![[Ethiopia] USAID, SIDA offer Enat Bank $10 million loan portfolio boost](Enat.png)
[Ethiopia] USAID, SIDA offer Enat Bank $10 million loan portfolio boost
Enat Bank has signed a loan portfolio with the United States Agency for International Development (USAID) and the Swedish International Development Cooperation Agency (SIDA) that will allow it to cover up to 50 per cent of losses on a $10 million dollar loan.
The agreement operating under the Portfolio Risk Sharing Loan instrument. will allow the entities to work together to provide more loans to women entrepreneurs and increase its capacity to lend to small and medium-sized enterprises (SMEs).
The purpose of the guarantee is to increase financial access for the most deprived sectors of society, including women and SMEs. It also aims to reduce unemployment in the country. The programme is expected to extend and facilitate loans to an under-served sector of borrowers, including those SMEs owned by women.
The guarantee also includes the provision of technical assistance to Enat Bank and borrowers’ cover under the guarantee, through training in business management and development.
“The agreement will enable the bank to provide loans to deprived parts of the society, but economically robust women, who can renew their business using the loan funds,“ said Wondwossen Teshome, President of Enat Bank.
Last year, an enterprise survey on business owners and top level managers at 848 firms by the World Bank indicated that over 40 pc of business environment constraint is caused by lack of finance.
Loans – for which guarantees will be provided – will be issued to meet the financial needs of women entrepreneurs for working capital, and the implementation of investment plans and projects.
Previously, USAID had the same agreement with Awash Bank, Nib Bank and Zemen Bank in 2011. While SIDA has also given the same guarantees in other African countries, like Zimbabwe.
The loan guarantee is expected to generate around 500 new jobs and raise the income of the benefiting firms by 75per cent.
USAID and SIDA launched a collaboration for the issuance of joint credit guarantees in developing countries back in March 2010. Since then, the two entities issued a loan guarantee for investments in climate change, food security and health.
“I am excited about the partnership, which is a fuel to strengthen the financial industry in the country,” said Lesile Reed, USAID Mission Director to Ethiopia. “The agreement will allow us to create a more conducive environment to empower women in eliminating poverty in the country.”
In emerging economies like Ethiopia, eight out of ten small business cannot easily access finance to grow. In order to fill this gap, USAID’s Development Credit Authority employs risk sharing agreements to encourage private investment. The programme has financed 50 million dollars to Ethiopian borrowers since its inception.
Enat Bank was first founded by 11 Ethiopian women in 2014, with 64 pc of the share owned by women. According to the bank’s latest audited report, it earned a 53.1 million Br of profit in the 2014/15 fiscal year.
The first loan portfolio guarantee agreement of USAID with Ethiopian banks started in 1999, with the Bank of Abyssnia. At this time, the aim was supporting small and medium enterprises engaged in different agricultural activities. Later, in 2009, Awash Bank and Oromia Cooperative Bank signed the same agreement worth 16 million dollars, in order to strengthen the lending capabilities of micro finance institutions.
