Joint $100mln Initiative to Enable MSMEs Gain Uncollateralized Credit Access

ADDIS ABABA – Mastercard Foundation and Kifiya Financial Technology PLC say they will expand their joint program to enable 477,800 enterprises gain access to uncollateralized digital credit products.

On Tuesday, the duo announced a scale-up program, named a ‘Sustainable Access to Finance to Enable Entrepreneurship (SAFEE), with a 100 million US Dollars budget.

The program incorporated learnings from Michu, a large-scale pilot by the Cooperative Bank of Oromia (CBO), Kifiya, and the Mastercard Foundation. This collaboration enabled more than 148,000 micro, small, and medium enterprises (MSMEs) to access uncollateralized working capital credit in just 14 months.

With the new program, Mastercard Foundation and Kifiya seek to unlock $300 million from six banks to enable more than 477,800 MSMEs to access uncollateralized digital credit products.

It will also support 425,000 young women to access mobile device financing.

Munir Duri, Chief Executive Officer of Kifiya, said: “the program is catalytic by design to enable the financial sector transition through system-level change support where uncollateralized digital credit for MSMEs become the new normal.”

Its credit products, Munir said, ranges from “digital working capital, invoice financing, inventory credit, buy-now-pay-later, and interest-free banking that address the needs and demands of MSMEs.”

Apart from CBO, the program has already partnered with Bunna Bank, Enat Bank, Amhara Bank, Wegagen Bank, and ZamZam Bank. The facility will increase the number of bank partnerships based on learnings and needs.

The program is designed to propel supply-side system-level change while addressing demand-side challenges that have traditionally constrained MSMEs’ access to uncollateralized financial services.

It does this by addressing the lack of credit history and records, availability of appropriate products and services, low use of financial technology and the cost of managing low-value credit.

SAFEE replaces the need for collateral by providing alternative data-driven Artificial Intelligence (AI) credit scoring, which ensures that appropriate and relevant products are tailored to and serve the needs and demands of MSMEs.

By using data-driven technology solutions, the costs of finance and management of small-value loans for the banks were reduced.

The announcement of the SAFEE program was part of the month-long “Startup Ethiopia” event in April 2024, along with the announcement of a series of reforms including access to finance opportunities for start-ups.

Over a period of five years, the latest initiative is expected to drive the creation of job opportunities for 2.18 million young people directly and support other programs to enable 3.65 million young people to access credit.

“Through collaborative efforts and innovative and tailored programs like SAFEE, the Foundation aims to create an ecosystem where MSMEs can harness the power of digital lending to realize their full potential and ensure sustainable livelihoods for fellow young people,” said Samuel Yalew, Mastercard Foundation Country Director.

“These MSMEs will not access financial services through traditional lending approaches otherwise.”

Including SAFEE, the Foundation claims that it has so far committed a total of $672 million in Ethiopia, of which $222 million is for increasing affordable access to finance through various partnerships.

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