Short Study on Microfinance: Ethiopia

This study aims to improve understanding of the operation of microfinance institutions (MFIs) in Ethiopia with particular attention to the ‘Amhara Credit and Savings Institution’ (ACSI).

The study involved discussions with representatives of Ethiopian MFIs, the ‘Association of Ethiopian Microfinance Institutions’ (AEMFI), and donor organizations supporting microfinance in Ethiopia.

The study finds that the microfinance industry in Ethiopia is characterized by:

• Rapid growth,;
• An aggressive drive to achieve scale and wide geographic coverage, especially in MFIs that the Government supports;
• Dominance of government-backed MFIs;
• Focus on rural households;
• Involvement in both agricultural and non-agricultural lending;
• Promotion of both credit and savings;
• Emphasis on sustainability and recognition of capacity-building needs;
• Discipline and strong leadership;
• Recognition of the importance of diversifying products and services, and of the need to study problems related to governance and ownership;
• Progress in improving regulation and supervision of MFIs through the National Bank of Ethiopia and self-regulatory processes overseen by AEMFI.

The study concludes that:

• AEMFI plays a key role in disseminating information within the industry and in offering training, connecting MFI professionals to world-wide experience;
• AEMFI has close links to government-supported MFIs, but works hard to balance the interests of both small and large MFIs in its networking role;
• ASCI is positioned to play an even more visible role as it grows into one of the largest MFIs in Africa.