Ethiopia: Partnership between banks and USAID to improve access to credit
On November 22nd, three Ethiopian banks signed a partnership agreement with the US Agency for International Development (USAID) in order to improve access to credit for projects in the health and agricultural sector.On November 22nd, three Ethiopian banks signed a partnership agreement with the US Agency for International Development (USAID) in order to improve access to credit for projects in the health and agricultural sector.
According to a press release from the US Department of State, the USAID, through the Development Credit Authority, will offer guaranties and share the risks with the Bank of Abyssinia, NIB Bank and Zemen Bank.
It is hoped this will allow for up to $20.7 million (€5.3 million) in loans to private sector health enterprises and to smallholder farmers and farming cooperatives.
These agreements "will not only boost productivity and growth in the agriculture and health sectors, they will increase employment possibilities and generate income. They will build the capacity of banks to lend to non-traditional clients", said USAID's director in Ethiopia Thomas Staal.
These incentives and sharing the risks with USAID should encourage banks to lend to businesses in sectors that may not have access to capital. The non-traditional clients have a chance to demonstrate their reliability as borrowers, possibly leading to future loans and ventures.
Agriculture accounted for more than 43 percent of national output in the 2008-09 fiscal year.