Maleda

The Concept

The project provide financing for small businesses delivering goods and services to the ECCE sector, which would otherwise not have the required collateral to be approved for a loan. The goal of the project is to ensure that small companies with good ideas can create a profitable and sustainable business, increase their impact, create more jobs and in some way contribute positively to the growth of the ECCE sector in Ethiopia. 

What makes Maleda unique is its approach; in addition to addressing the credit gap, the initiative creates media exposure for marketing, potential market linkage, and value chain mapping

Biruk Girma, Founder of Sumuni Creative Solution

The Challenge

Ethiopia’s business environment is challenging for SMEs, primarily due to limited access to finance because of insufficient collateral. This issue leads to a high failure rate among startups and impedes the growth of small businesses, despite their significant role in job creation and inclusive economic growth. Ethiopian banks, which only allocate about 7% of their financing to SMEs, perceive these loans as risky and unprofitable, citing lack of information, documentation, and collateral as major barriers. Additionally, SMEs often fall into a “missing middle” category, being too large for microfinance but too risky for bank loans. Female entrepreneurs face even greater obstacles, with nearly half citing financing as their main growth barrier, exacerbated by a lower likelihood of owning collateralizable assets.

The Solution

The project reduces banks’ lending risks by offering collateral and conducting thorough due diligence on SME applicants, supporting them as they grow and repay loans. This approach will facilitate easier access to future financing for successful businesses, encouraging SME creation and fostering inclusive economic growth. Sumuni handles initial due diligence and support businesses in reporting, funded by service fees or equity shares from participating businesses. PfC provides collateral funding, participating in selection and business support. Amhara bank distributes loans among selected businesses, which are expected to use the funds as intended and commit to repayment.