The project aims to support the 'missing middle' - businesses too small for commercial bank borrowing, but too big for MFIs
Women entrepreneurs running small businesses began registering, two weeks ago, at the micro finance one stop shops set up in each district of Addis Abeba. This registration is to access loans from a 50 million dollar fund approved by the International Development Association (IDA) - the World Bank's credit wing - nearly two years ago, but only recently released.
This project is to be implemented through the Women Entrepreneurs Development Project (WEDP). This project was set up by the IDA to be implemented through the Ministry of Finance & Economic development (MoFED), the Development Bank of Ethiopia (DBE) and Micro Finance Institutions (MFI) to support women-led small enterprises that are considered too small to borrow from commercial banks and too big to borrow from MFIs. The project coordinator, Yohannes Solomon, calls it the 'missing middle'.
Out of the total grant, which was approved in May 2012, 42.4 million dollars will go to the DBE through the MoFED for credit facility.
The IDA is a segment of the World Bank set up to help the world's poorest by providing credit.
This national urban project involves beneficiaries within 50kms of Bahir Dar, Adama, Hawassa, Mekelle, Addis Abeba and Dire Dewa, a WEDP coordinator, Yohannes Solomon, told Fortune.
The overall aim of the project is to increase the earning and employment capacity of Small & Micro Enterprises (SMEs) owned by female entrepreneurs. The World Bank, which expects 20,000 beneficiaries, believes that this will reduce gender inequalities in the education and labour market.
Some women entrepreneurs in Addis Abeba have, since last week, been signing up and receiving their ID for selection. This is a requirement before the selection process begins, says Yohannes.
The DBE gets the money from the MoFED and lends it to the MFI, with an 8.5 to nine percent interest, payable in three to five years.
The DBE is to assume full risk of the MFIs. The Federal Micro & Small Enterprise Development Agency (FMSEDA) will be the responsible body for the overall implementation of the WEDP and coordination of participating agencies at all levels. Eight MFIs have been selected to administer the credit granting process. The MFIs will set up One Stop Shops (OSSs) to serve as entry points for the MSEs into the WEDP.
The credit may be granted on either an individual or a collective basis. The first criterion requires being an owner of a licensed business, which is either wholly or partially owned by a female. The MSE must also be growth oriented.
"There is no specification on the type of business," says Yohannes. "However, it would be a plus to own a business which is export-oriented or which has the potential of creating employment opportunities for others."
The other requirement is the businesses requiring the loan must have been in business for at least six months and they need to have at least five percent of the capital they need to implement their business plans. Those deemed to have better credit worthiness could receive more loans, depending on their financial needs.