Sidama Micro Financing Institution s.c

1. Sidama Micro Financing Institutions.c

2. 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

3. 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.

4. 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.

5. 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.

6. 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;

7. Financial Products, Services and Methodology • Lending Methodology • two types of lending methods • Group lending • individual lending

8. Group lending • The lending modality is only group lending /Grameenmodel 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.

9. 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

10. 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

11. 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;

12. 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.

13. 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.

14. Savings services • Smfiis 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 • Compulsory saving ; • 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

15. 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.

16. 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/

17. 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

18. 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;

19. 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;

20. Current Challenges • Shortage of loan able funds; • A very low ratio of own capital /outstandingloan • 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;

21. 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,

22. 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;

23. The end Thank you