Catholic fund brings microfinance services to Ethiopia

In July, African Business reported that the Global Solidarity Fund (GSF), an organisation whose values are consistent with those of the Roman Catholic Church, had backed a deal to bring microfinance services to vulnerable and internally displaced people in Ethiopia. A consortium of local religious congregations, supported by the GSF, signed a memorandum of understanding with Hibret Bank and the technology firm Elebat Solutions that will see the institutions provide loans to unbanked people or those with limited credit histories.

The initiative, known as the Tila Project, is to be supervised by the Ethiopian Ministry of Labour and Skills and financially supported by the Mastercard Foundation. It is hoped that the scheme will ultimately help more than 40,000 people in Ethiopia access capital.

Jini Sebakunzi, programme and grant manager at the GSF and specialist in financial inclusion, explains that the project involves “providing loans via phones rather than cash to make it easier and more seamless.” He believes that this will help drive financial inclusion because “while many of the disadvantaged people we are talking to are illiterate, with a very low education level, they all have mobile phones and can read numbers.”

With this facility opened to them for the first time, Sebakunzi believes that more financially excluded people will be able to access loans and the formal banking system. The longer-term ambition is to help put marginalised individuals in a better position to obtain the initial capital needed to set up a small business, and therefore drive higher levels of economic growth and wider prosperity.

Partnerships to aid vulnerable people

The Tila Project also demonstrates the role the Catholic Church sees for itself in encouraging the development and uptake of new, inclusive financial solutions in Africa. The continent accounts for almost 20% of the world’s Catholic population and is the fastest-growing Catholic region in the world. Given these accelerating demographic trends, it is perhaps natural that the Catholic Church is beginning to consider how it can operate on the continent more comprehensively across different sectors.

Sebakunzi tells African Business that “the mission is to work as a bridge-builder – to make partnerships and connections between faith-based organisations, and other actors that work with vulnerable people.”

“You often find that lots of different groups are trying to do the same thing but not talking to each other. But if you join forces, you become more efficient, and you also have a bigger impact,” he adds. “We work with the public and private sector, NGOs, development agencies, and groups such as the UN, World Bank, and IMF to try and bring people together.”

To this end, the GSF is active at global summits such as the World Economic Forum in Davos and is constantly looking, in their words, “to catalyse partnerships.” The Tila Project – through which the GSF brought together banks, tech firms, government bodies, and global financial institutions – is a perfect example of how the Fund sees its role.

The Fund works with Catholic organisations and Catholic communities to help bring projects into life but the projects themselves are designed to support disadvantaged individuals of all religions. “GSF’s mission is to improve the livelihoods of vulnerable people, by partnering with members of all religions,” Sebakunzi explains. “In the case of Ethiopia, it is a pilot project predominantly with Catholic organisations that support all local communities that come with different religious organisations.”

Church committed to development goals

The GSF is a “very young organisation,” Sebakunzi says, having only been operating since 2018, but was born out of the Church’s desire to help communities make progress on the UN’s 2030 Agenda and Sustainable Development Goals. Since being elected in 2013, Pope Francis has been supportive of these initiatives, and other sustainability-focused schemes, and has committed the Catholic Church to “promoting and implementing the development goals that are supported by our deepest religious and ethical values.”

While the GSF does not have an endowment fund and therefore does not invest in projects or companies directly, Sebakunzi believes the Church’s contact with vulnerable communities and a wide range of institutions means they are well placed facilitate partnerships between different stakeholders.

“Our goal is really to improve the livelihoods of vulnerable people,” he adds. “We work with internally displaced people, migrants, and refugees predominantly because the Church has very good experience working with these groups. It feels very important that the Church should help the poorest of the poor,” he says.

Access to credit is essential

Sebakunzi has recently returned from a visit to Ethiopia, a trip which has reaffirmed his belief that one of the most effective means of helping the poorest individuals is to help them access capital and start businesses. Initiatives such as the Tila Project are designed to cover the first issue, but the GSF is also active in providing practical advice to those wishing to set up and manage small enterprises.

“Access to credit is one issue when it comes to financial inclusion, but once people have access to a loan, we’ve discovered that many people also need access to mentorship,” Sebakunzi tells African Business. “People come to us and say: “I’ve got a location. I’ve got a business. I’ve got access to loans. But I wish I could ask an expert: how do I get more customers? How do I secure better suppliers?” These types of things are less tangible than access to capital but equally important.”

Given this, the GSF also helps connect small business owners with business advisory organisations that can provide them with the mentorship they need to succeed. “Firms like having somebody step in to offer advice; not on a daily basis, of course – it could be as little as once a month,” Sebakunzi says. “The owner might just want to get on a call with an expert every now and then to ask some questions. Having access to an expert advisor who can accompany them on the journey is invaluable.”

Success stories

It is still early days for the GSF, but Sebakunzi is encouraged by some successes he has seen. “There was a woman I met recently in Ethiopia, who had a sewing machine. We provided her with some training and got her access to a proper workspace. After two months, she already had two sewing machines.”

“She had progressed to having two machines because she was making enough money to rent another one and the demand was there too. It was great to see that she could grow a business in this way, and she was very thankful,” Sebakunzi notes.

The GSF has ambitions to work across Africa and further afield but has started off largely operating in Ethiopia, simply because many of the professionals working at the organisation already have strong links with the East African country. “We started there because we already had the relationships in Ethiopia, we already knew which religious congregations we should reach out, which makes the job easier,” Sebakunzi notes. However, he does say that the group has started making moves to bring financial inclusion initiatives to Nigeria, while the GSF is also active in humanitarian projects in Colombia.

Looking ahead, Sebakunzi says the idea is to perfect the model in Ethiopia and then begin to expand into other countries in the region, making use of the “huge network that religious congregations have.”

“We want to look at how we can bring in more partners, more actors,” he says. “2024 will be an interesting year because we’ll be able to evaluate the success of the fintech and microfinance solutions we’ve been exploring and take them elsewhere.”

“If you can bring fintech solutions to the most disadvantaged people, you can really transform their lives.”