In 2013, the National Bank of Ethiopia issued a new directive allowing mobile banking for financial institutions, such as microfinance institutions. Following this policy change, USAID has been working with a private technology service provider to assist SMFSC to develop a mobile banking system that links the SMFSC branches through agent banking services. Agent banking allows shopkeepers or others engaged in commercial or business activities to carry out financial services on behalf of the microfinance institution. For those who live in rural communities, this means they will no longer have to trek into town to pay their loans or receive their money, but can conduct their business with the financial institution through their local agent. This new service is currently being piloted in the Somali Region. If successful, it will have the potential to expand to other areas in the country, bringing financial services within the reach of more and more people and helping them achieve their goals.
In January 2011, the National Bank of Ethiopia registered the Somali Microfinance Share Company (SMFSC), a joint venture between the Somali Regional Government, and non-government and private institutions. Starting out with an initial capital of 1.5 million Birr (US $78,000), the company has rapidly grown, increasing its capital value to 22 million Birr (US $ 1.1 million) by the end of 2013.
Since opening, the SMFSC has given out more than 19 million Birr (US $986,200) in small loans, ranging from 4,000 to 75,000 Birr, to both individuals and small businesses and currently has almost 3,400 customers. All of SMFSC’s loans have a compulsory savings component to help customers manage their money. At the end of 2013, SMFSC’s total customer savings amounted to more than 37 million Birr (US $1.9 million), which highlights the success of the savings initiative.
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