Central Bank Allows Microfinance Institutions to Evolve into Banks

Aug 22 , 2020

The National Bank of Ethiopia (NBE), in a directive issued last week, has allowed microfinance institutions to upgrade into full-fledged banks. The directive lays out the criteria for which microfinance institutions are eligible for this transition. Accordingly, microfinance institutions with a strong financial footing and with regional governments or city administrations as shareholders, which accounts for more than 70pc of the industry, are deemed qualified. It also states that institutions will have a period of two years to finalise their transition into banks. However, a transitioned microfinance institution, while performing the regular services of a bank, must not neglect the main aim of its establishment, according to Yinager Dessie (PhD), governor of the central bank. The institutions must continue to serve and provide loans to the small and medium enterprises and the low-income individuals they were established to serve. Currently, there are 38 microfinance institutions in the country, accounting for 41.6 billion Br in mobilised savings deposits.