Professional Documents
Culture Documents
DAI/WEDP
December, 2015
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Table of Contents
Methodology.................................................................................................................................... 3
Goals and Challenges ................................................................................................................... 3
About the WEDP Program and DAI/PEPE .................................................................................... 4
Advertising, Printing and Secretarial .............................................................................................. 5
Bakeries............................................................................................................................................ 6
Beauty Salons ................................................................................................................................... 7
Boutiques ......................................................................................................................................... 8
Brick Manufacturing........................................................................................................................ 9
Building Materials .......................................................................................................................... 10
Cafes and Restaurants ................................................................................................................... 11
Construction and Machinery Rental .............................................................................................. 12
Baltena/ Food Processing .............................................................................................................. 13
Hotels with bars and Restaurants .................................................................................................. 14
Import/Export ................................................................................................................................ 15
Retail Shops.................................................................................................................................... 16
Stationary Shops ............................................................................................................................ 17
Tailoring and Weaving ................................................................................................................... 18
Wholesalers Grain, Vegetables and Fruits .................................................................................. 19
Wood and Metal Work .................................................................................................................. 20
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Methodology
This report was taken from an analysis 2,275 out of 3,288 women-owned micro and small enterprises
(MSEs) who received loans from the WEDP program from January 2014 to September 2015. Types of
businesses selected were based on count. The reliability of these ratios is based on the number of
records included in the business type. The more records, the higher the quality and lower the standard
deviation. For this reason, we required at least 50 instances of loans made to a particular business type
to include it in the survey. However, due to the focus given to the manufacturing sector, we have
included two additional businesses with a count of less than 50 in the manufacturing sector:
Weaving/Tailoring and Brick Manufacturing.
Normally, a survey of this sort would focus only on good-quality loans. However, the data was collected
at the start of the loan term, it has not been segmented based on loan quality. At the time of this
writing, PAR30 was under two percent. However, it should be noted that most loans go bad toward the
end of the term, and these loans havent had time to encounter any repayment problems.
Some of the MFI partners have been lending since January 2014.
Note: All monetary values are in ETB.
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Bakeries
An average bakery has the following characteristics:
Bakery (55)
Average
Min
Max
General profile: Bakeries are businesses engaged in making
Years
2.96
0.5
7
breads, cookies and cakes, which they produce and sell at
Operating
that same place/shop. The businesses involve mass
Loan size
302,172 50,000 1,801,440
production and supplying to retail shops, restaurants, and or
disbursed
cafes on the one hand and also retailing at the shop itself.
Loan term
33.52
12
48
Investment requirements/fixed asset: Starting up a bakery
requires a high initial investment to acquire the necessary
# Employees
5.19
0
15
machines. These include stoves, mixers, steamers, cutters,
Before loan
furniture, etc.
Monthly
196,341 17,500 1,138,542
Working capital requirement/inventory: An established
Sales
bakery requires working capital to buy raw material/inputs,
Profit
0.29
0.03
0.94
mainly the flour (about 90%). Others include yeast, bread
margin
improvers, sugar, butter, creamers, salt, packaging materials,
Total Assets
703,944 37,480 5,349,000
etc.
Loan term: Bakery is a high turnover business. The products
Inventory
100,109
1,000
950,000
are sold immediately to end users or retailers. There is
Value
limited stocking of inventories of finished products, except
Debt to
0.5
0.33
0.56
for cookies. Hence, if a loan is given for working capital, the
Assets
loan terms should be for a short time, i.e., less than a year.
However, if the purpose of loan is to finance purchase of new
machineries, the term could go higher. However, one should determine the payback period based on the cash
flow analysis of the business.
Loan size: Loan size also depends on the purpose of the loan, i.e. whether it is for investment or working capital.
An average stove costs between 25,000 and 60,000, a mixer up to 90,000, and a steamer up to 25,000. If the
business is expanding, loan requirement could go up to 1.8 Million as seen in the sample, while average stands
at about 300,000.
Staffing: An average bakery employs between 3-5 staff, including one main baker, assistant baker, sales
person/cashier, and perhaps one distributor. Staff levels should grow with the size of the bakery.
Profitability: Profit margins average around 30%, but could go close to 100%. These depend on volume of
operation, location, market linkages and availability of inputs to maximize economics of scale.
Appraising Bakery-critical areas to review: What is important in appraising a bakery is capacity of production
(check capacities of all machineries involved), standing orders from retailers, restaurants or shops, check daily
estimated production against sales records, and availability of enough inputs, etc.
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Beauty Salons
An average Beauty Salon has the following
characteristics:
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Boutiques
An average Boutique has the following
characteristics:
Boutique
Min
Max
General Profile: Boutiques are generally defined as stores
(347)
Average
selling clothing and goods for children. Boutiques are high
Years
4.42
0.5
31
turnover businesses, with the bulk of their assets in
Operating
inventory. The most common loan use for boutiques,
therefore, is to increase inventory, though in rare cases
Loan size
199,595 19,000
800,000
loans may be used for renovation and expansion.
disbursed
Investment requirements/fixed asset: A boutique is a
Loan term
32.95
3
60
buying and selling business without adding value. Hence,
investment is limited to renovation of shops and initial
# Employees
1.85
0
31
investment in shelves, displays and other furniture.
Before
loan
Working capital requirement/inventory: Inventory is a key
asset for a boutique and averaged 32% of boutique total
Monthly
208,792
5,750 5,160,000
assets.
Sales
Loan size: Loans are mostly used for increasing stock and
Profit margin
0.33
0.03
0.98
diversifying items offered.
Loan Term: The average loan terms from the data appear
excessive. They should be shorter, as most loans will be
Total Assets
479,397 26,980 5,174,200
used to purchase working capital. Boutiques should turn
over their inventory fairly quickly, and the long terms
Inventory
155,836
1,600 1,000,000
granted by MFIs are likely a product of habit rather than an
Value
analysis of the businesss cash flow. Terms should likely be
in the one to two year range, rather than the three-year
terms habitually provided by Ethiopian MFIs.
Profitability: Boutiques are medium margin businesses, depending on the location and size of the business. It
averaged about 33% for the businesses reviewed.
Appraising boutiques-critical areas to review: When evaluating a boutique, loan officers should inquire about
the mark-up on goods sold. The mark-up must cover the boutiques expenses and, therefore, should be higher
than the profit margin reported. Inventory level, location of business, and level of competition in the area are
important issues to review. Once again, the seasonality of business should be noted and information obtained
should be verified. Loan officers should make sure that borrowers are not projecting an excessive increase in
inventory, a more frequently observed tendency. The location of the stores and variety of items has strong
impact in projecting the cash flow.
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Brick Manufacturing
An average Brick Manufacturing Business has the
following characteristics:
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Building Materials
An average building materials shop has the
following characteristics:
Building
Materials
Shop (97)
Years
Operating
Average
Min
Max
10 | P a g e
11 | P a g e
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Baltena/Food Processing
An average Baltena has the following characteristics:
Food
Average
Min
Max
General Profile: Baltena (food processing) involves making
Processing
different varieties of spices. Though it is described as a
(114)
manufacturing business, the actual processing takes little
Years
4.48
0.08
35
time. Hence, it is considered a business with high turnover
Operating
and labor intensive. This category also includes small-scale
manufacturers producing injera, primarily for wholesale.
Loan size
245,544 40,000 2,000,000
disbursed
Investment requirements: This is a labor-intensive business
with little investment requirement.
Loan term
33.34
12
60
Working capital requirement: Capital is required for the
purchase of the raw material/inputs. Most of the assets are
# Employees
4.64
0
40
Before loan
in a form of inventory inputs as well as finished products.
Loan size: The loans are normally used for buying raw
Monthly Sales 261,696
8,000 1,999,800
materials/ingredients, i.e. for inventory, hence this type of
firm doesnt require huge investment. It is normally a
Profit margin
0.29
0.05
0.80
handmade/labor intensive process. There are large-scale
producers requiring higher loans. Such producers normally
Total Assets
506,091 17,900 4,800,000
also own different machineries like grindings mills.
Loan Terms: One might assume that for a manufacturing
Inventory
122,887
8,000 1,235,000
firm investing in fixed assets, an average loan term over
Value
three years is reasonable. However, within the Ethiopian
firms surveyed, many food processing firms were seeking Debt to
0.49
2.23
0.42
loans for inventory. Inventory is processed and then sold, Assets
presumably within at least a one-year period (hopefully
sooner). Loan terms should be careful to provide appropriate loan terms based on the use of the loan as well as
the business needs.
Profitability: Food processing is a fast-moving business, more similar to trade as the processing is done over
short periods and the items sell quickly. Profit margin can go up to 80%, but highly affected by seasonality.
Appraising food processing businesses-critical areas to review: Emphasis should be given to availability of
market linkages due to the nature of the business, daily manufacturing capacities and quality of the products.
Borrowers need to have regular customers that receive the items in bulk and as a standing order. Seasonality,
and variety of spices produced should also be considered.
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Hotels with
Average
Min
Max
Restaurants
General Profile: The hotel business has higher initial costs
(281)
and relatively low running costs once functional. The main
Years
4.77
0.5
35.00
purpose of loans to established hotels is for expansion, i.e.,
Operating
construction of additional rooms and renovation-hence
capital intensive. A relatively smaller portion of loans is
Loan size
254,031 15,000
2,400,000
disbursed
used for working capital.
Investment requirements /Fixed Assets: Fixed assets
Loan term
34.39
12
60
account for a high percentage of total assets, mainly
acquired during start-up. When evaluating the value of the
# Employees
5.48
0
50.00
fixed assets, loan officers should consider their age and
Before loan
condition.
Working capital requirement: /inventory: Hotels typically
Monthly Sales 166,777 6,520
1,286,808
have less than five percent of their assets in inventory, with
a slightly higher percentage for hotels with restaurants. In
Profit margin
0.37
0.04
0.98
the sample assessed, the average was about 14%. The low
percentage is because the total asset is relatively bigger as
it often includes buildings.
Total Assets
637,513 1,200
11,372,200
Loan size: The loan size could be relatively bigger
depending on the purpose of loan. If the loan goes toward
Inventory
85,868
578
1,699,880
renovation, a higher loan size may be required. But in most
Value
cases, the loan goes to working capital, going as low as
15,000 ETB.
Loan term: The loan term also depends on the purpose of loan. Working capital loans can be repaid over a
shorter time period. For the businesses reviewed, it ranged from 12 to 60 months, with an average of 35
months. Since most loans are for working capital, the average loan tem should be shorter.
Profitability: Small business-sized hotels are typically high-margin businesses, largely because the majority of
costs in the hotel business are up front, during the construction and start-up phases. The average profit margin
in the sample assessed is about 37% but could go as high as 98%, depending on the quality and location of the
hotel. Additional services in bar and restaurant contributes to the high margin.
Appraising hotel businesses-critical areas to review: Loan officers assessing hotels should note that once past
the start-up phase, the largest cost should be labor and supplies, and this should be relatively low in Ethiopia,
resulting in high profit margins. Accordingly, most of the loan goes to working capital if it is a mature hotel; while
the loan goes to investment if it is in start-up phase (or if there is a planned renovation). While estimating cash
flow, room prices and average occupancy should be assessed. There may be some seasonality in the hotel
business which needs to be considered as well. Seasonality issues should also be considered while fixing
repayment schedules. Hence, instead of setting a standard loan term, the maturity level of the hotel and the
intended purpose should be analyzed in setting appropriate terms that match the cash flows.
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Import/Export
An average import/export business has the following
characteristics:
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Retail Shops
An average retail shop has the following
characteristics:
Retail Shop
Average
Min
Max
General Profile: Retail shops are one of the most common
(535)
activities Ethiopian women are engaged in. It involves
Years
3.93
0.5
26
buying and selling various commodities/merchandise. It is
Operating
a fast moving business with high sales turnover and low
investment cost.
Loan size
167,714 10,000
745,000
Investment requirement: Investment in retail shops
disbursed
involves acquiring the shop and furnishing it with shelves
and displays. These are normally a one-time investment,
Loan term
33.2
12
60
with less frequent expansion and renovation. Hence, in
most cases, and for mature businesses, a loan is required
to increase stock levels.
# Employees
1.7
0
18
Working capital requirement: Inventory is the major asset
Before loan
for a retail shop. Typically, cash and inventory will account
Monthly Sales
146,530
2,352 3,749,185
for 40-50% of total assets. At times, Inventory levels could
account for up to 80% of total assets.
Loan size: Loans normally go toward buying
Profit margin
0.30
0.01
0.99
merchandise/inventory, though rarely they might be used
for the purchase of fixed assets. The average loan size is
Total Assets
382,983
8,000 5,384,000
about 167,000 ETB.
Loan term: The loan terms here again appear excessive. A
Inventory
119,215
1,700 4,418,000
strong retail shop should be able to turn over its inventory
Value
well in advance of 33 months. MFIs may wish to consider
shorter loan terms, based on the borrowers capacity to
repay.
Profitability: Margins in retail shops will vary widely based on the type of goods sold.
Appraising retail shops-critical areas to review: When loan officers review the sales of a retail shop, they should
closely examine the location. A shop in a high-traffic area has a strong sales advantage over a shop hidden in a
dark alley. Moreover, inventory levels and competition in the area should also be considered in estimating sales
and expenses. Variety of items offered also need to be considered.
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Stationary Shops
An average stationary shop has the following
characteristics:
Stationary
Average
Min
Max
General description: These are businesses engaged in
(68)
the sale of stationery items including notebooks, pens,
Years
3.8
0.5
11
pencils, papers, markers, staples, punchers, folders,
Operating
clips, sticker, etc. They can range from small to medium
size shops, which also can accommodate bulk
Loan size
236,353
21,000
1,000,000
purchases.
disbursed
Investment requirements: The business doesnt require
Loan term
31.55
12
60
fixed investment as such. It is the buying and selling of
stationery items. Fixed investments may only include
shelves and renovating shops, if owned.
# Employees
2.14
0
8
Working capital requirement: Most of the assets are in
Before loan
the form of inventory. Hence, financing is mostly
required to increase stock levels and increase the
Monthly
247,134
5,000
2,170,000
variety of items offered.
Sales
Loan term: The loan tem should be relatively shorter,
as this is a high-turnover business. The average term is
Profit
0.31
0.04
0.75
32 months for the businesses reviewed, which seems
margin
high for this type of businesses. MFIs need to consider
shortening the loan term to match with the cash flow
Total Assets
477,807
10,300
2,880,000
pattern of the business.
Loan size: Loan sizes range from 20,000 to 1 million ETB
Inventory
160,794
2,000
900,000
in the sample reviewed. The loan size can be bigger
Value
depending on the space available and demand in the
area, and if the business offers wholesaling service.
Profitability: This an average margin business with profit margins averaging at 31%.
Appraising Stationary shops-critical areas to review: Inventory management /control, location of shop (near
school, universities), variety of items supplied, and turnover of major items (check for purchase dates and check
against stock levels).
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Wholesaler Average
Min
Max
General description: These are businesses engaged in
Grain/Veg/
the sale of vegetables and fruits, and those in the sale
Fruit (71)
of various grains also providing grindings services,
Years
4.53
0.5
20
especially for teff.
Operating
Investment requirements: These require relatively
larger investment to buy the grinding mill/ machines.
Loan size
235,521
35,000
1,396,000
Grinding mills cost between 50,000 and 80,000. For
disbursed
those selling fruits and vegetables, their initial
investment is low.
Loan term
33.23
12
48
Working capital requirement: All businesses in this
category require relatively larger working capital to
buy items in bulk and obtain price advantages.
# Employees
2.52
0
10
Before loan
Loan term: The loan term should be low for mature
business demanding working capital loans. But it
Monthly
307,208
7,500
3,456,000
averaged 33 months for the sample businesses
Sales
reviewed, which is on the high end.
Loan size: The loan size depends on the purpose of
Profit
0.25
0.04
0.92
loan. In most cases, loans go to working capital to buy
margin
commodities in bulk and sell to retailers. In such
Total Assets
538,772
13,750
3,000,000
cases, they may require higher loan sizes. The
average loan was 235,000 for the assessed
Inventory
114,803
1,500
439,500
businesses.
Value
Profitability: The average profit margin was 25% for
the sample reviewed. The margin is affected by
seasonality and price of grains and vegetables which are volatile in the market.
Appraising wholesale businesses-critical areas to review: A wholesaler needs to have regular customers
(retailers), and this is a key area to be assessed during appraisal. Regularity and stability of supply is another
critical area to review. Since most of the loan request goes to inventory financing, ensure that increases in
inventory are within the limit of the business, given its current status, and they will be able to accommodate.
These include space, the inventory control system in place and the demand. Increases in inventory by more than
two times will have more risk as the capacity (management capacity plus demand) to cope with the increased
inventory is not tested.
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