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The Mastercard Foundation, in partnership with Kifiya Financial Technology, launches a $100 million program that aims to make uncollateralized digital lending the new normal for micro, small, and medium enterprises (MSMEs).

Dubbed the Sustainable Access to Finance to Enable Entrepreneurship (SAFEE) Program, the initiative is designed to unlock resources from banks, innovate new models/products, and solve challenges that have traditionally constrained MSMEs’ access to financial services.

SAFEE, which will run for five years, will see the development and launch of several digital financial products targeting MSMEs. The program also provides technical assistance for financial institutions to transition from conventional collateral-based lending to uncollateralized, digitally enabled, credit-score-based lending and embrace new modes of financial service delivery.

“Our partnership with the Mastercard Foundation will enable the unlocking of uncollateralized credit products ranging from digital working capital, invoice financing, inventory credit, buy-now-pay-later, and interest-free banking that address the needs and demands of MSMEs,’ said Munir Duri, founder and CEO of Kifiya Financial Technology

“The program is catalytic by design to enable the financial sector transition through system-level change support where uncollateralized digital credit for MSMEs becomes the new normal,” he added.

Founded in 2010, Kifiya works on simplifying complex financial services to bridge the digital divide. The company offers a diverse portfolio of services in payments, agriculture, micro-insurance, and mobility.

Michu, Ethiopia’s first uncollateralized digital lending product, is also a by-product of Kifiya, Cooperative Bank of Oromia, and the Mastercard Foundation. It enabled more than 148,000 MSMEs to access uncollateralized working capital credit in 14 months.

SAFEE incorporates learnings from Michu and unlocks $300 million from six banks. The partnership allocates a portion of the $100 million budget as a revolving fund for participating banks to distribute as loans. Each bank will contribute its own capital, bringing the total available credit to $300 million.

The credit will be available in various forms, including nano, micro, and small working capital loans, inventory credit, invoice financing, equipment financing, and buy-now-pay-later options. These products will be accessible to MSMEs in urban, peri-urban, and rural areas across Ethiopia.

The project aims to reach around 477,800 MSMEs to access uncollateralized digital credit products. In addition, it creates an opportunity for 425,000 women to own smartphones through device financing.

SAFEE has initially partnered with the Cooperative Bank of Oromia, Bunna Bank, Enat Bank, Amhara Bank, Wegagen Bank, and ZamZam Bank. The partners plan to increase the number of banks in the program based on learning and needs.

According to the SME Finance Forum, the financing gap for MSMEs in Ethiopia and Sub-Saharan Africa is estimated to be $4.3 billion and $331 billion, respectively.  

“Through collaborative efforts and innovative, tailored programs like SAFEE, the Foundation aims to create an ecosystem where MSMEs can harness the power of digital lending to realize their full potential and ensure sustainable livelihoods for fellow young people,” said Samuel Yalew Adela, Mastercard Foundation Country Director, Ethiopia.

Including SAFEE, the Foundation to date has committed a total of $672 million in Ethiopia, of which $222 million is dedicated to increasing affordable access to finance through various partnerships.

Over a period of five years, the program aims to directly drive the creation of job opportunities for 2.18 million young people (80 percent women) and support other programs to enable 3.65 million young people to access credit.

The program will also focus on supporting vulnerable young people who are traditionally excluded from accessing financial products, including women, persons with disabilities, refugees, and Internally Displaced People (IDPs)

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Kaleab Girma, an Addis Ababa-based reporter and researcher, with over six years of experience in the field. He currently serves as Shega's Editor-in-Chief and specializes in reporting on small businesses, innovation, technology, and startups in Ethiopia.