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Large

Missing Middle

Micro

WEDP Loan Portfolio Analysis

September, 2015

WEDP works with twelve MFI partners (eight

initially selected and four of them joined in second

round of selection in January 2015). Partner-MFIs

began lending in 2014. By September 30, 2015, a

total of 3,445 loans to women worth of ETB 808M

was disbursed by the 12 MFIs. This report analyzes

3,288 loans entered into the WEDP database and

notes the trends.

The Missing Middle WEDP loans target urban, female business owners

within the “missing middle.” Ethiopia’s missing

middle can be defined as businesses requesting

loans between ETB 100,000 – 1,000,000 (Approx.

$5K-$50K). Figure.1 Missing Middle pyramid

At 244,441 ETB, the average WEDP loan does

indeed serve this “missing middle” (Fig. 1), though

it falls within the bottom of the pyramid. Over the

last one year period, changes on the average loan

size was not significant as it was Birr 244,455 in

August, 2014, and Birr 246,978 in June, 2015.

However, WEDP average loan size is by far higher

than the average individual loan size before WEDP

intervention, which was Birr 19,241. The increase in

average loan size is attributed to new opportunities

created for the MSE’s in the missing middle

through complementary TA to the MFIs to come up

with appropriate individual loan product coupled

with dedicated loan capital.

Figure 2. Advanced Vs. Cumulative Disbursed Vs. MFI's Internal Funds Utilized

As indicated on the above figure-2, though the

majority of the WEDP portfolio derives from the

WEDP credit line administered by DBE, four MFIs

(AdCSI, ACSI, SFPI and Harbu) have begun utilizing

their own funds for a total of ETB 101.3M/Out of

the total 808.3M ETB disbursed to WEDP clients/.

WEDP loan has become a significant portion of loan

portfolios for several partner MFIs. WEDP loan

accounts for up 13% for for Harbu and 11% for

ADCSI and SFPI (see Figure 3 for details). Figure 3.

WEDP Loans as a Percent of the MFI's Overall Portfolio

0

100

200

300

400

500

600

700

800

900

Advanced Vs. Disbursed Vs. Internal Fund utilized ( in Millions of ETB)

WEDP Loan FundAdvanced fromDBE/Total/

Cumulative WEDPLoan disbursed towomen borrowers

MFI's Internal fundutilized to WEDPClients

0%

2%

4%

6%

8%

10%

12%

14%

WEDP Portfolio as % of MFI's Total Portfolio, June 2015

Loans > ETB 1M

Loans < 100k

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Figure 4. Average WEDP Loan Size as of June, 2015

The smallest WEDP loan was ETB 10,000, the

largest being ETB 2.6 million. The average loan size

vary by business sector (Figure 4) with construction

sector on the high end and agriculture on the

lower. MFIs set their own minimum and maximum

loan amounts. The larger loan sizes are offered by

the bigger MFIs, ACSI and Ocssco, while small MFIs

usually provide loans below 500,000 as constrained

by internal capacity (capital, limited experience,

staff capacity, etc) including limits set by the

regulator

Figure 5: Minimum and Maximum WEDP Disbursements

But the majority of WEDP loans were made on the

lower end of the spectrum (figure 6).

Figure 6. Range of Loan Disbursements

Most WEDP businesses are mature, with an

average age of 6.5 years. Only 0.9 percent of WEDP

businesses are under one year old. The demand is

there for larger loans; however the MFIs are taking

a cautious approach due to liquidity concerns and

that WEDP loans are still a relatively new product

for them.

However, 62% of WEDP borrowers are new to the

MFI. It would appear that WEDP loans are opening

up a new market for participating MFIs. For repeat

borrowers, there was a 103% average increase in

loan size, possibly indicating that these

microfinance borrowers were dramatically

underserved by previously existing loan sizes, but

had no other borrowing options.

Eighty-two percent of WEDP loan disbursements to

date have gone to the service and trade sectors

(Figure 7).

0

100000

200000

300000

400000

Average Loan Size per sector

AverageLoan Size

0

500000

1000000

1500000

2000000

2500000

3000000

Was

asa

SFP

I

OC

SSC

O

Ad

CSI

AC

SI

DEC

SI

Har

bu

OM

O

MET

EMA

MEN

AG

GA

R

Max Vs. Min Loan Size Per MFI

Max LoanSize

Mini LoanSize

0%

10%

20%

30%

40%

Number of WEDP borrowers per Loan Size Range

Number of WEDPborrowers per LoanSize Range

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Figure 7. Percent Disbursements by Sector

Collateral requirements were a key barrier to

Ethiopian women accessing credit. Most MFIs

require homes as collateral, and for women this

can be a substantial roadblock. To this end, WEDP

encouraged MFIs to use alternate forms of

collateral where lending decision should mainly be

based on cash flow of the business. (Figure 8),

Figure 8. Collateral Pledged for WEDP Loans, June, 2015

43% of the collateral pledged was other than

personal residences. These include vehicles,

personal guarantees, postdated checks, savings and

combination of these. However, the average

collateral value was ETB 498,660 making the

average collateral coverage of 204%. Why? You

can’t collateralize a fraction of a house, and homes

made up the bulk of the collateral. And the value of

the homes pledged drove up the coverage statistic.

But, over the last one year period, loan to collateral

coverage ratio decreased to 204% (September,

2015) from 221% in August, 2014, which is

encouraging.

Figure 9. Projected Loan Use

The projected loan use averaged ETB 169,606 for

working capital and ETB 156,674 for fixed assets

across all sectors. On average, 54% of the loan

went to working capital and 46% for investment

purposes. A detailed breakdown can be viewed in

Figure 9, above.

WEDP loan terms averaged nearly 33 months

across all sectors – possibly too long, considering so

many loans went for working capital.

Figure 10. WEDP Portfolio at Risk Past 30 Days

With most MFIs, the WEDP PAR30 is less than 1%.

The World Bank standard, which matches the

international standard, is PAR30 should be less

than 5%.

Agriculture 2%

Construction 3%

Trade 47%

Service 35%

Manufacturing 13%

Loan Disbursement per sector (Volume)

House 57%

Others 43%

Types of Collateral Utilized

0%20%40%60%80%

100%120%

Projected Loan Use by sector

FixedAsset/Investment

Working Capital

0%

1%

2%

3%

4%

5%

AC

SI

Ad

CSI

DEC

SI

Har

bu

Ocs

sco

OM

O

SFP

I

Was

asa

WEDP Loan PAR>30 Days

WEDP LoanPAR>30 Days

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Staff Trained

334 LOAN officers Trained.

552 MFI staff trained

To assist partner MFIs in transitioning to cash-flow

based lending, WEDP provides on-going training

and mentoring to WEDP-focused loan officers, and

branch and HO staff directly involving in

appraisal/approval of WEDP loan.

Prior to loan disbursement, borrowers were asked

to project the change in number employees after

loan disbursement. Their responses, by sector, are

in Figure 11.

Figure11: Projected Jobs (self-reported, by borrowers)

4513 ENTREPRENEURS Trained.

WEDP partners also provided training to 4513

clients based on input from FEMSEDA.

Impact

According to a recent World Bank baseline survey,

WEDP loans are making a significant, positive

impact on borrower’s businesses. After the first

year of a WEDP loan, the average business

reported a 35.7% increase in profits. WEDP

borrowers also reported an 18.2% increase in

number of employees.

35.7%

01234567

Planned/ projected Jobs (average, by sector per loan)

Planned/projected Jobs(average persector)

INCREASE IN

PROFIT