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FINANCIAL SERVICES EMMA

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Page 1: FINANCIAL SERVICES EMMA

FINANCIAL SERVICES EMMA

Page 2: FINANCIAL SERVICES EMMA
Page 3: FINANCIAL SERVICES EMMA

Contents Executive summary or brief ....................................................................................................................................................................... 3

Context ................................................................................................................................................................................................................. 5

Methodology ...................................................................................................................................................................................................... 6

Selected market systems .............................................................................................................................................................................. 7

Financial services Market Map system .................................................................................................................................................. 8

Key findings – results of the financial service provider assessments .................................................................................... 10

Commercial Banks key finding ........................................................................................................................................................... 10

Microfinance Institutions and AEMFI key finding ..................................................................................................................... 12

RUSSACO/SACCOS key finding ........................................................................................................................................................... 16

Multipurpose cooperative union ....................................................................................................................................................... 17

Index Based Livestock Insurance ...................................................................................................................................................... 18

Micro and Small Enterprise Agencies .............................................................................................................................................. 19

Main recommendations and conclusions ........................................................................................................................................... 20

Annex 1. Financial Services Seasonal calendar ................................................................................................................................ 28

Annex 2. Financial service Contact list ................................................................................................................................................ 29

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Executive summary or brief Finance is one of the key elements in addressing development issues in Ethiopia. It is even

considered to play a leading role in guiding development interventions in the country.

Whatever development strategies or programs (poverty reduction strategy, rural development

strategy, etc.,), we propose for PRIME operation areas; there is a need for finance and financial

systems to implement the development programs. If the objective is to deliver financial services

to the excluded and develop an inclusive financial system in the regions, there is a need to have

well-functioning financial systems and institutions in place. Moreover, non-financial services

such as the provision of technical skills, Business Development Services (BDS) and financial

literacy are needed to address social and financial exclusion. In order to increase outreach,

expansion of branches, efficiency, inclusiveness, appropriateness, innovations and

sustainability, there is a need for interventions/supports at Bank, microfinance and

RUSSACOs/SACCOS providers and client levels.

For this reason, access and appropriate finance is the blood of all the activities of PRIME project

such as Dairy, Livestock, Input supplier etc. So, this requires a special form of financial

institutions that conform to access and appropriate financial service such as Islamic principles

and at the same time that can work within the diverse and intricate institutional, socio-

economic, ecological, and technological constraints. First, the existing financial institutions have

to modify their mode of services to serve the pastoralist communities. Second, new forms of

financial institutions need to be introduced in these areas. One of the advisable of way of

addressing the issue surrounding the problem of rural financing is through organizing saving

and Credit Cooperatives and linking to MFIs.

The targeted spots of the assessment were all three clusters of PRIME project operational areas

which are Somali, Oromia and Afar regional states of Ethiopia, the specific operational area

which these project targets suffer from recurrent external shocks that result in unpredictable

levels of production, restricted mobility and access to markets, and widespread under-

investment in risk-mitigating or productive opportunities, keeping vulnerable households

forever on the precipice of hunger and disease prevent households, communities and market

systems from better preparing for, coping with and recovering from natural shocks. It not

secret that Lack of available and access to appropriate financial services is one of the main root

causes of these vulnerabilities.

Therefore the team from different institution started assessing available financial services

providers such as Banks, Micro finances, MSE, RuSACCO, SACCOs, etc in all clusters of the

PRIME project as well as to analyze deeply how these services providers help the community

particular the pastoralist to cope with external shocks and quickly recover their livelihoods.

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At this end, the potential demand for financial service in the regions assessed by the team,

particularly, free interest loan products, Micro-insurance products, convenient saving

instruments and money transfer are enormous. However, the existing supply of financial

services to the poor in urban, pastoralist and MSE is very limited and absent in many Districts in

the Afar region and Somali Region except the newly established Somali MFI reached small

number of remote Districts where there is no any financial service providers. The EMMA

assessment focused primarily to identify the existing financial service providers especially the

Banks, MFI and RUSSACOs?SACCOs in Afar Region, Dire Daw Administration, Harari City, Somali

Region and in Oromia Region especially in Yabelo, Moyale and Negele respectively. The

assessment aim is to develop innovative financial system in within the next five years of project

life. This will expand and improve the delivery of quality and diverse financial services to the

excluded by focusing on sustainability, accessibility and appropriateness.

The EMMA assessment team of finance acknowledged that PRIME access finance will create

opportunities to increase wealth by increasing agricultural, livestock production and

productivity, reducing vulnerability, ensuring food security, enhancing new and existing

business activities (private sector development), increasing the supply of goods and value chain

linkages, promoting competition, attracting investors, generating employment and increasing

income for low-income households in rural and urban areas.

In this regard, the assessment team identified that Lack of access and appropriate to financial

services, the absence of appropriate loan products, Micro-insurance products, leasing products,

convenient saving instruments, money transfer and various other financial instruments such as

limited institutional capacity of MFIs, banks, NBE, AEMFI and RUSSACOS are major constraints

limiting the access of finance to the poor people in urban and pastoralist and the development

of indigenous micro and small enterprises as the financial service providers stated in assessed

regions.

At this end, the assessment team strongly recommends that PRIME intervention areas of

Finance should be to enhance the capacity of the existing financial service provider particularly

the following points:

1. Strengthening and Building the institutional capacity of MFIs , Commercial banks, NBE

and AEMFI

2. Provide Capacity Building to the clients ( Demand side)

3. Provide Capacity building, Strengthening, Expanding & Linking of SACOS/RUSACOS

4. Provide capacity building on Micro and Small enterprises agency

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5. Introduce innovative micro insurance product and services to pastoralist

Context As in most developing countries, markets are generally poorly organized. Particularly, the

capital and factor markets in the rural and pastoralist areas of Ethiopia are mostly missing.

Specifically, these markets are entirely missing in the pastoralist and agro-pastoralist areas of

the country. In these areas, the products markets that are relatively developed in rest parts of

the country are generally poorly functioning in the pastoralist areas and the markets for many

agricultural products are even missing for many reasons.

Pastoralist and agro-pastoralists of Ethiopia are not only sparsely distributed over a very wide

remote areas of the country, the climatic condition of these areas are also very harsh for

human being. The global climate change is not only making the areas harsher than ever before,

it is also, compounded by many other interrelated socio-economic and institutional problems,

increasing the scarcity of the natural resources of water, pasture and forests. As a result of this

growing scarcity of these natural resources, pastoralists have to freely move across a wide

range of areas to attain their livelihood. But the increasing demand for mobility of pastoralists

coupled with the growing demand for similar resources by other groups is increasing the

competition for natural resources in the pastoralist areas. As a result, pastoralists are facing a

lot of pressure internally and externally. In addition to these special problems, the property

right regime (including land tenure), the institutional environment and the poor infrastructural

and technological developments pose a lot of difficulty to the development of markets in

general.

All these intricate problems raise the costs of delivering financial services to the pastoralists and

agro-pastoralists communities. Thus, in generally providing small financial services to small and

subsistent pastoralist which are scattered over wide remote and infrastructure deficient areas

remained difficult. The overall situation not only the moral hazard and adverse selection

problems raise the risk costs of providing financial services in these areas, it also raise the

operation costs administering small financial services in these areas. As a result, providing

credit and insurance services to pastoralist households remained unprofitable and unattractive

to formal financial institutions such as banks, insurance companies and even micro-finance

institutions. In addition, the cultural and religious situations require financial institutions to

revise their current approach and procedures to conform to the Islamic principles. Due to all

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these facts, financial are generally missing. Improving the livelihood and the resilience capacity

of pastoralists cannot be achieved without introducing and expanding financial markets.

This requires a special form of financial institutions that conform to Islamic principles and at the

same time require a different approach that can meet the special demand of pastoralists and

that can effectively operate within the diverse and intricate institutional, socio-economic,

ecological, infrastructural and technological constraints. First, the existing financial institutions

have to modify their mode of services to serve the pastoralist communities. Second, special

forms of financial institutions need to be introduced in these areas. One of the advisable of way

of addressing the issue surrounding the problem of financing pastoralist economic activities is

through organizing saving and Credit Cooperatives. Yet other options need to be sought to

expand the financial service to the wider community.

Methodology The Financial service team is one of the groups among organized team to assess the actual

market mapping in the three PRIME impact geographic regions (southern, Eastern and Afar

clusters). Its rationale is that a better understanding of the existing financial service providers

whether its accessibility and appropriateness to the pastoralist, agro-pastoralist and urban

community and to see how is the coverage of financial service providers in regions and how

would leveraging the existing financial service provider align with PRIME program and in the

way that to design a broad range of responses options across the regions.

The financial service team was made up of 5 staff members from 4 organizations including:

Mercy corps (Lead), CARE-Ethiopia, PC and Haramaya University. The team has equipped with

the basic training on EMMA tools for five days before engaged in the field assessment and has

also the related experience in the area of finance services product both at the ground level and

in the respected institutions.

Field work primarily took place in Afar (Semer, Awash, Gewane), Eastern cluster (Diredawa,

Shinile , Erer, Harar, Jig-Jiga, Hartisheck and Wajale) and Southern cluster (Moyale, Yabelo, Filtu

and Negel Borena) and Addis Abab, with secondary sources and desk-based research used to

maximize use of available information. Key informant interview and Focus Group Discusion

were held with key players in the financial institutions like Commercial banks, MFIs, and MSEs,

as well as support players like the, Insurance, AEMFIs, RUSACOS and SACOS, Cooperative

promotion agencies, Livestock traders and individuals were also contacted. Challenges that

were experienced by the financial service team included: 1) the existing few MFI and MSE in the

regions is focusing and working more in the urban areas and lack experience with pastoralist

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area; 2) the financial product what the institution currently providing is not aligned with Muslim

product and no experience; 3) there is no MFIs and functional MSE in Afar regions; 4) Lack of

bank service in the Liban zone of Somali Region. Thus the team has focusing on the

recommendation that would help to potentially facilitating the establishment of financial

service product in addressing the huge demand at the rural areas and linkage with pastoralist

community.

Selected market systems Financial services, especially credit in its many different forms are the life-blood of all market

system. From safe savings to investment capital, all actors in the livestock value chain and

support markets rely on access to capital to pursue innovation. There is currently a lack of

financial service products and institutions appropriate for pastoral areas, considering both the

seasonality of production, the nature of their assets (livestock are not valid collateral) and

cultural practices. The PRIME will work at all level to address these gaps across the regions. In

order to restore the financial market system performance in the pastoralist, agro-pastoralist

and urban areas the PRIME will consider providing loans or revolving fund through directly to

market actors.

The provision of financial services, particularly to the excluded, can increase income in the

wider economy by mobilizing savings and providing loans which can be used to support the

creation of small business in the pastoralist areas. The development of inclusive finance in

pastoralist areas can also play an important role in reducing risk and vulnerability from the

current climate change, and in increasing the ability of low income sections of the population to

access basic services like health and education through financial intermediation, thus making a

more direct impact on growth, employment, reduced burden on natural resource depletion and

well protected natural resource management and poverty reduction.

In this regards, the selected financial markets that exists in the assessed regions in general,

there are seven major sources of loan and other financial services in the regions: These are:

Commercial banks, Microfinances, C-operatives (Savings and credit cooperatives and

multipurpose cooperatives), Semi-formal finance (Iquib, Iddir, Hagbad etc), Informal finances

(Money lenders, Traders, Suppliers’’ credit, friends, relatives), NGOs and Donors and

Government projects and programs. Thus, the team after they have discussion in different ways

and due to short period of time of the assessment decided to focus only three financial services

providers that most have direct effect on the community such as Banks, MFIs and

RUSSACO/SACCOs. This assessment report refers to the financial service key players in the

market but the findings are logically allied with those of the livestock traders, input suppliers,

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MSE agency and cooperative promotion agency etc. The Key Analytical Question that this

assessment addresses is:

1. Do existing financial service providers creates and assures access and appropriate financial

service to the community?

2. What are the main constraints of the financial service provider to offer appropriate inclusive

finance to excluded community particularly pastoralist?

3. How accessible and appropriate financial service can be developed to the excluded

community and pastoralists?

Financial services Market Map system The figure below describes the loan, savings and insurance flows. While the light blue color

shows flow of loans and savings. The orange arrows show the source of fund of the institutions

and the black arrow displays the premium of insurance. There are two sources of funds: foreign

and domestic. The foreign sources comes in the form of aid, grant, long term and short term

loans, etc. which flow through National Bank of Ethiopia (NBE). The other sources are parts of

income that is saved in the banks and hoarded under the mattress. The vast majority of

pastoralists save most of their money at home for various reasons: limited access to financial

institutions, absence of suitable financial institutions for the Islamic community, limited

knowledge about modern financial systems. The most of investment fund comes from formal

financial institutions such as banks, insurance companies and MFIs. In addition, very small

portion of investment fund comes from semi-formal financial institutions such as

SACCOs/RuSACCOs and Cooperative Unions. However small, this last sources of investment

fund has a potential to grow in the future. While the main collateral system of formal financial

institutions are fixed assets, MFIs use various forms of collaterals such as group collateral,

government/municipality budget, and some fixed assets. The dominant collateral systems of

semi-formal financial institutions remain social capital built from social relationships and

networks.

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In addition to the loan/saving services, the figure portrays the insurance services. Unlike credit/saving

services, insurance services nearly absent in the pastoralist areas. The infrastructural, institutional,

socio-economic and legal environments increase the transaction costs of proving insurance services to

pastoralist communities. The moral hazard and adverse selection problems that arise from information

asymmetries raise the transaction costs of insurance services. In addition, the unit operation costs are

also very high. As a result, livestock and other insurances services are not profitable to conventional

insurance institutions. Moreover, the common risk hazards such as drought and diseases are not only

large in scale, they also affect the whole community simultaneously. Due to this, pastoralists have not

been able to develop some informal forms of insurances. In sum, both formal and informal insurance

services are absent in the pastoralist areas.

Despite these undesirable situations, International Livestock Research Institutions (ILRI) designed an

innovative approach called Index Based Livestock Insurance (IBLI) and has implemented a pilot project in

Borena Zones. IBLI is livestock insurance systems that use a uniform community wide index threshold

level to measure the occurrence of the risk. The purpose of the index is to eliminate the transaction

costs associated with moral hazard and adverse selection problems which are common in the

conventional insurance systems.

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Key findings – results of the financial service provider assessments

The key finding of this part focussed more on the constraint and opportunities of the financial

services providers that exist in the PRIME operation areas. In addition the assessment identified

the access and appropriateness of the existing financial services providers. This will aim at

expanding and improving the delivery of quality and diverse financial services to the excluded

by focusing on accessibility and appropriateness.

Commercial Banks key finding The Capacity of the conventional banking sector in the country to serve the needs of the poor is weak.

The number of commercial banks operating in the country reached fourteen, out of which eleven are

privately owned commercial banks. Moreover, most of the branches of these financial institutions are

concentrated in relatively larger towns and cities. Many of the districts in the regions done this

assessment do not access their services. For example only 11.5% of the districts in the Somali Region

have branch banks. Even if there are banks in these Districts, there is poor limited access to conventional

banks due to high collateral requirements (land or physical assets) and the livestock traders and other

traders in the regions do approach to get access of credit due to fear of the interest issue. The

commercial banks in the region failed to serve both the poor and other people to give appropriate

service both saving and credit.

One of the major problems of people face in the rural and urban areas in the regions is lack of capital.

Even though, it is clear that the importance of credit and saving in the lives of the people, the majority

of the people are excluded from the service of formal financial institutions like banks. Commercial Banks

are generally unwilling to engage in activities which are perceived as financially unprofitable. In addition,

these institutions have a number of standard procedures and policies, which limit access to credit

service by the people.

In this regard, there are around 12 commercial banks in Dire Dawa and Jig-Jiga. As mentioned earlier

Out of these two big commercial banks owned by Government, i.e. Commercial bank of Ethiopia and

Business and Construction bank and the remaining banks are owned by private sectors. The services

these banks provide to communities are credit services, saving service, remittance services, Foreign

exchange service. The Commercial bank of Ethiopia is governed and implements the government

strategies, the major focus areas of credit service are mainly concentrated three sectors: Agricultural

investment, Export and Industrial.

Commercial banking systems have with the limited capacity, no obvious ability to resolve this in the

short to medium-term loans. The other factor that devastating the commercial banks credit service is

based on conventional system with interest and as the official commercial banks told, its challenging

issues and no appropriate product for Muslim community which consist the majority of the population

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in eastern cluster. The commercial banks main focus areas are mobilizing at public large both rural and

urban and doing door to door saving strategy.

The commercial banks cannot satisfy and fulfil the huge demand of financial service of the societies and

not willing to focus and serve the excluded poor people due their high cost administration and small

loan size. The assessment team was found that Commercial bank of Ethiopia is not willing to provide

access and appropriate finance to excluded pastoralist to benefit the formal financial service and the

poor people in the urban areas and their major focus areas as stated earlier, are big agricultural

investment, Export and industries. It also found that the big livestock trader, investor and big trader

from these regions are unable to get access credit from commercial banks due to the fear issue of

Interest which became big challenge for this community.

The Cooperative Bank of Oromia is one of the commercial banks operating in the eastern cluster. The

Major services that this institution provides to the community are credit services, savings, and local

money transfer and international remittance with collaboration of different Hawala’s

The Cooperative Bank of Oromia provides and offers loans without collateral to cooperatives and MSE,

as the DD branch manager told to the assessment team in the eastern Oronia regions, their loan

collateral system based on the viability of the business. The loan size of the OCB ranges from1000 and

above and their loan term are from 1year-10 years. The Cooperative Bank of Oromia also working kind

of facilitation of value chains financing and linkage of Bajaj supplier (Red Star International Trading). The

Institution uses loan system which mostly similar to cost plus mark-up principles, the Cooperative Bank

of Oromia procures Bajaj from Re d Star International Trading and hand over to their customer putting

the costs some mark-up of 10.5% which they are using as Interest. It was realized that, this loan system

is exclusive only for Cooperative Banks of Oromia. The other private commercial banks are not flexible

like this institution.

During our discussion with branch managers of Cooperatives bank of Oromia in Dire Dawa, Jig-jiga and

Wajale they clearly state that their main challenge that hampered their business in the eastern part of

the country is the issue of the interest and to work and, operate with this system their hindrance is lack

of skilled and experienced persons in the areas of Islamic banking system. Finally the EMMA assessment

team, identified that the Cooperative Bank of Oromia to be one of selected bank in the future that we

can work closely due to their short term loan and medium loan term which address to poor and middle

level income, offering loan without collateral that can allow easily to access loan particularly to livestock

traders etc, in terms of coverage the Cooperative bank of Oromia has branches most of our operation

areas and willing to operate and open branch in the other regions as the Chief Executive officers told us

and etc.

Thus, the two important key finding that hampered the most of the commercial banks in the region to

operate with free interest banking system as the assessment team identified are:

The assessment team realized one of the bottleneck and challenges that the commercial

banks do not start to run and open free interest banking system is lack skilled and

experienced staff and the free interest banking window require to start with initial capital

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that do not contaminated with interest, for this reason, the commercial banks have limited

or Lack of uncontaminated fund.

Lack of appropriate financial services products both saving and credit, Lack of attitude

change of the community towards the credit and saving, Poor saving cultures of the

community and Lack of appropriate linkage among banks, traders and pastoralist

Microfinance Institutions and AEMFI key finding The major barrier to access to credit service by the poor are high and rigid collateral requirements which

the poor cannot afford, high transaction cost associated with small size loans and unwillingness by

formal financial institutions to consider them, complicated and lengthen loan processing procedures.

These facts should lead MFIs and saving and credit Cooperatives to design and respond to the failure of

traditional banking system to serve the financial needs of the small farmers, pastoralist, and agro-

pastoralist and MSE operators. The delivery of financial services to the poor requires financial systems

that reach the poor coupled with an innovative appropriate targeting methodology and a credit delivery

mechanism that helps identify and attract only the poor who can initiate and sustain productive use of

loans.

In this regard, Lack of access and appropriate to financial services, the absence of appropriate loan

products, Micro-insurance products, leasing products, convenient saving instruments, money transfer

and various other financial instruments are major constraints limiting the accumulation of assets by the

poor people in urban and pastoralist and the development of indigenous micro and small enterprises in

assessed regions. Access and appropriate to finance empowers the financially excluded population in

the regions and creates opportunities to increase wealth by reducing vulnerabilities, enhancing business

activities, generating employment and increasing income for low-income households and enterprises.

At this end, the potential demand for financial service in the regions assessed by the team, particularly,

free interest loan products, Micro-insurance products, convenient saving instruments and money

transfer are enormous. However, the existing supply of financial services to the poor in urban,

pastoralist and MSE operators is very limited and absent in many Districts in the Afar region and Somali

Region except the newly established Somali MFI reached small number of remote Districts where there

is no any financial service providers. Thus, the team assessed the existing financial service providers

especially the MFI in Afar Region, Dire Daw Administration, Harari City, Somali Region and In Oromia

Region especially in Yabelo, Moyale and Negele as stated here under.

The Afar regional state is one of the pastoral dominant livelihoods in the country. Like any other

pastoralists. Afar region was also neglected from developmental activities and services like

microfinance institutions. Among the pastoralist sample, a substantial number of participants

were found with high potential need for microfinance services at the same time with lack of

awareness as how to diversify income generating activities.

At this end, till now the regional MFI is still under the process to establishments. The existing financial

service system and structures is not functioning and benefiting the pastoralist and urban community.

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However, the government sectors head like BOFED, MSE agency are struggling to have their own MFI

and ready towards the establishment of the financial institutions that would have appropriate product

for the community and marginalized groups. As per commercial business law of Ethiopia, a minimum

number of shareholders that can establish a company are five. To this end, based on that the Afar MFI

was organized and envisaged five shareholders before years but failed to get license from National Bank

of Ethiopia due to the number of requirement as per the Proclamation of MFI. The Shareholders of Afar

MFI were Afar Regional Sate, Two local NGO, Women Association and Afar youth Association. The role

of private sector participation is very important to harmonize power of the government but in the Afar

MFI case the involvement of this sector is non-existence or nil.

So, the assessment team found that there is huge demand of MFI services in Afar region but the factor

contributed the establishment to delay were: due to lack of skilled and experienced person from Afar

region that can fulfil the NBE requirement, due to the unwillingness of competent and qualified person

to work in Afar regions, due to lack of commitment and awareness about MFI from the government.

The Dire Daw Administration is located in the eastern part of the country. The major economic

base of Dire-Dawa city is trade and services followed by industry and small-scale manufacturing

while agriculture is the main livelihood to the rural people. While employment opportunities are

already scarce, lack of skills has become additional constraints to job seekers. This indicates that

skill training programs for the unemployed and provision of credit contributes significantly to

reducing unemployment in the Region.

Thus, to response, the above mentioned the Dire MFI was established May 2003 and started operation

in April 2004. The MFI operates Dire Dawa City and its surrounding 38 peasant Association kebele.. In

distribution of shares, 97% of the share is owned by the government while the remaining 3% is owned

by private sector and women associations. The institution has nine branches in urban mean in the city

and four branches in rural areas.

The institution’s loan based conventional system at its starting operation but now the institution opened

free interest window for Muslim community even though, it is not started operation yet. The major

services of the institution are credit service, saving services both voluntary and compulsory and pension

payment.

The interest on loan and saving was the most challenging issue observed in Dire MFI. All of the clients of

Muslim community see interest from religious point of view. For sustainable approach, serving without

interest is not viable in the conventional MFIs. For this reason, Dire MFI started and finalized the process

of establishing free interest micro financing without experience. The free interest micro financing

window is ready to operate in two branches in city and four branches for surrounding 38 peasant

associations. At this end, the assessment realized that Dire MFI main weakness that to be addressed are

lack of staff capacity building such as training particularly Islamic financial system and exposure visit.

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The Harai MFI operates in Harar city and its surrounding peasant associations. Like Dire MFI, the

unemployment is very high both the city and rural. For these reason, the MFI established to

response this unemployment. The demand of the financial service is enormous particularly the

poor but the existence MFI cannot afford the huge demand of the community due to limited

loanable fund, due to limited capacity of the staff of the institutions and due to lack of

appropriate financial service product to community. The major services Harari MFI offer to

clients are like Dire MFI credit services and saving services. The assessment team found that

there is huge demand of Interest free product in the region, lack of appropriate and diversified

development product, lack management information system and lack of MSE financing loan.

The Somali Micro Finance Institution Share Company (SMFI) was established by Somali regional

government, some of pioneer business private sector and local NGOs with collaboration and

support of Mercy Corps RAIN program. The company is duly registered on January 31st, 2011 by

the National Bank of Ethiopia and it is owned by seven shareholders. Somali MFI has 16

branches including in remote areas of the region where there is no banks. This is the only MFI in

Ethiopia that is based on loan Shari compliance.

The assessment team found that the loan modalities of Somali MFI are based on shari compliance due

to the appropriate loan product of the MFI the repayment rate is 100% and the PAR is zero which is

surprising: The institution has both the credit and saving appropriate product that based on the

principles of shari such as Murabaha Sale; (cost plus markup sale contract), Ijarah; (leasing contract and

Mudaraba; (profits are shared according to a predetermined ratio). The team has realized that the

Somali MFI Experience must duplicate to other regions in order to solve the big challenges regarding the

issue of interest in all the country particularly in Afar etc.

As the team had discussion with Somali MFI Manager, shinile branch and Tog wajale branch, it was

found that the major constraint is lack of loanable fund, as the branches managers told there is huge

demand of credit service but due to limited capital they are only doing saving mobilization and money

transfer, the other challenges encountered the Somali MFI are: Lack of appropriate product for

pastoralist, Lack of Management Information system, Shortage of skilled manpower, Limited Capacity of

the staff, Infrastructure like telecommunication, internet network, roads electricity etc, Shortage of

logistics( Vehicles and motorbikes), There is also lack of appropriate and well-structured diversification

of Islamic loan and saving product and Lack of loanable fund

The other financial service providers that exists and operating in Yabelo and Moyale wareds is

Oromai credit and Saving Share Company (OCSSCO). The OCSSCO has gotten legal personality to

offer microfinance services in National Bank of Ethiopia and commenced its operation in August

1997. OCSSCO is one of the leading microfinance institutions in Ethiopia which possess six area

office and 202 branches with more than half million clients. The main objectives of OCSSCO is to

improve the socio-economic condition of the low-income people through providing working

finance at affordable interest rate and encouraging saving habit of the people. Like other MFI,

one of challenge issue of interest as the Deputy General Manager informed the assessment

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teams. In this regard, the OCSSCO has Yabelo zone branch and under this branch there are nine

sub branches. These branches provide service the Borena and Guji zone of Oromia Regional

State. The services provide by these branches to communities are: Credit Service, Saving service,

Money Transfer and Micro insurance

In Moyale Wareda Somali Region, there is no existing MFI and no formal financial service providers

except small number of RUSSACOs in Moyale. At this end, the assessment found that in Yabelo OCSSCO

branch the interest on loan is not an issue but the limited capacity of these branches cannot cover and

fulfil the huge demand of loan in the in Yabelo wareda and some part of Moyale Wareda, but large parts

of Moyal community complaining the interest. In the other hand, the Moyal Somali parts has no any

access of finance except the limited number of RUSSACO that exist in small part of the Wareda. The

Challenges the yabelo zonal zone branches and at OCSSCO level at all: Shortage of Loanable fund,

Interest Issue in some parts of borena and all eastern parts of the region particularly in East Haraghe,

Shortage of logistics to increase coverage, Drought, Conflict, Market distortion of Government and

NGOs, Wrong perception of credit about community and Poor credit and saving culture.

Association of Ethiopian Microfinance Institutions: The Association of Ethiopian Microfinance

Institution (AEMFI) was registered under the Ministry of Justice of the Federal Democratic

Republic if Ethiopia on June 28, 1999. The strategic goal of AEMFI includes, among others,

creating institutional structure to serve as a national/industry forum and network for

microfinance institutions (MFIs).

AEMFI in conjunction with its members sets out to identify and promote “good practices” through a

number of key programs and activities, these include:

A. Training: to coordinate and ensure that appropriate technical and skill training is

delivered to the board, management and all other personnel of the MFIs and also the

clients of the MFIs.

B. Performance Monitoring: In consultation with the National bank of Ethiopia (NBE),

AEMFI seeks to monitor the financial performance of the MFIs and Produce periodic

performance indicator.

C. Advocacy: to liaise with federal and local governments, NGOs and other relevant

organizations in the financial sector to promote the services of the microfinance

industry in all appropriate media.

D. Technical Assistance: to assist members with the provision of MFIs, marketing, financial

management and preparation of business plans

E. Research: To carry out, coordinate, publish and disseminate the results of the research

projects that are relevant and related to the future success of the microfinance industry.

F. Financial cooperatives (SACCOS/RUSSACOs: Support is provided by AEMFI through

training, technical support, research, and performance monitoring of

(SACCOs/RUSSACOS.

G. Networking: AEMFI, together with its members, seek to liaise with all organizations,

networks (SEEP, AFMIN, INFAFI, MAIN and AFRACA) and individuals who share a

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common interest, in promoting and delivering financial services to the economically

active poor.

H. Exposure visit: To build and maintain a resources center providing a collection of books

and reports, relevant to the microfinance industry, available to all interested individuals

and groups.

I. Fund raising: To seek out and identify potential donors and lenders who are interested

in developing, building and enhancing the services of the microfinance industry and

providing loan and equity funds.

Thus, the assessment team identified that in spite of the visible success of the network within a short

period of time, it is facing a lot of challenges to meet the needs of its members and stakeholders. These

include:

Huge expectations from the industry in terms of the capacity building, research,

advocacy, fund raising, etc.. However, the limited fund and capacity of AEMFI does not

allow it to meet all the expectations.

RUSSACO/SACCOS key finding

SACCOs seems to be the most successful types of cooperatives among the different types of

cooperatives established in both urban and rural areas of Ethiopia for a number of reasons. SACCOs

have many desirable properties than other types of cooperatives. Members participate continuously in

the business activities of the cooperative and the amount of members’ money continuously grow over

time, hence, members develop strong ownership feelings on their cooperatives and they actively

participate in any matters of the cooperative. The cooperatives provide credit services at zero default

risk. The types of business activities are few, simple, predetermined and periodic. Hence, it puts small

burden on management committee. In sum, RuSACCOs primarily improve the saving behaviour of

members and also encourage them to enter into profitable business activities. Thus, it increases savings

and enables them to increase their income which in turn increases the saving capacity and enable them

to diversify and expand their business activities which further increase income and saving capacity and

so on. It thus leads to an upward spiral saving-income growth.

As the assessment of EMMA team reveals except the cooperatives of Dire Dawa Administrative Council,

most of the RuSACCOs are slightly different from the conventional RuSACCOs in that some modifications

have been made to conform the bylaws and working procedures of the cooperatives with the Islamic

principles and the culture and tradition of the pastoralist communities. It was learnt that all the visited

RuSACCO do not pay any interest to savings (compulsory and voluntary savings) and loans. However,

most the visited cooperatives charge a certain percentage of the loan in the form of service charge and

explicitly mentioned it in the bylaws of the cooperatives. Still some other RuSACCO/PaSACCOs of the

region have agreed to provide members loans in kind (in the form of livestock, water pump, etc.) by

adding the costs some plus mark up of procuring the materials to be supplied to the borrower in-kind

and to administer the loan by including some profits onto the market prices of the material supplied to

the borrower. In addition to the modifications made on saving and loan to conform to Islamic principles

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and as element of the principles of cooperatives, the strict procedures common in commercial loans and

conventional cooperatives have been made very loose to reflect the cultural and social settings of the

pastoralists. Hence, unlike the conventional RuSACCOs which uses other members’ saving as collateral,

the RuSACCO established in the Somali regions takes social relationships and sanctions as principal

instrument for enforcing loan repayment and other contract agreements. Except these changes on the

saving and loan procedures, the organizational structures and other aspects of bylaws are the same as

the conventional RuSACCOs.

The situation is a bit different in the Borena Zone of Oromia region in that the RuSACCOs are just similar

with the conventional RuSACCOs. The field survey indicated that the issue of Islamic principle seems to

be not an issue in most of the parts. Hence they have not made major modifications in the bylaws.

Given these organizational forms, except the RuSACCOs of Borena Zone of Oromia region where most of

them established at the end of 1990s, most of the RuSACCO in Somali region were established only in

the past two to three years. Thus, most of the cooperatives are just at their infant stages. Yet, the

performance of the cooperatives seems promising. The assesment team members of the visited

cooperatives reported that members have been saving the agreed minimum amounts of compulsory

savings without interruption. It is also reported that each cooperative has currently accumulated a total

savings of 50000 to 80000 Birr.

It is the Pastoralist Community Development Project (PCDP) and Mercy Corps, CARE Ethiopia that

facilitated and supported the organizations and promotion of RuSACCOs in Borena, Afar and Somali

regions. In addition to these, the Cooperative Promotion Bureau has also promoted and organized

similar RuSACCOs in many districts of the region. Most of the cooperatives have reported that they have

provided loan services to about 30% of the members of the cooperatives. It was also reported that the

borrower have been able to enter into new micro-business activities such as fruit, small ruminant

fattening, vegetable, khat, butter and other merchandise goods trading. But cooperative in Afar region

faced challenge and resulted to frustration among members due the service charge for the credit service

in considering that it contradict with Muslim Shari.

Multipurpose cooperative union Dire Multipurpose Cooperative was established in 2009 with 38 peasant association kebele members

and 38000 Birr initial capital. Since its establishment, the Dire Dawa Administration has provided the

Union seed money, offices and agreed to pay the salary of three experts working in the Union. Although

the Union is its infant stage as most RuSACCOs of Dire Dawa, Somali, and Afar regions, it leapt into

diverse complementary business activities. It also introduced many innovative approaches and

procedures to develop the Union.

Currently, the Union has formed three business wings, namely; merchandise trade, agro-processing and

credit and saving wings. The merchandise trade wing supplies various inputs (fertilizer, pesticides, water

pump, etc) and other consumption goods. The agro-manufacturing wing has already started to process

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and pack honey production and have made the necessary preparations to establish wheat processing

plant. The credit and saving wing mobilizes savings from both members and non-members and provide

credit services to members. The credit and saving wing has introduced mobile banking services within a

radius of 80 km to mobilize rural savings. The saving and credit procedures the Union introduced partly

agree with the interest of the Islamic community in that no interest is paid for saving and the credits are

provided in kind with cost plus mark-up charges to the costs of supplying the required material to the

borrower. As a result, the cooperative has shown a dramatic capital growth. In addition to the business

activities, the Union is also providing various technical supports to the member primary cooperative.

The assessment team revealed that to introduce and duplicate the experience of Dire Daw Union

RUSSACOs to other regions like Borena zone in Oromai region, Somali regions and Afar regions is will be

an asset and leverage point for PRIME because there many SACCOs/RUSSACOs that need to organize in

one union.

Index Based Livestock Insurance Index Based Livestock Insurance (IBLI) was introduced by reducing the operation costs and by

eliminating the risk costs associated with both moral hazard and adverse selection problems of

providing small insurance services to remote and scattered pastoralists. Such index-based insurance

could not only provide an effective safety net to the vulnerable pastoralist community it can also

contribute to the deepening of other financial systems.

The index based livestock insurance (IBLI) which was, for the first time, designed to manage the risks of

livestock mortality among pastoralist in Marsabit district of northern Kenya. The preference is that

index-based insurance contracts avoid the twin asymmetric information problems of adverse selection

(hidden information) and moral hazard (hidden behavior) because the indices are not individual-specific;

they explicitly target – and transfer to insurers – covariate risk within the contract place and period. Due

to these essential characteristics and its potential for adaptation, the IBLI was planned to be adopted for

pastoralists in Borana zone in southern Ethiopia. Based on the experience of Northern Kenya,

International Livestock Research Institution (ILRI) started a pilot IBLI system in pastoralist areas of

Borena zone in collaboration with Oromia insurance company and Cornell University.

ILRI was a lead for the implementation and initiatives of the IBLI in Borena zones and coordinating with

oromiya insurance. The community mobilization and premium collection is channeled by the Oromiya

saving and credit association at Yabelo branch and having the share of 10% from the collected premium

from the community. Though the intensive effort done so far the result was not as such expected by the

insurance as only 631 pastoralists only purchased the premium in two rounds. The overall coverage in

the borena zone was in 8 woredas.

The IBLI seems promising intervention and to be replicated in other region as the oromiya insurance has

also an extending strategy to other pastoralist areas. The PRIME will potentially facilitate with having

evidence based experience from the Northern Kenya and promoting the insurance approach across the

Borena zones and geographically inseparable Somali regions (Liben zones). The impact and sustainability

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of IBLI require further research and assessment as the EMMA assessment only identified that this

innovation of micro-insurance of livestock could be duplicate to other pastoralist regions like Somali MFI

and Afar but it should be modify to align with the shari principles.

Micro and Small Enterprise Agencies In countries where unemployment is extremely high and its one of major social problems solution is

MSE because of its nature of employing huge labor force especially semi-skilled and unskilled labor. As a

result, developing and expanding MSEs become development strategy for Regional states in Ethiopia.

Hence, as a development strategy, it is important to focus on development and expansion of the MSEs

in Ethiopia

Thus, the study identified that the MSE agency in the regions have very limited capacity and experiences

to manage and organize MSE both urban and rural, In this regard strengthening the capacity of MSE

agency in the regions will be leveraging point for PRIME to enhance the expansion of MSE to pastoralists

and as well as to work to link parallel to MFI. Some of common gaps that identified by the team in all

region visited are:

Lack of strengthening/capacitating/delegating of one stop service centres to provide complete

services to the community such as providing trade license, investment license,, Cooperative

Certificates, Title deeds, bylaws in one stop centre;

Lack of awareness by the regional stakeholders on the regional MSE Development strategy and

Poor support by the regional bureaus in giving due consideration/ priority to the established

small enterprises of the region during BID/contract competition; (Most market supply

provisions are government dependent that does not able MSEs to be competent

independently), the relationship with cooperative agency is poor particularly in Afar and Somali

Region.

Lack of strengthening/capacitating/delegating of one stop service centers to provide

complete services to the community such as providing trade license, investment

license,, Cooperative Certificates, Title deeds, bylaws in one stop center;

Lack of Database and Logistic problem because Somali MSE doesn’t have a single vehicle

Capacity building of different levels of the staff on the new rules and regulations that

are going to be implemented the strategy and limited information to locate/analyze

markets therefore exhibition/bazaar is needed

Lack of linkage of Modern Agricultural inputs i.e. modern beehives, farm tools,

fertilizers etc and lack of Assessments on different sectors of MSEs that are going to be

identified on the opportunities existing in the region

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Main recommendations and conclusions

The EMMA assessment team recommended hereby based on the finding of constraints and

opportunities in visited areas that PRIME will make an intervention to leverage the financial service that

exists in the operational regions.

I. Building the institutional capacity of MFIs and Commercial banks

The issue of interest is most common challenging issues in all financial service providers.

For, this reason, Provide and facilitate training and exposure visit on Islamic modalities

both banks and MFIs

Develop new products and improve the existing financial services such as introducing

free interest modalities both the MFIs and interested Commercial banks.

Lack of loan fund to on-lend to clients, as the number reason which directly influences

the growth of MFIs in the regions the team assessment team that, this is aggravated by

the inadequate capacity of MFIs to mobilize savings, limited access to bank loans,

absence of donors and NGOs support to provide grant and inadequate support to

implement credit guarantee schemes. In this regards, PRIME must focus on supporting

the MFI to make loan guarantee fund or revolving fund because all MFIs visited first

raised that their major constraints is lack of loan fund.

Limited use of back-office and front-office technologies was mentioned as the second

serious problems in expanding the activities of MFI in the regions. The EMMA

assessment team recommend that PRIME will support for MFIs for appropriate MIS to

improve their efficiency.

The limited Capacity of staff to effectively deliver quality financial services to clients, the

third major problem of MFIs constraining the growth of outreach and expansion. The

team emphasize to provide training and arrange exposure for MFI staff and banks are

very crucial to develop access and appropriate financial service providers.

Lack of concerted and coordinated efforts to expand education, also constrained saving

mobilization, managing the financial resources of clients and limited the awareness of

the pastoralist on Micro-insurance of livestock and other financial products. In this

regard, PRIME should address to support the MFIs to improve saving mobilization and

awareness of the pastoralist on insurance

Inadequate capacity of in developing client-centred financial product, poor governance,

weak management and leadership, lack of donor support and social investors, who can

buy shares, has limited the expansion and outreach of the institutions.

Strengthen the establishment process of afar MFI and provide all necessary steps and

conduct awareness creation workshops and training for the board of members and

senior government officials.

Support Somali MFI for Mobile and agent banking service to reach the remote areas

where there are no financial service providers.

II. Provide Capacity Building to the clients ( Demand side)

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Providing business development services, technical training, Marketing linkages, market

places and other technical services to clients.

Provide financial literacy which has the primary objectives of imparting knowledge and

skills to manage financial resources effectively. There is dire need to educate clients on

how to develop saving and insurance culture, manage loans and other financial

resources, carry out cash flow, and manage relations with lenders.

III. Provide Capacity building, Strengthening, Expanding & Linking of SACOS/RUSACOS

The establishment of RUSACOS in the visited regions lacks good foundation in that

members were encouraged to come to the cooperatives by putting membership

requirement as a precondition for obtaining loan. Not only, many of the important

working documents and forms are missing, the existing documents are not being used

properly. The existing rules and regulations that are essential for guiding the decision of

management committee are shallow and less articulated. In this regard, strengthening

the capacity of RUSSACO through training on recording keeping, organizational

management , leadership styles and mentoring, Coaching and developing appropriate

documents and products and arranging exposure visit

Among the various cooperatives visited in the survey, we found Dire Multipurpose

Cooperative Union. The assessment team recommend that to introduce and replicate

the experience of Dire Daw Union RUSSACOs to other regions like Borena zone in

Oromai region, Somali regions and Afar regions is will be an asset and leverage point for

PRIME because there many SACCOs/RUSSACOs that need to organize in one union.

Facilitation of organizing and awareness creation should RUSSACO union should be

conducted in Afar, Somali and Borena zone.

The issue of interest is very distressful to many of SACCOS/RUSSACOs in Afar, Somali

and some parts of Borena zone. To overcome and get solution for it, it is crucial to

introduce to develop appropriate product that can meet the interest of

SACCOs/RUSSACOs members particularly in Afar region

One of the main constraints of RUSSACOs and SACCOs are limited capital of loan. In this

regard, there should be mechanism to link MFI to get access of credit or PRIME facilitate

loan guarantee fund to get loan from MFI.

IV. Provide capacity building on Micro and Small enterprises agency

The team found that there is Lack of strengthening/capacitating/delegating of one stop

service centres to provide complete services to the community such as providing trade

license, investment license,, Cooperative Certificates, Title deeds, bylaws in one stop

centre; So, the project support to provide training and arrange exposure visit to teach

to MSE agency staff and other concerned body of government about how the one stop

services works in other regions.

The assessment team found that there is Lack of awareness and Poor support by the

regional stakeholders on the regional MSE Development. In this regard, we, should

support to MSE agency to conduct awareness creation and to facilitate market linkage

for their product and skills.

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We identified that the MSE required Capacity building of different levels of the staff on

the new rules and regulations that are going to be implemented the strategy. So the

team recommend supporting to provide training on staff to become familiar with

federal strategy.

Also we found that there is limited information to locate/analyse markets ,therefore,

the project prepare arrange trade fair, exhibition/bazaar in the Modern Agricultural

inputs i.e. modern beehives, farm tools, fertilizers etc

V. Introduce innovative micro insurance product and services to pastoralist

The IBLI seems promising intervention and to be replicated in other region as the oromiya insurance has

also an extending strategy to other pastoralist areas. The PRIME will potentially facilitate with having

evidence based experience from the Northern Kenya and promoting the insurance approach across the

Borena zones and geographically inseparable Somali regions (Liben zones). The impact and sustainability

of IBLI require further research and assessment as the EMMA assessment only identified that this

innovation of micro-insurance of livestock could be duplicate to other pastoralist regions like Somali MFI

and Afar but it should be modify to align with the shari principles.

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Response Options

Option Implementation Methods

Advantages Disadvantages Feasibility & Timing

Indicators

1. Building the institutional capacity of MFIs and Commercial banks Provide and facilitate training and

exposure visit on Islamic modalities both banks and MFIs

Conducting training on free interest banking to MFI

Conducting training on free interest banking to interested Banks and NBE

Prepare and arrange exposure visit in neighbouring countries

Huge untapped demand

Existing & supportive of NBE directives

Existence of free interest banking in neighbouring countries like Kenya, Djibouti and Sudan

Lack of skilled persons in in free interest banking in the regions as well as in the country

Lack of experience in this areas

Within six months and above

Number of participants trained in free interest banking system both of MFI and banks

Number of person participated the exposure visits

Develop appropriate new products and improve the existing financial services

Hire Constancy to develop appropriate new product for excluded community and improve the existing ones

High demand of appropriate product for pastoralist

Limited of experiences of pastoralist product in the country

Within 12 months

Number of people benefited the new products

Provide loan guarantee fund for MFIs or revolving fund for MSE, RUSSACO/SACCOS and

Availing fund for MFIs to serve the TOPs and pastoralist.

Facilitate loan guarantee fund for TOPs to access loan from MFIs

Arrange agreement for MFI to provide credit to RUSSACOs and MSE operators

High demand of loan for TOPs

Limited capacity of MSE operators to avail guarantee

Limited skills of TOPs and MSE operators to manage loans

Create Dependency or negative attitudes about the credits

Within 12 months

Number of beneficiaries got access loan from MFIs for the revolving fund

Number of RUSSACOs got access of loan for the guarantee fund

Provide Support on appropriate MIS for MFIs

Hire MIS technology providers to install the system to MFIs

Create strong internal control system

MFI required highly

Limited or lack of MIS for MFIs

Limited experience of MFI Staff for MIS

Within 12 months

Number of MFI provided MIS technology

Workshops and trainings for the board of members and senior government officials in Afar Regions

Conduct awareness creation Workshops lead by PRIME with collaboration with AEMFI, NBE delegates while the event facilitated by

AEMFI willingness to support the establishment of MFI

Supportive legal environment from

Lack of skilled man power and experience

Interference of the govet structures

Poor infrastructure

Immediately Number of participants created awareness of MFIs’ importance for the communities.

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PRIME NBE

Willingness of the BOFED and respective burues

Existence of local NGOS and private sectors

Poor culture of credit and saving

Participation of private sectors and local NGO in the share of the Afar MFI

Promoting and organize private sectors actors to participate the share of Afar MFI particularly Livestock traders.

Government interference decreased and decision of share holder harmonize

LS traders benefited from MFIs

MFI financial capacity strengthened

Limited awareness of private sector about MFI

Unwilling of private sectors to share with government

Private sector need profit from MFI

12 months Number of private shareholders participate the Afar MFI

Support MFI expansion of new branches for logistics such as Motorcycle etc

Procure motorbikes for MFIs to reach the remote areas particularly pastoralist

Reach the remote areas or villages to serve credit and saving facility

Lack of infrastructure like rural roads

12 months Number of clients reached by MFIs

Replicate the experience of Somali MFI to other MFIs

Arrange exposure visit other MFIs to see the Somali loan modalities

Easily adopt the existing Somali experience MFI to other MFIs

Limited experience of MFI staff in Islamic loan Modalities

Within six months

Number of staff visited to Somali MFI

Number of MFI adopt the Islamic loan modalities

Support Somali MFI for Mobile and agent banking service to reach remote areas

Provide training and capacity building to Somali MFI staff

Install Mobile and agent banking system to Somali MFI

Awareness of community about mobile banking service

Limited infrastructure such network coverage

2. Provide Capacity Building to the clients ( Demand side)

•Providing business development services, technical training, Marketing linkages, market places and other technical services to clients.

Conducting business training and create market linkage for clients both MSE and clients

Huge untapped demand for loans and other financial services

limited entrepreneurial capacity

Within six month

Number of clients trained BDS

•Provide financial literacy to educate Conduct training Huge potential Limited capacity Within 12 Number of clients

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clients on how to develop saving and insurance culture, manage loans and other financial resources, carry out cash flow, and manage relations with lenders.

on financial literacy for MSE, clients etc

for saving

mobilization; Huge untapped

demand for loans

and other financial

services

of clients (lack of technical skill training and BDS services, working places, etc) to use the opportunities and take risks;

months participated the financial literacy

3. .Provide Capacity building, Strengthening, Expanding & Linking of SACOS/RUSACOS Improve access to credit for RUSACOS,

with appropriate product for pastoral

community (rural and urban)

Capacity building on

office equipment,

printing documentation

awareness creation on

the modalities on

Islamic financial ,

exposure visit

Untapped Huge Demand

Existence of prior experience in SRS & DD

Limited experience of RUSSACO on appropriate product for clients

Within six months

Number of RUSSACOs got access of appropriate product

Strengthening the capacity of RUSSACO through training on recording keeping, organizational management , leadership styles and mentoring, Coaching

Conducting on training for RUSSACO, such as book keeping, organizational management, leadership

Mentoring and coaching

High demand of RUSSACOs for capacity building

Limited capacity of RUSSACOs for organizational management

Within six months

Number of RUSSACOs trained

Organize the existing RUSSACO to form Multi-purpose Cooperatives and Arrange exposure visit

Conduct awareness creation about the Multi-purpose Union

Arrange exposure visit

High Untapped demand of multi-purpose Cooperatives union

Limited capacity of RUSSACOs for organizing multi-purpose union

Within 12 months

Number of RUSSACOs organized in Cooperative union

Link RUSSACO to MFI to get access of loan or facilitate loan guarantee fund to get access of credit

Prepare agreement with MFIs to facilitates credit services

High Untapped demand of credit

Limited financial capacity of RUSSACOs

Within 12 months

Number of RUSSACOs participated loan guarantee fund

4. Provide capacity building on Micro and Small enterprises agency Provide MSE agency staff TOT on BDS

and arrange experience sharing in other regions

Conduct TOT for MSE agency training on BDS

Existing MSE agency across the region

High demand of MSE operators.

Limited capacity of MSE operators Within 12 months

Number of MSE operators trained in TOT on BDS

Capacity building in office infrastructure and staffing

Working along the MSE agency based on the

Limited resources to address the requirement by each MSE across the

12 Months

Number of MSE agency supported by PRIME

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requirement across the region to improve the capacity to reach the unreached

regions Number of MSE operators assisted

Support MSE agency to organize awareness creation work shop for government for the Development Strategy of MSE

Conduct awareness creation workshop

High demand of MSE operators

Limited knowledge of MSE in regions 12 months

Number persons participated the workshop

Facilitate and create market linkage for MSE operators’ product and support to create one stop services in the regions

Conduct trade fair Bazar I modern input suppliers

Facilitate one stop service centres

High demand of MSE product increase

Limited experience on Bazar and trade fairs

12 months

Number of MSE operators participated the trade fair or Bazar

5. Introduce innovative micro insurance product and services to pastoralist

Asses the feasibility in the Northern Kenya and benefit so far in the selected Borena areas

Working closely with the ILRI on how the community advantageous.

Due the recurrent drought in the pastoral areas would benefit pastoralist due tremendous asset loss

Insurance reluctance to cover all regions

Low level of awareness to insurance service by the community

12 months Number of pastoralist entered to the insurance

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Annex 1. Financial Services Seasonal calendar

Seasons Drought season Rainy season Drought season Rainy season

Drought season

Calendar Sep Oct Nov Dec Jaun Febr Mar Apr May Jun Jul Aug

1 Credit

2 Saving

3 Remittance

4 Insurance

Keys for the table

High

Low

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Annex 2. Financial service Contact list Region/woreda Institution Contacted person Address Remark

Afar

Afar BOFED Ahmed 093000 0046

Afar Cooperative Agency Omer Nur 0910741649

Afar Cooperative Agency Ahmed Mohamed 0923206320

Afar Cooperative Agency Gashaw Shifaraw 0911022192

Afar Micro and Small E. agency Said

Afar PCDP Azhar Yilmaw 0913173063

Afar PCDP Efrem Tadess 0911062217

AFAR MFI under formation

Mohamed Afkea

Aar MFI Under formation Mohamed Abdulkadir

Eastern cluster

DD Cooperative Bank of Oromia

Dire MFI Ato Neguse 0912101833

Dire MFI Ato Getachew 0911353890

Commercial bank of Ethiopia

Negatu 0913853237

Micro and Small enterprise Agency

Ato Wagayo

Cooperative Agency Ato Shamsadin

DD Cooperative Union

Shinile

Somali MFI, Shinile branch Sa’ada Omer Nur 0915742766

Bile RUSSACO( Erer Wareda

Harar

Harari MFI Arif Adulhafiz 0912623783

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Jig- Jiga Cooperative Oromia Bank Abarew Asfaw 0911710130

Awash Bank in JJ

Commercial Bank of Ethiopia in JJ

Somali MFI

Cooperative Oromia Bank in Togwajale

Mesfin Alemeyu 0933270488

Somali MFI Togwajale branch

Mawlid Abdi 0911033376

Dalsan RUSSACO in Hartisheck

Muna Abdullahi 0915075858

SRS Cooperative Agency Guled 0915330199

SRS MSE agency Abdulfatah Mahamud 0915754404

Southern cluster

OCSSCO Borena Zone office

Birru Darad 0912202279

Commercial Bank Yabelo branch

Cooperative Agency in Moyale branch in Moyale Oromia

Mesfin Alameyu 0911851837

MSE agency in Moyale Oromia

Dhabo Abdulkadir 0911916275

IRLI in Yabelo Wako

Guji Zone Oromia MFI branch

Mokenen

Alfatah RUSSACO in Filktu

Addis Ababa

Oromia Insurance Company

AEMFI Yared & Dr. Wolday

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OCSSCO Teshome and Rashid 0911511407 &0911637504 respectively

Cooperative Oromia Bank