Sidama Micro Financing Institution s.c

Historical Background• SMFI has evolved from Sidama Rural Women’s Credit

and savings schemes from 1994 to 1998; • Objective , to create access to credit and savings

services to empowering women. • Previously, this RWCAS Scheme supported by the

Bureau of Agriculture; • The schemes had operated two years before licensed ;• SD Program had coordinated the Irish Aid Grant

Legal Status Cont.

• Has got operational license from NBE in 1998• SMFI is a registered, licensed, regulated and

public owned/Community owned micro financing institution.

• The Head quarter is in Hawassa, capital of SNNPRS in Sidama Zone.

Vision, Mission

SMFI’s Vision• Is “Seeing the Changed Live of the Poor”SMFI’s Mission • To improve the well being of the

economically active poor both in the rural and urban areas through providing sustainable and appropriate financial services to the productive poor.

Specific objectives:

• Provide financial services to productive poor• To expand outreaches in clients, portfolios and

branch network; • Give priority to women to get access to F. services;• Promote rural and urban MSE operators ;• Promote culture of savings in operating area;• Creation of self-employment and IGA;• Develop appropriate financial products and BDS to

meet the needs of the clients; • Deter exploitation of moneylenders; who push

poor in vicious cycle of poverty.

Ownership

• SMFI is established as Share Company • public owned/community ownership and• Represented by nominal shareholders ; • has represented with few/7/ nominal

shareholders;• who don’t have legal right to claim

dividend at any time;• And simply they assigned to fulfill the

legal requirement;

Financial Products, Services and Methodology

• Lending Methodology• two types of lending methods

1. Group lending 2. individual lending

Group lending

• The lending modality is only group lending /Grameen model until recently ;

• Members of the group are jointly liable for unpaid loan.

• Repayment enforcement through Peer pressure• The group member will be trained for seven days • The individual group member will co-guarantee

each other • Loan will be given to individual within the group • Solidarity group lending is continuing for rural ,

agricultural loan – specially farmers.

Individual lending

–individual lending is Introduced recently–Objective to maintain creditworthy

individual borrowers during their group lending; –To meet higher loan size need of clients –Individual lending is to address the

financial needs of the missing middle –Individual loan are required to pledge

tangible collateral or personal guarantee

Types of Loan Products

• Types of Loan Products–Agricultural Loans–Micro and Small enterprises loan–Petty trades –Handicrafts and services loan –Consumption loan–Housing loan

Activities Financed • Some of the economic activities financed so far• Cereal Crop farming and Vegetables products• Trade (selling of coffee, chat, grain and other

staple crops);• Fishing activities ;• Cattle fattening and selling;• Selling of dairy products such as butter and milk;• Small restaurants, tea rooms;• Preparation and selling of bamboo wood product ;• Selling of 'enset' products;

Some Features of Agricultural Loans

• Average loan is XXX Birr• The loans are provided for farmers in the rural ;• Application is easy & filling loan request format• Terms are six months’ loans • Repaid in Lump sum payment • The interest rate is 18% flat per Annum.• Farmers invest this loan for periodic farm input

demand • As farmer’s income is seasonal in nature • Repay their loan during post harvesting their farm

products.

Loan Eligibility Criteria

• Client's experience in performing his/her business activity

• Availability of market for the product/services• Willingness to form groups and center; • Access loans on a group guarantee basis;• Credit History, Character assessment and motivation • Type of Collateral Needed; • Group and Center Guarantee are required• Group guarantee or peer pressure is used as collateral

& repayment enforcement.

Savings services • Smfi is a deposit taking MFI • Saving service is provided for both loan & non clients• Saving is a cheap source of sustainable fund • SMFI mobilizes two types of saving

1. Compulsory saving ;2. Voluntary saving -like, time deposit, institution

saving, saving Box instrument etc;• Individuals and institutions are encouraged to save • Mobilize more savings and diversify its product to

encourage a saving habit in the society; • pays interest rate of 5% per annum on both saving

Cont. • Compulsory-saving• Group and individual loan borrowers forced to save 10% up

front deduction;• Compulsory saving used as security for the loan; • Withdrawal is possible when loan fully repaid; • Pays 5% interest rate for this saving ; • Insurance services • Credit life insurance services would be given for clients;• 1% premium collected from Group borrowers and 2% on

individual depend up on loan size; • Remaining unpaid loan will be offset if the client die;• Help to reduce a Vulnerability of client’s family’s or group

members.

Overall performance Status

• Current Operational Area (s), the MFI is operating in Sidama Zone alone , Covered 19 woredas-SNNPRG

• Total No. of Kebeles Covered so far 230 out of 526 ;• Total No. of Branches Opened so far 21 full-fledged

Branches;• Gender Sensitivity; M, clients = 52%, F, Clients = 48%• Total No. of Clients served so far 70,000 with 60% R• Total loan disbursement made so far 270 million birr • Total Amount of loan recovered so far birr

259million /about 96% RR/

Target Clients for the services • The primary clients of SIDAMA are:• Rural poor peasants;• Off-farm activity operators; individual clients ;• Micro and Small Enterprise Operators;• Special emphasis is given to women clients;• Target Clients for Savings Urban and Rural poor households• Thus , the SMFI has reach 60% of its clients, are rural one; • Currently about 20,400 active borrows are agricultural loan,

nearly 80% of the total clients; • Disburse annual loan of 40 million birr Agri. Loan per yr• Currently agricultural loan has account for 50% (31.3 million)

outstanding portfolios;• Currently creates employment for over 230 employees

Current performance • As of June 30,2012 , disbursed loans of birr

63,000,000 for 12 thousand loan clients; • has an outstanding loan balance of around

52million ETB with 30,000 Clients ;• Mobilize net saving of 29million birr both in

compulsory and voluntary saving during the same period;

• OSS =120% , FSS= 82% - this will be improved in the yrs come.

• The objective of SMFI is to create access to financial services for the rural & urban clients;

Key Partners’ organization

• Donors , Irish Aid /mother NGO/ now it is inactive/quite • DBE via RUFIP Program –IFAD

mission; • Care Ethiopia –Active • Sidama Development corporation –

Active one;

Current Challenges

• Shortage of loan able funds;• A very low ratio of own capital /outstanding loan• MIS Problem/system constraint • Inflation effect- create expensive operational

activities; High transaction costs, • Staff turn over • Limited BDS services to build the capacity of

clients;

Cont. • Weak entrepreneurship skill of clients and

high risk nature of the services ;• Limited ability to repay from cash flows• No systems for collateral valuation• No access to the Credit

Bureau/information• A lack of knowledge and skills on

product development like agri-business loan , Value-chain finance system,

Future Expansion Plan

• SIDAMA has no intention of expanding to other regions. • It rather wants to increase the outreach in Clients 30,000

to 110,000 • To increase portfolios size from 51million to 235 million to

be served in the same region/zone the next three to five years.

• Adopt MIS Technology • Build branches office facilities at all Woredas to enhance

capacity • Establish Micro bank department to address the missing

meddle rural and urban areas • Enhance financial and operational self sufficiency to build

sustainability;

The end

Thank you