Somali Region Gets a Second Micro Finance Institutions

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The MFI has acquired a CORE banking system from Neptune for undisclosed sum

The Somlai Region is going to open a second Micro Finance Institution (MFI) from which is going to extend loans from 10pc to 20pc. This will be the second in the region.

Rays MFI received approval from the National Bank of Ethiopia (NBE) on January 26, 2015, which will enable it to commence operations. This happened four years after the first, the Somali MFI, opened its office in the region.

Starting Monday, February 2, 2015, its Jigjiga and Gode Branches will be open to provide full microfinance services, according to Abdiaziz Hassan, manager of Rays MFI. And in three weeks, the Addis Abeba, Wajale, Hargelle and Fik branches will follow. The plan for the year includes 11 branches across Somali Region, Dire Dewa and Addis Abeba.

Rays MFI was established in July 2014 by six people, fulfilling the required 200,000 Br minimum paid-up capital.

Group Guaranteed Loan (GGL), which is a mechanism that allows a group of individuals to provide collateral or loan guarantee through a group repayment pledge is one of the loan services Rays will provide for people with low income. The initial average loan amount for the first cycle of clients reaches 4,000 Br in the first year of operation, which will be higher after that, with 10pc to 20pc loan interest rate per annum. Rays also provides loans to cooperatives through co-signatory or an immovable asset or vehicle as loan collateral. The average loan amount for first cycle loans is 7,500 Br in the first year of operation, which will increase after that. The loan term is one year with monthly repayment frequency with 10pc loan interest rate per annum.

The institution has a compulsory saving system that is mandatory for all active borrowers and volunteer saving service for individuals and institutions, with minimum savings of 10Br and 100Br, respectively.

Other than this service, in order to provide its customers with the latest banking technology, it signed a deal on January 23, 2015 with Neptune Software Limited to install a core banking system. Neptune was one of the 10 short listed companies in the international bid request for supply and implementation of core banking system by Rays on January, 2014, according to Abdiaziz.

Neptune will start the installation of Orbit-R, which is a core banking solution built for Micro finance Institutions, within 10 day’s time, stated Badanga Raymond, country manager of Neptune Software Limited. The installation alone will take two months and an additional month to integrate the system with ATMs, Mobile banking and other systems, he added. The system will automate the entire manual operation of the MFI; profitability and growth analysis can also be done on a daily basis for all branches and institutions, according Raymond.

“The Orbit-R’s architecture will allow easy interface delivery channels like mobile payment networks, ATM/POS switch, telephone banking, Swift, ECX. We can interface with any other payment networks that Rays may require and introduce with time as the business grows, giving our customers convenience and getting a competitive advantage in the market,” Abdiaziz.

Prior to this business deal, Neptune, which is a UK-based company has worked with Berhan International Bank (Private Bank) and OMO Micro Finance Institution implementing a core banking system. Currently, there are 33 Micro Finance Institutions operating across Ethiopia.


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