Whereas, Commercial Bank of Ethiopia (CBE) has changed its strategic direction to customer centricity with the aim of making savings and credit products more customer centric and offering better customer value propositions;
Whereas, it has become necessary to improve customer experience by digitizing micro business segment through Micro loan products;
Whereas, Commercial bank of Ethiopia intends to diversify its credit portfolio mix in terms of tenure through expanding the short-term financing to be availed to micro business segments;
Whereas, it is necessary to set eligibility requirements, terms and conditions of loan products and services to the micro business segment in view of risk involved and customer’s demand;
Whereas, it is necessary to attract the underserved part of the society and enhance financial inclusion with low-cost financial services availed through mobile money platform;
Whereas, the majority of Micro Enterprises do not fit the loan terms and conditions of Micro Finance Institutions and Banks due to they are high in number and lacked collateral. And CBE has established Micro Credit Department to properly address loan demand from Micro Enterprises.
NOW, therefore; it becomes important to develop and introduce the “Micro Saving and Loan Policy”.
1.2. Short Title
This policy may be cited as “Micro Saving and Loan (MSL) Policy of the Commercial Bank of Ethiopia”;
1.3. Definitions of Terms
“Board” means supervisory Board of the Bank formed in accordance with Article 10 (2) and 12 of Public Enterprises Proclamation No 25/1992.
“Credit Scoring” means judging/evaluating the creditworthiness of a customer based on basic characteristics and past experiences with credit.
“Digital Lending” means a remote and automated lending process, largely by use of seamless digital technologies for customer acquisition, credit assessment, loan approval, disbursement, recovery, and associated customer services.
“Micro Saving and Loan (MSL)” means a digital based saving and lending platform for customers. Here, Under MSL, the “Micro Saving” is a saving platform that allows customers to save money on a digital platform (using their mobile phones) without visiting branches and filling forms. “Micro Loan” is uncollateralized(Credit Scoring Based) digital lending product which is instant, automated, and remote loan offered through mobile phones for CBE Birr customers;
“Micro saving and Loan” means a small amount of loan availed to micro businesses and individuals for the purpose of supporting businesses and consumption.
“MSL Policy” means a general framework approved by the board that spells out and guides the bank’s MSL strategic directions, processes or activities and credit /financing decision.
“National Bank of Ethiopia (NBE)” means a supervising authority of banks, established in accordance with the council of ministers’ proclamation number 591/2008;
“Loan Pricing” means setting interest rate, fees, commission and others to be charged by the Bank
1. Financial Inclusion of street
vendors – Promotion of Micro
Enterprises
State Bank Of India
2. Financial Inclusion
Stated as “ Financially including persons from all strata into the mainstream
banking system .
Financial inclusion index was launched in 2018 based on four dimensions—branch
penetration, deposit penetration, credit penetration and insurance penetration.
The index will have three measurement dimensions; (i) Access to financial
services (ii) Usage of financial services and (iii) Quality.
The Digital India initiative, payments banks and small finance banks are
playing a pivot role along with banks in bridging the financial gap
3. Finance to Street Vendors
• Mostly rely on personal savings to invest in their personal,
social and professional areas
• Work on turnover basis and often avail recourse to high
interest loans from non-institutional lenders
• High repayment capacity but absence of Collateral and firm
domiciliary status restrict institutional credit
4. Challenges associated with Financial
Inclusion of Street Vendors
Lack of KYC
documents
Lack of Financial
literacy
Lack of financial
accessibility
Lack of regular
Substantial income
(Uncertainty)
Low level of
savings
Unable to provide
security against
Credit
5. Prospective Solutions
For Vendors:
•Development of saving habit
•Financial literacy
•Basic accounting of receivables
and sales
For Government:
•Provide legal status by issuing
license and providing hawking
zones
•Include vendors in City and
Town plans
•Set up Social Security fund for
street vendors
For Banks:
•Designing innovative Digital
lending process
•Creation of focused products
•Emphasis to extend more
finance to these vendors under
MUDRA Scheme
6. •MUDRA: Development of a paperless (end to end digital) loan process for
small value loans upto Rs.50,000 (e-MUDRA)
•DRI Scheme for SC/ST:
• Quantum: Upto Rs.50,000
• Tenure: 2 to 3 years
• 4% simple rate of interest
•Pradahan Mantri Suraksha Bima Yojana (PMSBY):
• Age: 18 to 70 years
• Premium: Rs. 12/year
• Risk Coverage: 2 lacs for accidental death or 1 lacs for partial disability
•Pradhan Mantri Jeevan Jyoti Beema Yojana (PMJJY):
• Age: 18 to 50 years
• Premium: Annual premium of Rs.330
• SB account holder
• Life insurance cover of Rs.2 lacs
SBI’s
Initiatives
7. PRADHAN MANTRI MUDRA YOJANA (PMMY)
COLLATERAL FREE LOAN UPTO RS. 10 LACS UNDER PMMY SCHEME
Parameters Features
Nature of Facility Working Capital and Term Loan
Purpose Business purpose, capacity expansion, modernization
Target Group
Business Enterprises in Manufacturing, Trading and Services sector
including allied agricultural activities.
Eligibility Criteria Existing & New units
Quantum of loan (Min/Max)
•Maximum loan amount : Upto Rs 10 lacs Loans upto Rs.50,000 are
categorised as SHISHU
•Loans from Rs.50,001 to Rs.500,000 are categorised as KISHORE
•Loans from Rs.500,001/- to Rs.10,00,000/- are categorised as TARUN
8. Margin (%)
Upto Rs. 50,000/- Nil
Rs. 50,001 to Rs. 10 lacs: 10%
Pricing Competitive Pricing Linked to MCLR
Collateral Security
Nil. To be covered under CGFMU.
However, as Primary Security, Hyp. of P&M for TL and Hyp. of Stocks & Receivables for CC to be
done.
Repayment Period
WC/TL: in 3 - 5 yrs including a moratorium of upto 6 months depending on the activity/ income
generation.
Review of WC/TL to be done annually.
Processing Fee/Upfront Fee
•Nil for Shishu and Kishore to MSE Units
•For Tarun: 0.50%(plus applicable tax) of Loan amount
Other Conditions
•The loans under Mudra Scheme are guaranteed by Credit Guarantee for Micro Units (CGFMU) and
the same is provided through National Credit Guarantee Trustee Company (NCGTC).
•The guarantee cover is available for five years and hence for advances granted under Mudra
Scheme the maximum period is 60 months.
•Leads are now available in Udyami Mitra Portal (www.udyamimitra.in). Site can be accessed by
Branches with Username and Password
•All Branches to issue MUDRA RuPay Card for all the eligible CC accounts.
