The Cooperative Bank of Oromia (Coopbank) has secured a 570 million-birr ($10 million) loan portfolio guarantee from FMO, the Dutch Entrepreneurial Development Bank, to expand its collateral-free loans to MSMEs.
This initiative, targeting underserved groups such as agricultural, youth, and women-owned small entrepreneurs, was announced on July 8, 2024, and is part of the NASIRA program. Through a risk-sharing arrangement, the NASIRA guarantee covers potential credit losses resulting from MSMEs not repaying their loans. NASIRA, marking its first engagement in Ethiopia, has provided $371 million in guarantees so far.
Coopbank, in partnership with Kifiya Financial Technology, launched the nation’s first uncollateralized digital lending app, Michu, in 2022. As of June 2024, Michu has disbursed 5 billion birr to over 230,000 MSMEs.
Although efforts to reach officials at Coopbank and FMO before this article’s publication were unsuccessful, Shega has learned that the guarantee might be linked with Coop’s new Revenue-Based Financing (RBF) model.
Coopbank, supported by the World Bank Gender Innovation Lab, Renew Capital, and Rise Addis Advisory, has been piloting this RBF model, another novel financial product in Ethiopia. Revenue-based financing allows loan approval based on evidence of income rather than collateral.
In addition, unlike conventional loans with rigid repayment structures, this new lending product offers flexibility as repayment is tied to revenue.
No Comment Found.