The Transparent Pricing Initiative in Ethiopia has published standardized pricing data from 17 microfinance providers, representing an estimated 95% of Ethiopia’s microloan borrowers. Launched in 2011 the Initiative is delivered in partnership with the Association of Ethiopian Microfinance Institutions (AEMFI) and is funded by MicroNed.Microfinance in Ethiopia
The industry serves more than 2.3 million active borrowers and has a gross loan portfolio of 10.2 billion ETB (approx. 574 million USD) as at December 2011. Demand for microfinance service in Ethiopia is believed to be very high, with some studies estimating that only a third of the total demand for microfinance service in the country has so far been met. One of the challenges for microfinance institutions is raising capital funds to meet such demand.
The Ethiopian microfinance regulatory environment is characterized by a long standing prudential framework and a dedicated supervisory directorate at the Central Bank. This directorate has been mandated via proclamation no. 626/2009 to license, supervise and regulate all registered microfinance institutions in the country. It was also entrusted with ensuring the soundness of the industry via issuing directives pertinent to microfinance business.
Although specific truth in lending legislation does not exist, NBE directive No. MFI 12/1998 states that it is the responsibility of the Board of Directors of each MFI to set the lending interest rate. The directive however does not to specify how the interest rate should be calculated or communicated.
The price graph presented below shows the prices of all the microloan products in the Ethiopia dataset. Each data-point represents a real loan given to a real borrower, calculated using original loan documentation from the institution. The color of the data-point correlates with the Transparency Index of the sample. The interactive legend beneath the graph can be used to change the graph axis and labels. Try the custom feature to see price correlations with attributes such as loan purpose, institution type, loan term and percent of gross national income.
The Ethiopian Price Graphs shows that microloan sizes in Ethiopia are relatively small, with most loans falling below 10, 000 ETB (Appx. 550 USD). The regional government-backed MFIs, which are the largest and most well established, charge prices below the average market rate for Ethiopia. The smaller MFIs charge loan interest rates above the average country price curve.
MFTransparency’s research shows that microloans in Ethiopia are relatively low in price when compared to international statistics. The highly self regulatory nature of the industry, the legislated commitment to social mission, dominance of large scale MFIs and availability of concessionary funds all contribute towards this.
|Institution||# Borrowers||Portfolio (US$)||Products||Transp. Index||Participating Since||Age of Data|
|Wisdom MFI||45,300||5,500,000||6||61||2012-Mar||80 mos.|