Michu, Ethiopia’s First Uncollateralized Digital Lending Platform, Disburses One Billion Birr in Loans

Cooperative Bank of Oromia (coop) has announced that Michu, Ethiopia’s first uncollateralized digital lending platform, has disbursed loans exceeding one billion birr.

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A collaboration between coop and Kifiya Financial Technology, Michu has served 100,000 clients, with an average loan amount of 12,000 birr per borrower.

Deribe Asfaw, President of the Cooperative Bank of Oromia, provided an update on Michu’s progress today at a Knowledge Series Conference attended by key stakeholders.

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The conference, titled “Data-Driven MSME Digital Lending for an Inclusive Economy,” was organized by the National Bank of Ethiopia in partnership with the International Financial Corporation (IFC), Financial Sector Deepening-Ethiopia (FSD-Ethiopia), Kifiya, and the Mastercard Foundation. The event focused on MSMEs’ access to credit and the need to modernize unsecured digital lending in Ethiopia.

During the conference, Deribe stated that 80% of the loans on Michu were taken by individuals aged between 18 and 35, with women comprising 30% of borrowers and the physically disabled accounting for 10%. Additionally, the president indicated that only 10% of borrowers exhibited a high risk of defaulting.

coop and Kifiya partnered to launch Michu in January 2022, and it became operational in May 2022. Michu is powered by Qena, an AI-driven digital lending platform that enables banks to provide uncollateralized credit through a credit scoring system.

Currently, micro-businesses needing financing can obtain loans ranging from 5,000 to 50,000 birr through Michu. Interest rates on Michu loans vary from 2% to 2.5% monthly, with a 2% facility fee calculated on the approved loan amount.

Michu was followed by Ethio Telecom’s Telebirr, which launched its digital microcredit services in August 2022. By the end of last year, Telebirr had provided loan facilities amounting to 1.17 billion birr.

The digital lending landscape in Ethiopia is expanding, with platforms like Dashen Bank’s Dube Ale, a buy now pay later scheme, and Lion Bank’s Alegnata joining the fray.