AfDB’s financial support for Ethiopian trade targets SMEs to boost regional trade from and around Ethiopia.
The African Development Bank (AfDB) has approved a $40 million transaction guarantee facility aimed at enhancing Ethiopian trade finance activities. This significant move is set to bolster the country’s economic landscape by supporting small and medium-sized enterprises (SMEs) and facilitating import-export activities within the region.
Empowering SMEs in Ethiopia
The $40 million guarantee facility is strategically designed to provide much-needed support to Ethiopia’s SMEs, which are critical to the nation’s economic development. By addressing the trade finance requirements of these enterprises, the AfDB is ensuring that smaller businesses can participate more actively in both local and regional trade, thereby promoting economic inclusivity.
Strengthening Intra-Africa Trade
This initiative and the support of Ethiopian trade also plays a crucial role in advancing the African Continental Free Trade Area (AfCFTA) agenda. By facilitating intra-African trade, the AfDB’s support aligns with broader efforts to create a more integrated and competitive African market. The guarantee provided by the AfDB will cover up to 100% of the non-payment risk associated with trade finance instruments, thereby encouraging more banks to participate in cross-border trade.
Strategic Partnership with Dashen Bank
Dashen Bank, a leading financial institution in Ethiopia, will be the primary beneficiary of this facility. The partnership between AfDB and Dashen Bank underscores the importance of leveraging local knowledge and networks to maximize the impact of such financial interventions.
Nnenna Nwabufo, Director General, East Africa, AfDB said of the agreement, “Supporting trade in Africa is a key priority at the AfDB. Trade finance is an important driver of economic growth and is critical for cross-border trade, particularly in emerging markets. We are delighted to work with Dashen, a strong partner with extensive knowledge and network in Ethiopia, on a shared ambition to support the region’s trade.”
“After fulfilling the stringent due diligence requirements of the AfDB, we are so delighted that its Board of Directors has approved a trade finance transaction guarantee facility of $40 million. This much-needed guarantee facility will be instrumental in expanding our bank’s trade services across the region and beyond,” said Asfaw Alemu, CEO, Dashen Bank. “The best practices learned through our engagement and the due diligence exercise passed with the continent’s premier development financier has been invaluable in pursuit of Dashen Bank’s strategic aspirations to be a best-in-class bank in Africa. We look forward to further strengthening our partnership and benefiting more from the resources and extensive capabilities of the AfDB and its partners, as we endeavor to support Ethiopia’s thriving small and medium enterprises in productive economic sectors, including agriculture and manufacturing.”
Impact on Ethiopia’s Economic Growth
The AfDB’s commitment to supporting Ethiopian trade is a testament to its broader goal of fostering sustainable economic growth across Africa. By providing financial guarantees and reducing the risk for local banks, the AfDB is paving the way for increased economic activity and job creation in Ethiopia. This initiative not only supports the immediate trade finance needs of the country but also contributes to long-term economic stability and growth.
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