Digital banking and customisation is rapidly expanding Awash Bank’s markets for banking services among Ethiopia’s SMEs and underbanked retail customers. Henock Tessema, Chief, Retail & SME Banking Officer, Awash Bank, Ethiopia, discusses how the bank’s strategy to foster entrepreneurship, close the SME financing gap, and bank the unbanked is supporting Ethiopia’s economic growth.
Global Finance: Why are SMEs so important to Ethiopia’s economy? What financing gaps exist for SMEs?
Henock Tessema: Small and medium enterprises (SMEs) create significant job growth in the Ethiopian economy. As a result, addressing the financing needs of the SME segment as well as tackling other challenges is very important as it directly impacts the economic growth of the nation and the wellbeing of its citizens. As Ethiopia’s financial industry is in its infancy and the financial needs of the SME segment are not adequately served, the financing gap for SMEs is inevitably huge due to the limited availability of loanable funds. In addition, due to the obvious limitations of SMEs themselves, such as credit history, record keeping, absence of necessary skill sets as well as lack of collateral, the SME financing gap persists.
GF: How is Awash Bank providing SMEs with access to capital & services to support their businesses? What new SME products & services have you developed?
HT: Awash Bank understands the importance of working with SMEs to achieve sustainable growth as they are main drivers of the economy. Accordingly, the bank introduced a range of specialised banking products for SMEs. For instance, we provide warehouse receipt financing for the agricultural value chain and financial services and packages for MSMEs and start-ups, tour and travel businesses, micro finance institutions, women-owned and -managed SMEs, small holder farmers, pastoralists and agro-pastoralists, and small transporter operators, among many other business segments.
We also forged partnerships with various governmental and non-governmental organizations to address the SME financing gap and work on financial literacy. The risk-sharing arrangement we have implemented in collaboration with the USAID/DFC program and MasterCard Foundation enabled the bank to reach a significant number of MSMEs that have no access to bank loans because they lack collateral.
Awash Bank is also embarking on an entrepreneurship competition called “Tatariwochu” (The Industries): Empowering the Visionaries that aims to support the cultivation of potential entrepreneurs across Ethiopia. The goal of the “Tatariwochu” program is to support up to 1,000 entrepreneurs with innovative and problem-solving business ideas through training, business development support, and access to finance or unsecured loans.
GF: What is your strategy for retail customers?
HT: The retail customer segment holds an important place in Awash Bank’s growth aspirations by providing stable deposits and a wide customer base. As a result, the bank capitalizes on the need to work aggressively to serve the unbanked and underbanked populations by providing customised products for these mass customer markets in their local settings. Leveraging digital channels has enabled us to focus on addressing the unbanked mass market needs like never before. Providing excellent customer services across various channels to improve the customer experience is our strategic priority.
GF: How are Awash Bank’s digital banking services meeting the needs of your SME customers?
HT: Digitising our banking services for SMEs will significantly improve the efficiency and effectiveness of our service delivery by transforming banking channels through digital business models. Of course, as SMEs are engaging with the digital platforms, they now expect more from the bank as they become increasingly familiar with automation and digitisation. To respond to the digital banking needs of the SME customers, Awash Bank offers convenient ATM, PoS, online, agent, and mobile banking services. We have found a growing number of SMEs are now preferring card and mobile payment options.