Developing Agriculture Loan Products for Poor Rural Communities - Metemamen Microfinance Institution: Ethiopia

This paper describes the pilot testing of an agricultural loan product, Eshet, by Metemamen Microfinance Institution, an Ethiopian MFI.The Eshet product was designed to serve as a catalyst for Metemamens entry into rural areas. The primary objectives of Eshet were to:

• Provide loans to resource-poor farmers;
• Expand Metemamen's rural market penetration into new areas;
• Link with Catholic Relief services (CRS), Ethiopia's agro-enterprise development intervention;
• Generate income to enhance operational and financial self-sufficiency.

The Eshet loan product was successful and created demand for agriculture loans in a number of communities. Its success hinged on key factors such as:

• Excluding the interest rate, no other fees were charged on the loan product;
• CRS support in organizing farmer groups, providing materials and training farmers was beneficial;
• Good weather conditions helped farmers plant and harvest their crops on time;
• Clients were honest and had strong solidarity relationships;
• Close monitoring of activities by Metemamen staff encouraged timely repayment;
• Hiring loan officers from the project area established trust;
• Partnering organizations ensured that recruitment, group formation and follow-up were conducted easily.