What was the objective of the South-South exchange? : The Development Bank of Ethiopia (DBE) sought to learn from India how to implement and sustain a credit facility dedicated to women’s economic empowerment leveraging microfinance institutions, as part of the World Bank’s funded Women Entrepreneurship Development Project (WEDP) in Ethiopia. Learning was expected to improve the participants’ understanding of the whole "value chain" of a microfinance line of credit.

What has happened so far?

Officials from the DBE and Ethiopia’s Federal Micro and Small Enterprises Development Agency (FeMSEDA) along with WEDP staff visited New Delhi, Lucknow, Bangalore and Mumbai in June 2013 to learn from the experiences of the Small Industries Development Bank of India (SIDBI) and three Indian MFIs participating in a similar line of credit. Delegates learned about the transition of Indian MFIs from group lending to individual lending, and tools, methodologies, and resources that could be adapted to Ethiopia’s context. They also learned what factors contributed to an MFI’s success with individual financial products, such as: a strong technology platform; an open and receptive management team; agility and experience with lending to scale; a strong governance structure; an extreme credit discipline; transparency; and a robust client verification process.

What results have been achieved?

The Ethiopian delegates were highly satisfied with the exchange and returned with greater motivation to implement a line of credit under the WEDP. For some, the exchange was their first exposure to an MFI and the “value chain” of a line of credit. Ethiopian delegates have begun to share lessons with MFIs in Ethiopia that are participating in the WEDP, especially on transitioning from group to individual lending. The latter is needed to reach the “missing middle” and target female clients. Knowledge and best practices from the exchange are being integrated into a technical assistance (TA) package for MFIs, which will focus on training of loan officers, management information systems and collateral substitution. In addition, the exchange established a connection between SIDBI and DBE, which is expected to lead to future knowledge sharing.

Client Feedback from Yemenzwork Girefie, a Project Coordinator of the WEDP in the Development Bank of Ethiopia

What was the situation prior to the exchange?

Development Bank of Ethiopia (DBE) was selected as the implementing agency by the World Bank and Ethiopian Government for the WEDP program. Our Bank’s experience in MFI financing was not adequate and our expectation was to gain better knowledge on the credit administration and financing of MFIs for urban women beneficiaries and SME financing.

What were the results from the exchange?
Sharing experiences helped us a lot to understand the challenges and the ups and downs of MFIs. We learned about the risks of lending and how to find ways of minimizing such risks. We noted that there should be careful scrutiny of business plans of customers and other assessments when MFIs are considering credits.

Since the exchange we have been more careful in understanding the business proposals submitted from MFIs, and developed and adopted appraisal formats. MFIs were also encouraged to analyze SME credit proposals and financial statements rather than simply giving credit based on collateral or group lending procedures.

What would have happened if you didn’t have the exchange?
We were not working efficiently and would have done business as usual. This experience was essential to adopting a new way of thinking.