The most powerful attraction is MEDA’s Ethiopia team – their hospitality, dedication to the development of their country, intelligence, and the humility with which they approach their work that reminds me of our Mennonite members in Waterloo. It is precisely the support they provide me for all my assignments in Ethiopia and the diligence with which they follow up that strengthens my belief that great results are possible only with great teams.
My trip to Ethiopia was to help the team start another exciting project committed to increasing sustainable employment and income generation for women and men in the Amhara region who work in rice, vegetables and gemstones. I was to provide orientation training to MEDA staff and managers of the local Bunna Bank branches.
Bunna Bank committed to provide financing to small local enterprises in the rice and vegetable sectors that buy raw rice and vegetables from local farmers. MEDA in turn agreed to cover part of the bank’s losses in case if loans are not repaid. This guarantee encourages local financial institutions to lend money to small enterprises.
MEDA encouraged the bank to offer loans to small rural enterprises that commonly lack access to finance due to inadequate collateral – a serious challenge in rural Ethiopia.
In a previous project working with rice and textile weavers, MEDA guarantees boosted bank financing to small enterprises such as rice processors, textile designers, and exporters, enabling them to create value and demand for rice and textiles that ultimately benefited rural farmers and weavers. Through this partnership, the bank provided multiple loans to 16 enterprises that previously had no access to finance. This resulted in the creation of 27 jobs and the launch of a new textile workshop.
The loans also spurred an extra purchase of inputs, raw rice and textiles from another 990 new rice farmers and weavers in rural locations, at a total value of about $273,000 CAD monthly! And to the bank’s astonishment, the repayment rate was as high as for loans to large companies, proving small rural businesses can be as creditworthy and bankable as their corporate customers. Not bad, eh?
Now, building on this success, MEDA and Bunna Bank have signed a new guarantee agreement to expand financing to small businesses in the region’s rice and vegetable sectors. To ensure a successful launch, we began with a thorough orientation on the new arrangement in Bahirdar, the main city of Amhara Region.
I was amazed to see managers and loan staff from six Bunna branches, as only two participated in our previous program. These branches will be offering services to small businesses, representing the MEDA program and practically acting as agents of change in their target rural areas.
Then we visited two rice processing enterprises financed previously to demonstrate the impact of small business loans. I still remember the surprise in the eyes of one manager when we arrived at the first business. When I asked him why, he said, “I could not even imagine that we at a large bank, with all our risk management systems in place could finance such small informally run businesses and experience the same high repayment rate.”
Bank staff had a chance to interview both business owners and get a sense of their performance, use of previous loans and current demands for financing. When we debriefed later, all branch staff agreed it was an eye-opening event, and said they were ready to market their services to our target small businesses. One branch manager said, “We are all bankers here, and in our everyday business we are so much focused on just achieving our business targets and processing the loans that we do not even think of the social impact we can produce with these loans. It was a wonderful opportunity for us to see that our work results in new jobs, more demand for locally produced goods and helps people achieve prosperity.”
Whenever I hear such feedback, especially when it comes from pragmatic bankers, I am re-energized and on top of my passion to serve people. At a debriefing with our Ethiopian field team, we agreed to use the momentum and follow up with the bank to implement their marketing to our target businesses. I was confident that the team in Ethiopia would make it happen.
An email yesterday from Yohannes of our Ethiopia team confirmed four loan applications are up for approval at the bank, and three other applications are pending in the appraisal process.
Keep up the great work, team!
Read about Solomon, another MEDA client in Ethiopia, here.