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Ethiopia: $43M from African Development Fund for Youth and Women-led MSMEs

Wednesday, 22 May 2024 18:59
Ethiopia: $43M from African Development Fund for Youth and Women-led MSMEs

(AfDB) - The Board of Directors of the African Development Fund – the African Development Bank Group’s concessional financing window – approved a grant of $42.86 million to Ethiopia on 22 May 2024 to fund the implementation of the Agri-MSMEs development for jobs Program.  

Aimed at boosting the growth and productivity of youth and women-led MSMEs in Ethiopia, the program focuses on improving access to finance, providing business development services, and strengthening the entrepreneurship enabling environment.

AfDB’s financing is bolstered by a $10 million contribution from the Development Bank of Ethiopia and $6.24 million from the Ethiopian Government. These will significantly boost this promising initiative seeking to eliminate the barriers to finance access for youth and women entrepreneurs’ access in Ethiopia.

The project aims to enhance the growth and productivity of over 8,000 micro, small and medium-sized businesses (MSMEs) led by young people and women. Emphasizing the transformational nature of the project, AfDB Deputy Director General for East Africa, Dr Abdul Kamara, stated, “The project interventions are timely and will support major sector reforms that will help strengthen the strategic and institutional framework for financial inclusion, and youth- and women-led entrepreneurship development in Ethiopia”.  

The project comprises two pillars. One seeks to expand access to finance and non-financial services for youth and women led agri-MSMEs, with institutional capacity strengthening for the main institutional providers of non-financial services. Not only will it support financial institutions to increase lending to youth and women-led Agri-MSMEs, it will also improve the quality and range of services offered by key public and private sector entrepreneurship service providers.

These enhancements are designed to increase the quality of business development services and promote stronger linkages across different service providers. Ms Martha Phiri, AfDB Director for Human Development confirmed that “the project focus on youth and women entrepreneurs will immensely contribute to advancing the inclusive growth agenda and gender commitments of the Bank”.

The second pilar centres on designing, establishing and deploying the Youth Entrepreneurship Investment Bank (YEIB) framework. Its goal is to offer long-term financial and non-financial support to mitigate risks for youth entrepreneurs and nurture their talents and entrepreneurial spirit. The support includes a management company to oversee an equity investment fund providing long-term patient capital to youth businesses in the form of equity and quasi equity. The management company will also work closely with the national Public Credit Guarantee Scheme under design to provide guarantees to financial institutions to incentivise them to lend to youth businesses, which are most often asset-light, without collateral. It will also work closely with the Entrepreneurship Development Institute under the Ministry of Labour and Skills to build MSME capacity.

The Bank’s Acting Director of Financial Sector Development, Mr Ahmed Attout explained that, “The YEIB aims to transform hurdles for young entrepreneurs by acting as ecosystem anchor, convening stakeholders, achieving financial synergies, and establishing youth entrepreneurs as an attractive investment asset class."

The project implementation emphasizes collaboration with the Africa Adaptation Acceleration Program, seeking to capitalize on opportunities for strengthening  businesses, while focusing on climate adaptation through capacity building and empowerment initiatives.

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ECOFIN AGENCY offers a selection of articles translated from AGENCE ECOFIN. Founded in 2011, Agence Ecofin is a leader in Francophone Pan-African economic news, particularly in West and Central Africa. The agency publishes daily news on nine African economic sectors: Public Management, Finance, ICT, Agribusiness, Energy, Mining, Transport & Logistics, Communication, and Training.

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