The concept of the Small and Medium Enterprise Finance Project /SMEFP/ originated from a study conducted by World Bank in 2014 on the financing of small and medium enterprises (SMEs) in Ethiopia which discovered the phenomenon called ‘‘missing middle’’ where small and medium enterprises are more credit constrained than micro and large enterprises.
The study suggested a solution:
Strengthen the financial capacity of microfinance institutions (MFIs) and provide them with training to serve small and medium enterprises with high credit demand.
Commercial banks should also review their lending policy and focus on supporting small and medium enterprises in addition to the financial support of large enterprises, which should be based on the existing lending needs of small and medium enterprises.
Based on this study, the Small and Medium Enterprises Finance Project was realized through an agreement between the Government of Ethiopia and the World Bank. Accordingly, the loan agreement was signed between the Government of Ethiopia and the World Bank on 15 June 2016.
The project has four components. The Project Coordination Office under the Ethiopian Enterprise Development /EED/ is responsible for the overall coordination role and direct implementation of the second, third and fourth components.
The component is being implemented by the Development Bank of Ethiopia with a budget of $ 269 million and an additional $ 180 million is added to the fund.
The credit line of the project has two lending windows:
This Component is carrying out by the National Bank of Ethiopia and the Project Coordination Office with a budget of $ 1.87 million. The activities under this framework are “Centralized electronic collateral registry and diagnostic survey on insolvency and creditors/debtors regime”. There is also additional activity to be implemented by the National Bank of Ethiopian /NBA/ and the Project Coordination Office which is earmarked $ 3 million for the development of Movable Asset Based Lending and strengthening the credit system in the additional finance.
This component aims to build firm capabilities through selected value chains and broaden SMEs’ access to market by implementing a firm capability-building program and e-commerce platform in Ethiopia. It is implementing by the Project Coordination Office and Ethiopian Postal Service /EPS/. The budget for the parent project is $ 2.26 million, $ 15 million allocated for the additional finance.
It is implementing by the Project Coordination Office and has a budget of $ 2.86 million in the parent project; $ 2 million is earmarked for additional finance.
EED aims to enhance the competitiveness of Ethiopian Enterprise Development, create meaningful employments opportunities, and contribute to the nation's overall economic growth and development.