Representatives of International Finance Corporation (IFC), a member of the World Bank Group, said on Monday that lending money to small and medium enterprises would be a profitable business for financial institutions operating in Ethiopia.
With 90 percent of the businesses operating in the country being SMEs providing 60 to 80 percent of the employment in the sector, rendering a better credit service will only be beneficial for both the enterprises and the financial institutions, the representatives said at a workshop organized by the corporation in collaboration with the National Bank of Ethiopia(NBE).
“There is an untapped potential to do business with SMEs here particularly for banks,” Yony Lythgoe, head of the corporation’s financial infrastructure unit, told The Reporter. “However, Ethiopia is one of the lowest lending per capita in the sector where only 70,000 to 100,000 SMEs are being provided with bank loans and credit services.”
In order to render a better lending service to SMEs, a credit information bureau that provides credit information on SMEs should be established along with the right tools that provide a better platform for the service, Lythgoe said. Presently, there is no credit information bureau on SMEs in the country while such enterprises are not required to report. On top of that, the right technology that makes lending service to SMEs easier is non-existent, according to the official.
“We have informed the national bank to establish the credit information bureau and advice the banks to use a better technology that streamlines credit service to SMEs,” Lythgoe said. “Once the tools are installed, we will help the banks how best to use it.” According to him, the IFC organized the workshop to encourage Ethiopian bankers to more to the SMEs sector.
Banks here are not interested to provide more credit service to SMEs and take the risk while they are already profitable with what they do with the other sector of the economy, Lythgoe said. The workshop organized to highlight the significance of lending bank money to SMEs, was attended by presidents and heads of various financial institutions.
[Reporter]