Addis Ababa( Ethiopia Today) June 14,2023: Kifiya Financial Technologies, the pioneer fintech company in Ethiopia advised the Government of Ethiopia to provide risk and liquidity facilities for fintech companies that are introducing collateral free lending to small and microbusinesses.
Risk and liquidity facilities are needed by financial institutions to enable the institutions provide small credit facilities without collateral to the people engaged in small and microbusiness, according to Munir Duri, CEO and founder of Kifiya Financial Technologies PLC, which introduced digitalized utility payment in Ethiopia about a decade ago.
Even though the financial institutions use the latest Artificial Intelligence (AI) technologies to analyze credit worthiness, the financial institutions still take some level of risks when they extend lending without collateral to the small and microbusinesses, according to Mr. Munir, who advised the government of Ethiopia to consider providing risk and liquidity related facilities to the institutions.
Mr. Munir made the remark on Tuesday a media workshop held at Radisson Blu Hotel, Addis Ababa on Women’s Digital Financial Inclusion (WDFI). The media workshop organized by the UN Capital Development Fund (UNCDF) through its flagship gender initiative, is aimed to share information about the potential of Digital Financial Services (DFS) to transform the lives of unbanked Ethiopians, especially women who lack access to formal financial services.
Commenting to New Business Ethiopia on the issue, Melaku Kinfegabriel, Business Consultant at Premier Consult, argues that lending to small and microbusinesses without collateral is much less risky than lending to big and medium size businesses with collateral. This is mainly because of the large number of small and microbusiness and the small amount of the credit the financial institutions lend to each enterprise, as compared to the large amount of loan each medium and large business access.
“Instead of demanding the Government to provide risk and liquidity facilities, I suggest these financial institutions to but group insurance that can minimize their risk of default by extending collateral free loans to the small and microbusinesses,” Mr. Melaku suggests.
Currently cooperative Bank of Oromia and Ethio-telcom, are providing un collaterized digital lending to small and micro businesses.
Credit:- Behaki
