Hijra Bank Pitches Digital Collateral Model to Expand Credit for Ethiopia’s Underserved Businesses

Hijra Bank is promoting a digital lending model that could change how small and medium-sized businesses qualify for financing in Ethiopia by using payment activity and cash-flow data instead of traditional physical collateral.

The model, presented by Hassen Mohammed, Senior Chief for Retail Banking and Digitalisation at Hijra Bank, uses transaction records generated through the bank’s HalalPay platform to assess a business’s financial behaviour.

Rather than asking whether a business owns registered property that can be pledged as security, the approach examines indicators such as transaction volumes, sales consistency, seasonal patterns and cash-flow strength to estimate a borrower’s ability to repay.

Hijra Bank describes this transaction history as “digital collateral”—a financial record that can provide lenders with information about the productive capacity of a business even when the owner lacks property to pledge.

Turning Payment Data Into Credit Information

The model is particularly relevant to Ethiopia’s MSME sector, where access to formal credit remains constrained by conventional collateral requirements.

Payment data can potentially provide lenders with a more dynamic view of a business than a property title alone. A bank can observe how frequently a business receives payments, how sales change over time, and whether cash flows are sufficiently stable to support financing.

This shifts the lending question from “What assets do you own?” toward “How does your business perform?”

The approach is already being applied through Hijra Bank’s digital financing ecosystem. The bank says HalalPay has surpassed ETB 1 billion in collateral-free E-Murabaha financing, with more than 1.3 million wallet users and over 3,000 SMEs benefiting from the platform.

Hijra Bank has also increased its E-Murabaha financing limit through HalalPay to ETB 1 million, with the bank advertising the financing as interest-free, fully digital and without collateral.

A Potential Shift for SME Lending

The model could become increasingly important as Ethiopia’s financial sector becomes more digital.

Traditional lending models depend heavily on documented assets, guarantees and other forms of physical security. This can exclude businesses that generate regular revenue but operate without significant fixed assets or formal property ownership.

Digital transaction histories provide an alternative source of information.

For lenders, the potential advantage is greater visibility into a business’s actual economic activity. For entrepreneurs, it could reduce the importance of owning property when seeking financing.

The model also aligns with Hijra Bank’s broader positioning around financial inclusion and Sharia-compliant finance. Its HalalPay E-Murabaha product is designed to provide financing without interest and, according to the bank, without conventional collateral requirements.

The Data Challenge

The expansion of digital lending, however, will depend on the quality and reliability of transaction data.

A digital payment history does not automatically guarantee that a business is creditworthy. Lenders still need to account for existing debts, operating costs, irregular income, fraud risks and changes in market conditions.

Data privacy and responsible use of customer information will also become increasingly important as financial institutions use payment histories for automated credit decisions.

For Ethiopia, the larger significance is the potential development of a new form of financial infrastructure in which digital activity itself becomes an important signal of creditworthiness.

If the model scales successfully, businesses that were previously excluded because they lacked physical collateral could gain access to formal financing based more directly on the strength of their cash flows.

Source: EBR