A practice that started 26 years ago, Saving and Microcredit Program (SMCP) is changing the lives of so many people in Eritrea.
The Office of the Saving and Microcredit Program was introduced in Eritrea in July 1996 with a view to improving the living standard of clients under its supervision. Under the auspices of the Ministry of National Development, the small financial institution started by giving a loan of 1.3 million Birr to citizens. People in rural areas and small towns who do not have access to banks, people who cannot put up a collateral, members of the defense forces who have been discharged from the military and those who have completed their national service are the main clients of SMCP.
A major attraction of SMCP is that you do not need a collateral to be able to borrow, which is required by other financial institutions such as banks. Members of one group of borrowers can act as guarantors of one another. In addition, the office of the SMCP gives out the loans and savings to the clients by visiting them in their particular villages, a very essential service especially for those who live in remote locations.
The SMCP’s has been making efforts to reach out to as many clients as possible. It is now giving service all over the country, covering 73.06% of the administrative areas and 64.99% of the villages. According to the SMCP provisional manager, Mr. Tafla Asmerom, the SMCP started with 1,532 clients in 1996 which rose to 72,000 in 2018. In the past year, however, the number went down to 67,287 due to COVID-19.
Overall, in the past 25 years, SMCP has opened 746 village banks, giving a loan of 3.4 billion Nfa to 933,898 clients.
The SMCP gives three types of loans: solidarity group loan, individual loan and instant loan. Solidarity Group loan is for those with less work experience, who should be organized into a group. The amount of loan given starts with 6,000 Nfa and goes through five loan cycles to reach a maximum of 20,000 Nfa.
Members of the group are required to be guarantors of one another.
Individual loan is given to individuals who are engaged in a profit generating business and can prove that they can cover the expected credit repayments. The amount for this category ranges from 30,000 to 150,000 Nfa that goes through eight loan cycles. In this case, the minimum amount of loan must not be less than 7,000 Nfa.
Instant loan, the latest type of loan which came into effect in 2017, is meant for employees in government and private organizations. It allows employees to borrow an amount of money equivalent to their salary for six months, and they are required to pay back in monthly installments from their salary within a year or two. The lowest amount of loan in this category is 6,000 Nfa at the beginning and after eight loan cycles, the individual can borrow up to 150,000 Nfa.
One of the main concerns of people who would like to borrow money is the interest rate, which varies according to the category. For a micro business loan, the loan is paid back in twelve monthly installments with an interest rate of 16% amortization declining method. For a small seasonal agricultural loan, loans are paid back in three-month installments with an interest rate of 16% amortization declining method. For irrigated agricultural loan, clients are required to pay back in monthly installments over the agreed loan term with an interest rate of 16% amortization declining method. The unrestricted employees’ loan requires a payback in monthly installments from their salaries with an interest of 7 % flat rate method.
A study conducted in 2017 has shown a significant influence of SMCP on the lives of clients. According to the study, the majority of the SMCP clients, 77%, approved the fairness of the interest rate, 5% said it was very low while 18% stated that it was very high.
Many clients have been improving their lives because of the loan they were able to secure from SMCP. Women, in particular, are now said to be the main users of SMCP. Overall, there are 35,730 women clients, who make up 53% of the service users. The clients are aware of the SMCP’s policy and, as a result, pay their loans on time. COVID 19 has made the clients a bit worried but their interaction with the Office is good and continuously improving.
Promoting small enterprises to bring about development is one of the main goals of SMCP. This year, SMCP aims to keep expanding its services all over the county. SMCP is very helpful in the development of citizens and the nation. It keeps on improving and creating more opportunities for the people. It is always ready to serve people who are willing to change and improve their lives through loans. Try to be a client of the program for an improved life and a better future.