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On February 21, 2022, Kifiya Financial Technology in partnership with the Mastercard Foundation and its knowledge partner International Finance Corporation kicked off a first of its kind knowledge seminar bringing together financial institutions, policymakers, and MSMEs to discuss how to make capital more accessible to entrepreneurs by addressing prohibitive collateral requirements. Kifiya Financial Technology is pioneering a unique approach to the challenge through its digital lending technology Qena, which connects businesses to credit without the need for collateral, leveraging new approaches to credit scoring.

Recent figures show that, Ethiopia has an estimated 800,000 MSMEs of which only about 130,000 have access to credit (70% micro-enterprises and 40% of SMEs), and the total financing gap is estimated to be approximately USD $4.2 billion (https://bit.ly/3Hd0qMh). The gap is driven by a variety of factors, including capital investment and machinery requirements, a general backlog of foreign currency, and much larger working capital requirements.

Speaking to the challenges facing MSMEs, Thomas Bekele said: “In the past, we worked with Micro Finance Institutions to purchase machinery for our business.  As small business owners, we haven’t had the chance to work with banks. That is mainly because we do not have a property that we can use as collateral to borrow money. Uncollateralized digital lending is a great opportunity to grow our business. Once digital lending products start providing loans, we plan to seize the opportunity and expand our business by opening an outlet and buying a vehicle for delivery.”

Financial institutions often lack platforms that enable them to interface directly with MSMEs, understand their challenges, and co-create solutions. By bringing together leading industry experts, researchers, bank senior officials, entrepreneurs, regulators, policymakers, government, and other key stakeholders, the knowledge seminar is poised to accelerate digital lending solutions and enhance access to finance for MSMEs in Ethiopia.

“Ethiopia is embarking on transforming the financial sector and embracing digital first. Digital knowledge is at its centre. And everyone needs to partake in bridging the knowledge gap in the sector. This is the beginning of a knowledge series to convene experts to debate, share ideas, experiences, and lessons to provide digital financial services to small businesses and smallholder farmers,” said Munir Duri, Kifiya Financial Technology CEO.

Ultimately, MSMEs are central to Ethiopia’s economic growth—but a lack of access to capital constrains their growth. Reflecting on the opportunities presented by collateral-free digital lending, Samuel Adela, Country Head, Ethiopia at the Mastercard Foundation said: “The bottom line here is not just profit for businesses—it is an opportunity for Ethiopians, particularly young Ethiopians. This is about unlocking the potential of MSMEs to deliver critical products and services, fuel the economy, and create jobs that allow individuals to build dignified and fulfilling lives.”