Country
Ethiopia

Local Project Partner
Zemen Bank

German Project Partner
Frankfurt School of Finance and Management

Donor
European Investment Bank (EIB)

Duration
05.01.2026 - 14.01.2028

Ethiopia faces a financing gap for SMEs, making additional funding to this target group timely and useful. Looking at agricultural value chains will take an important economic sector into focus, with agriculture being the sector with the largest share of employment in the country and agricultural products being the most common goods for export. The mandatory loan allocation criteria will strongly contribute to achieving the overall project objective of successfully deploying the EIB credit line, with the aim to expand the agrifood/ agricultural sector portfolio focusing on climate action and environmental sustainability and women led or owned businesses. EIB’s Climate Action and Environmental Sustainability (CA&ES) and the 2X criteria will be the guiding rails for pipeline building and roll-out.

The project includes:
1. Development of Zemen's Environmental and Social Management Systems.
2. Support Zemen in developing suitable pipeline in the agricultural sector.
3. Raise awareness and support compliance with EU directives, including the EUDR.
4. Provide customized TA support to improve Zemen’s outreach to women and align the agri-food portfolio with the 2X Challenge Criteria on gender.
5. Supporting Zemen to comply with EIB contractual requirements.
6. Provide tailored TA support to final beneficiaries/MSMEs/ wider ecosystem.

Tasks
The project will be implemented towards the overall regulatory and economic environment of Ethiopia, which requires close monitoring. Since the end of the fixed-exchange rates system in the summer of 2024, a considerable depreciation of the Ethiopian Birr (ETB) and consequently an increase of prices, including those for imports, has impacted the economy and the society at large. Additionally, the National Bank of Ethiopia has introduced regulation capping credit growth of private financial institutions to influence inflation, slowing down loan disbursement growth. Liquidity conditions in the banking sector have improved somewhat recently, but liquidity constraints remain a recurring challenge that continues to limit the capacity of Ethiopian banks to expand on-lending. Existing credit lines of various donors, including EIB, started to address this gap, many of them targeting micro and smaller businesses with smaller loan sizes and with specific target groups, like women. These credit lines were mostly channelled through the Development Bank of Ethiopia, acting as apex institution for on-lending to the financial institutions in local currency. The banks and final borrowers therefore did not encounter a currency risk and the market absorbed the credit lines well.