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									Institutional Performance, Opportunities & Challenges
            in Financing Rural Value Chains
                 Atakilt Kiros (DECSI)
◦ Dedebit Credit and saving institution is one of the micro finance
  institutions in Ethiopia undertaking micro financing activities in the
  Tigray

◦ DECSI is now managing a huge operation financing all sectors from
  the subsistence farmers to micro, small and medium enterprise
  operators

◦ As a key engine to the regional economic development, DECSI is still
  expected to play a remarkable role in creating a stable, efficient,
  sustainable financial systems

◦ That contain financial solutions in the fight against poverty in the
  region and the country as well.
   The performance of the institution so far is very promising.

   In its fifteen years of operations, DECSI has successfully
    achieved very concrete and quantifiable results.

   In terms of coverage, the institution has able to cover the
    largest part of the region, 6457 households for a sub-
    branch

   The number of branch offices has grown from 8 to 111 sub-
    branches supervised by 9 branches and 13 other branches

   In terms of the impacts, scientific assessments have shown
    very positive impacts on the lives of the poor.
   The population of the region is estimated to be above 4.4 million as of
    2007 of which 81% of the total population is from rural.

   The region is still characterized by food insecurity with an average land
    holding size of less than a hectare.

   While the resources such as labor, natural resources, water etc are
    available, they are not properly exploited due to various constraints in
    which finance is one.

   The financial services rendered by the banks is low, in a sense that the
    access of the population to financial services is very limited.
• There is only one commercial bank per about 8.5million
  population or nine commercial banks for the estimated 75
  million population of the country.

• Currently, the population to bank branch in Ethiopia has
  grown from 250,000 in 2005 to 178,000 as of 2006

• The ratio is even much higher than some countries such as
  54,000 in Ghana, 130,000 in Uganda, 11,136 in South Africa,
  20,074 in Namibia or below 2,000 for most of the OECD
  countries.

• Generally, the high population to branch ratio in the country
  shows the bank services are not closer to the population to
  monetize the economy.
   When it comes to the Tigray region, the banking services are
    even much higher than the average ratios for country,120000/sb

   The commercial banks are operating having at least one bank
    branch

   There is also a wide coverage of the population with micro-
    finance services .

   The level of deposits mobilized by these banks excluding the
    amount of savings mobilized by DECSI has shown a substantial
    increase from birr 1.7 billion in 2003 to birr 2.9 in 2007 showing
    the potentials for savings

   When added to the birr 355 million deposits mobilized by DECSI ,
    the total deposits mobilized in the region has reached birr 3.255
    billion.
   The targeting strategy of DECSI was designed from the very
    cause the institution.

   Improving the food security and stimulating the whole
    economy through offering an efficient and adequate financial
    services

   Basically, the financial service packages in the institution are
    designed to the interest of the needs the households and

   The activities that lie with in the rural value chains are the prior
    targets of DECSI,

   the value chains in each sector are addressed given all the
    opportunities and challenges that exist in our environment.
   To this effect, DECSI is involved in the full ranges of
    activities


   These are required to bring the outputs of the farmers from
    supplying with the necessary inputs through the different
    phases


   These include production, delivery of the products to
    consumers to raising the income generating capacity of the
    poor.
   Supply of
 raw Materials       Production                 Delivery      Consumers          Disposal


 Supply of:          Household:
 Grains             Poultry
                                             Transporters   Urban  dwellers   Clears
 Fertilizers        Diary farm
                                             Wholesalers    Rural farmers     MSEs
 Livestock          Fattening
                                             Retailers      The youth
 Water              Horticulture
 generators                                                  The handicap
                     Off farm activities
 Water pumps                                                The civil
                     Small irrigation
 Tridle pumps
                                                             servants
                     schemes
 Drip pipes         Water sources




  Credit Services    Individual,   Group, Guarantee, Special


                                                             Regular
Regular Loans       Household rural       Regular
                     & urban package                         Housing Loan
Household rural &                          BusinessLoan
urban package                                                Youth Loan
                                            Urban Package
Finances to MSEs                           Loan             Handicapped
                                                             loan
Type of           Technical                 Financing                  Marketing
Services           support




 Firm’s    • Rural dev’t office                                    • Marketing Agency
involved   • B. Of Agriculture                                     • Farmers multipurpose
                                                                   co-operatives
           • Food Security office
                                                                   • Agro processing plants
           • Farmers Organizations
           • Credit Committee
           • NGO’s
           •Commercial Bank of
           Ethiopia


Services   • Skill upgrading            • involving in screening   • Provision of market
                                        process                    information
Provided   • targeted trainings
                                        • Disbursement of loans    • Provision of markets
           • Consultation
                                        • Loan follow ups          • Linking producers with
           • Business development
                                                                   the buyers
           services                     • Collection of loans
           • Screening clients          • Assessment of impacts
           • Monitoring activities of
           clients
           • assessment of impacts
                          Rural Package

800000000
700000000
600000000
500000000
400000000
300000000
200000000
100000000
        0
            2002   2003    2004     2005     2006   2007   Jun-08

                                  Rural Package
   In terms of the activities financed so far and the demand for the
    services, the need for finance is amazingly increasing


   When the program was introduced, they very few farmers that
    joined the program.


   Latter on, the number of applications has grown slowly and
    raised up unexpectedly to the level DECSI couldn’t imagine and
    avail enough financial resources


   This was the time when the institution started to explore other
    mechanisms to raise financial resources to finance the new
    project ideas created by the households.
   Out of the basketful of alternatives, the cheapest and easiest way to
    obtain financial resources was savings

   This can be tapped from the community through implementing an
    efficient and effective way of saving mobilization systems.

   For this reason, It was necessary for DECSI, to strictly identify the
    factors influencing savings behaviors of the community

   More importantly, DECSI tried to identify the key allies from the
    stakeholders and signed a partnership agreement

   This was to transform the huge financial resources that can be
    mobilized through savings to their woreda investment activities.

   The arrangement requires for both parties to finance their programs
    with a 60%:40% contributions. The woreda is expected to mobilize
    60% of its program and get the remaining 40% from DECSI
   The key players in this model are the zonal, woreda and kebelle
    administration office & DECSI.

   According to the agreements, the administration offices are responsible to
    mobilize the community and the creation of awareness on the benefits of
    saving,

   DECSI is required to avoid any negative factors that influences the saving
    behaviors of the savers.

   While the government strives for savings opportunities or the capital
    formation of its zonal on woredas, DECSI will also be benefiting from the
    resources

   The reason is due to the mobilization of savings provides to have a strong
    capital base to a healthy & sustainable programme.

   Eventually, the institution will have other advantages such as protection of
    its portfolio from financial risks (default cost & inflation) and create a
    sense of responsibility, competence & accountability on the institution.
   The model is still designed from the advantages of the clients.

   The clients are the one benefiting the model because savings
    encourage them to plan their future activities and develop an
    excellent banking culture and financial discipline.

   Saving has also an important effect on the clients, as the culture
    develops self esteem, dignity, reduce dependency &
    indebtedness.

   The savings do also help clients to have stable economic status,
    secure the household as a financial safety net

   It does also serve the saver as capital bases to access more
    resources from banks.
                                       DECSI
    Office of the
    Government

                               Adapt Key Principles
    Mobilization of the        Create very quick and Accessible services
     community                  Clearly define the Macro economic environment
                                   ◦   Avoid shifting of preferences from monetary savings to physical
    Apply house to                    assets
     house/person to person/      Ensure income generation capacity of the people
     contacts
                                  Ensure competitive & attractive interest rate
    Involvement prominent        Ensure confidentiality of financial details of individuals
     people in the area           Make sure it has security guarantee to the depositors
    Use the media                Avail a professional saving officer at every branch
                                      10
                                           12




                  0
                      2
                          4
                              6
                                  8
          1995

          1996

          1997

          1998

          1999

          2000

          2001

          2002


Amount
          2003
                                                Average Annual Increment




          2004

          2005

          2006

          2007

         Jun-08
             Outstanding Saving in Million

400
350

300
250

200
150

100
50

 0




                                                                                                  Jun-08
      1995

             1996

                    1997

                           1998

                                  1999

                                         2000

                                                 2001

                                                        2002

                                                               2003

                                                                      2004

                                                                             2005

                                                                                    2006

                                                                                           2007
                                                Years

                           Outstanding Saving in Million
                        13,644,025.87

28,474,267.03                                 33,337,784.82



                                                           108,109,116.98




119,651,604.50                                       52,052,154.49

           Borrowers          Non Borrowers       Governmental
           Non Governmental   Group               Center
Key :


        Head Office in Mekelle Town

        Main Branch Offices – 9 (nine)

        Microfinance Branch Offices – 14

        Sub Branch Offices – 114
   OPPORTUNITIES

   Conducive working environment
   The fact that MFIs are part of the poverty reduction strategies in the
    country

   CHALLENGES

   Absence of enough financial resources
   The tendency to save in real assets than monetized assets
   The risk of drought

   CONCLUSIONS

   Design a financial system very responsive to the needs of the people
    through a ppp arrangements

								
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