EU, Germany, and Netherlands Grant €36 Million to Support Ethiopian SMEs

Ethiopian businesses to benefit from new 2,2 billion ETB (€36 million) economic recovery support from the EU, Germany and the Netherlands

The European Union (EU) and its partners launched a four-year programme to provide support to restore the local economy and build the resilience of micro-, small and medium-sized enterprises (MSMEs) that are affected by the crises in Ethiopia, with a focus on the North of the Country, notably the regions of Afar, Amhara and Tigray.

The programme is jointly funded by the European Union, the German Government, and the Minister for Foreign Trade and Development Cooperation of the Netherlands.

It is implemented by KfW Development Bank, the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), and the United Nations Capital Development Fund (UNCDF).

The 36 million Euro (2.2 billion Birr) programme aims at supporting the economic recovery of MSMEs in post-conflict areas in the North of Ethiopia through improved access to finance.

Various challenges and crises in recent years threaten Ethiopia’s gains in growth and poverty reduction with MSMEs being the most affected.

As most parts of Northern Ethiopia are undergoing a transition from ‘a state of conflict to a ‘state of development’, the programme is instrumental in supporting the efforts for post-conflict economic recovery.

The contribution towards the recovery of the economy in general, and MSMEs in particular, occurs in a setting of security, political and social transitions in the aftermath of a conflict.

It underlines the need to create specific approaches for conflict-affected regions that are urgently in need of the restoration of jobs and economic opportunities, especially for women and young people who are disproportionally affected by the crises, to build back social cohesion, peace, and political stability.

Access to finance is a significant factor for the recovery of MSMEs, specifically those in manufacturing and agro-processing sectors, which have either discontinued business or significantly scaled-down operations due to the conflict in the North.

Affected MSMEs face various additional constraints, e.g., a lack of adequate managerial skills to cope with crises and recover their business, damaged production assets, and loss of employees. Finally, financial institutions and service providers have also been damaged or closed operations, limiting the supply of finance to MSMEs further.

“This support adds to many other initiatives launched by the European Union and EU Member States to help the people of Ethiopia to recover from the conflicts.

We believe that helping the MSMEs will generate more social cohesion, economic recovery and eventually peace in the country.” said Roland Kobia, Ambassador of the European Union to Ethiopia.

“This programme shows that the European Union, The Netherlands and Germany always support us in the crucial sectors. We recognize the special importance of this action that focuses on job creation for youth and women, as 65% of our population constitutes of young people.” added Haasan Moalin, State Minister from the Ministry of Industry.

KfW, in collaboration with the Development Bank of Ethiopia (DBE), will improve access to finance through the provision of credit lines, to be channelled to MSMEs through local commercial banks and microfinance institutions.

GIZ will address the demand side by providing direct technical support to MSMEs with the aim to strengthen their business recovery and resilience as well as their creditworthiness for increasing their chances of accessing finance and reducing the risks of default for financial institutions.

GIZ will provide various types of tailored business development services and trainings to MSMEs to be selected in an open selection process. It will also organize matchmaking formats between MSMEs and financial institutions.

“This programme is in line with the overarching objective of the Netherlands activities in Ethiopia: contribution to sustainable stability in the country.

This particular Team Europe Initiative puts the private sector in the centre, which is crucial for strengthening the economy of the country.” said Henk Jan Bakker, Ambassador of the Netherlands to Ethiopia.

“We strongly believe that the way forward to support Ethiopia in post-conflict recovery is the Team Europe approach.” added Benjamin Hecker, Head of Development Cooperation from the German Embassy.

UNCDF will provide capacity building support to financial institutions and service providers to better serve the MSMEs, including via digital financial services.

Financial institutions and service providers will also be supported to develop new demand-oriented financial products and credit scoring systems, expand their agent networks, and facilitate partnerships among financial institutions and technology companies to enhance innovation.

“We believe this partnership will benefit for all of us and with our constructive efforts we can help restore the sense of normalcy through economic recovery in the post conflict areas of Ethiopia.” underlined Samuel Doe, UNDP Resident Representative

The programme will be implemented through the joint efforts of EU Member States’ development agencies and UNCDF in close collaboration with Ethiopian partner institutions.

The programme is financed by the European Union (EUR 30 Million / 1.8 Billion Birr) in addition to contributions from the German Federal Ministry for Economic Cooperation and Development (EUR 3 Million / 185 Million Birr) and the Ministry for Foreign Trade and Development Cooperation of the Netherlands (EUR 3 Million / 185 Million Birr).


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