financial system in Ethiopia.

AEMFIS MISSION AEMFIs Mission is to enhance the capacity of microfinance institutions and financial cooperatives to deliver financial services to urban and rural households through technical assistance, human capital development, knowledge management, research, networking and advocating and promoting the industry with mutual cooperation from its members, practitioners and key stakeholders.

AEMFI VALUES Transparency Non-political Equity Accountability Member driven Social responsiveness

OBJECTIVES:

Help build multifaceted capacity of MFIs in Ethiopia mainly through training; Study the status, problems, and prospects of existing MFIs in Ethiopia and assess the feasibility of forming new ones; Help improve the national policy and regulatory environment in favor of the MF industry and its beneficiaries in Ethiopia; Help MFIs pool loan and equity funds from domestic and foreign sources; Help formulate and disseminate resolutions and best practices related to the MF industry in Ethiopia

OBJECTIVES:

Help appraise and improve the performance of MFIs by serving as the industrys self-monitoring and database forum Facilitate collaboration, experience-sharing, and information exchange among MFIs in Ethiopia and the rest of the world Provide MF related information resources for use by policy makers, donors, lenders, continental and international networks, researchers, mf beneficiaries, and the general public Advocate about the mf industry in Ethiopia through media and publication and Stimulate exceptional contributions of individuals and organizations to the mf industry by creating an incentive system

AEMFIS STRATEGIC GOALS 2009 - 2013:

Goal 1: Enhance AEMFIs Functional Accountability and Transparency Goal 2: Enhance Efforts towards Achieving the Financial Sustainability of AEMFI

Goal 3: Ensure AEMFI Generates High Quality Research and Support

Goal 4: Enhance the Capacity and Efficiency of AEMFIs Human Capital

Goal 5: Promote an Inclusive Financial Sector

Goal 6: Enhance the Capacity of the Industry

ORGANIZATIONAL STRUCTURE
General Assembly Board of Directors

Executive Director

Admin Assistant EIFTRI

Accountant

Administration & Finance Unit

Support Staff Program Management Unit

Training Unit

SACCOs Unit

Social Performa nce Unit

Perform ance Monitori ng Unit

MIS Unit

Research & Publicatio ns Unit

Research & Publicatio ns Unit

THE DEVELOPMENT OF MICROFINANCE INSTITUTIONS (MFIS) IN ETHIOPIA

OBJECTIVES
1. Development of deposit-taking MFIs 2. Growth and outreach 3. Performance of MFIs 4. The role of the government and AEMFI 5. Major achievements 6. Challenges, opportunities and threats 7. Proposed interventions

DEVELOPMENT OF DEPOSIT TAKING MFIS IN ETHIOPIA

Credit scheme in Ethiopia started in the late 1980s, as part of NGO relief and

development programs.

Proclamation for licensing and supervision of microfinance businesses in 1996 to separate charity and finance. NGOs are prohibited from delivering

finance

The microfinance Proclamation was revised in 2009 (Proclamation 626 of 2009)

MFIs are allowed by law to mobilize public savings.

31 MFIs registered by the National Bank of Ethiopia Microfinance is a tool of the government to implement development policies and programs

FINANCIAL PRODUCTS OF MFIS

Loan products
Agricultural loans Micro and small enterprise loans Housing loans Equipment leasing loan Loan for trade and other services Consumption loan

Saving products
Compulsory saving Voluntary saving from members Voluntary saving from non-members

Insurance products Money transfer Other products such as paying pensioners, collection of taxes

Outreach of MFIs as of March 2013 Outreach: over 2.6 million active borrowers (49.8% Women) Outstanding loan balance: Birr 9.9 billion. (556 million USD)

Balance of savings: Birr. 6.1 billion (336

million USD) (74% Voluntary Savings)

GROWTH OF MFI OUTREACH IN ETHIOPIA Indicator Active borrowers Dec, 2003 755,073 March, 2013 % of Growth 2,609,060 345%

Loan 593,978,863 9,998,273,225 outstanding

1683%

Saving balance

325,028,670 6,053,312,925

1862%

OUTSTANDING LOANS & SAVINGS

( December 2003 December 2012)
12,000,000,000 10,000,000,000 8,000,000,000 6,000,000,000 Outstanding Loan Saving

4,000,000,000
2,000,000,000 0

ACTIVE CLIENTS

(December 2003 December 2010)

3,000,000 2,500,000 2,000,000 1,500,000

1,000,000
500,000 0 2003 2004 2005 2006 2007 2008 2009 2010 Active Clients

FINANCIAL PERFORMANCE
Financial Structure
Financial Performance

Efficiency and Productivity

Risk and Liquidity

FINANCIAL PERFORMANCE OF MFIS

Indicators 1 2 3 4 5 6 7 8 2003 2010

Return on Assets

-5%
Debt to Equity Operational Self-Sufficiency Financial Self-Sufficiency -8% 104% 77% 20% 129 383 6%

1.1%
2.1% 138% 113% 10% 177 423 7%

Operating Expense/Loan portfolio

Cost per Borrower Borrowers per Loan Officer Portfolio at Risk > 30 Days

Loan Loss ratio

5%

1%

PRIORITY SECTORS AND ACTIVITIES TO BE FINANCED BY MFIS IN THE GTP

Increase access to finance to 67% Provide financial services to MSE operators Avail 11 billion Birr of loan to 2.2 million MSE operators Provide financial services to the productive poor in agriculture Provide financial services to chronically food insecure households Mobilize savings Transform MFIs from credit-led to saving led institutions At least 80% of the loans should be financed from saving mobilization

TYPES OF GOVERNMENT INTERVENTIONS IN MICROFINANCE

Regulation (protect solvency of deposit taking MFIs) and creating an enabling policy environment Providing capacity building support Providing loan capital through RUFIP Direct investment or establishing finance providers owned by government or government as major shareholder Implementing government programs through MFIs Providing credit guarantee through regional governments Influence interest rate setting and other features of financial products Tax exemptions Disclosure requirements

THE ROLE OF AEMFI

Support the creation of an enabling policy and regulatory environment through consultative process Build the capacity of MFIs and other inclusive finance providers Established the Ethiopian Inclusive Finance and Training and Research Institute (EIFTRI) Create forums to discuss the critical issues of inclusive finance providers Monitor the financial and social performance management Promote inclusive finance in Ethiopia, including innovations in the industry Research Knowledge management

MAJOR ACHIEVEMENTS OF THE SECTOR

Strong focus on the excluded population (farmers and MSE operators) and on productive activities Increase in outreach MFIs have mobilized significant amount of savings Transforming from credit-led to saving-led institutions Improvements in operational and financial sustainability Transparency of MFIs, efforts to be rated An enabling policy and regulatory environment and strong and positive relationship between regulators and practitioners Value adding support of the government Strong network

CHALLENGES
High unmet demand and lack of loan capital Weak MIS Limited outreach, particularly women Limited capacity in terms of skilled manpower Uneven coverage and penetration of the regions in the country Limited financial products and innovations Limited opportunities to access foreign capital and inadequate donor funding Limited interventions to provide financial services to pastoralists Lack of solid interventions to promote financial literacy Governance problems Limited donor support

OPPORTUNITIES
Clear legal framework Huge unmet demand Existence of general government support Development of telecommunication and power services in rural areas Transformation of MFIs Competition Growing interest of banks, postal services, social investors, private sector Joining WTO and other regional trade organizations

THREATS
Production and marketing risks
Distortions of financial markets by donors, government, etc programs Inflation Politicizing microfinance HIV/AIDs

Over-regulation

PROPOSED INTERVENTIONS

Increase outreach by addressing the issue of loan capital Tailored interventions to increase women clients and other disadvantaged groups Support of promote back-office and front office technology Technical support in product development Provide capacity building in terms of training Financial literacy Promote SPM and client protection Establishment of wholesale facilities, without discouraging savings Provide focused interventions to provide financial services to access deficit areas, particularly pastoralists
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