Addis Ababa, Ethiopia,
25 November 2011
Help for smallholder farmers and more services for AIDS patients are two of the results expected from a new partnership between the U.S. government and Ethiopian banks.
The U.S. Agency for International Development (USAID) and three Ethiopian private banks — the Bank of Abyssinia, NIB Bank and Zemen Bank — signed two new agreements November 22 that will offer greater access to credit for projects in agriculture and health.
“The partnerships we celebrate today will not only boost productivity and growth in the agriculture and health sectors, they will increase employment possibilities and generate income,” said USAID’s director in Ethiopia, Thomas Staal.
“They will build the capacity of banks to lend to nontraditional clients. I have no doubt that the loans will boost an already growing national economy,” Staal said.
The agreements, made through USAID’s Development Credit Authority (DCA), expand the U.S. loan financing program in Ethiopia to allow for up to $20.7 million in loans to private sector health enterprises and to smallholder farmers and farming cooperatives.
By sharing the risk and offering incentives, the Development Credit Authority encourages commercial banks to lend to nontraditional clients in sectors that may not have access to capital. The nontraditional clients, who are getting access to loans for the first time, have a chance to demonstrate their reliability as borrowers, possibly leading to future loans and ventures.
The first USAID DCA agreement in Ethiopia started in 1999 with Abyssinia Bank, supporting small and medium-sized agricultural enterprises. So far, USAID’s DCA program has helped leverage more than $47.8 million for more than 200 businesses in Ethiopia, improving agricultural exports and agroprocessing industries, and supporting diaspora- and female-owned businesses.
HELP FOR HOSPITALS AND CLINICS
The new health sector loan agreement with the Bank of Abyssinia and NIB Bank, funded by the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR), will provide up to $13.4 million in loans to private sector health enterprises outside of Addis Ababa, particularly those offering HIV/AIDS and tuberculosis services.
The loans will enable clinics, pharmacies and hospitals to make quality improvements and expand services that support public health goals.
FINANCING HELP FOR SMALLHOLDER FARMERS
The agriculture sector loan agreement with the Bank of Abyssinia and Zemen Bank makes it possible for smallholder farmers and farming cooperatives to purchase agricultural equipment and machinery — such as tractors, harvesters or irrigation systems — through lease financing arranged with the banks.
The agreement, worth approximately $7.3 million in potential loans, reduces collateral requirements by 50 percent and encourages partnerships between agricultural equipment suppliers and private commercial banks.
The program will benefit farmers and cooperatives operating in the 83 woredas (districts) targeted for expansion under Ethiopia’s Agricultural Growth Program and the U.S. Feed the Future initiative.