ETHIOPIA: US supports small loans scheme for women

[ This report does not necessarily reflect the views of the United Nations]

ADDIS ABABA, 12 Oct 2005 (IRIN) - The US has agreed to finance an Ethiopian bank to the tune of US $10 million to guarantee loans to small- and medium-term businesses, the US embassy in the capital, Addis Ababa, said on Wednesday.

The loans, which will target women and entrepreneurs returning from overseas, will be used for the services, manufacturing, and agriculture sectors nationwide.

"The new program provides Dashen Bank with a 50 percent collateral substitute, guaranteed under the terms of the agreement up to a total of $10 million [over 86 million Ethiopian birr], for new small and medium borrowers," the embassy statement said.

"These loans are expected to leverage short- and medium-term credit [...] over five years and will especially help businesses led by women and those benefiting from the experience and expertise of entrepreneurs returning from overseas," it added.

The US has also backed the Bank of Abyssinia and Awash International Bank in similar schemes focusing on agri-business and agricultural cooperatives. All three programmes are worth a combined total of $28 million.

The move came as the government announced that during its next five-year term, it planned to expand micro- and small enterprises across the country.

In documents provided to parliament, the government said it would try to accelerate its industrial development and further privatise state-owned businesses.

Agriculture currently dominates the Ethiopian economy, with more than half of its $8.3 billion GDP earned from the sector. The US and other development partners have repeatedly called for greater emphasis to be placed on the private sector and for banking restrictions to be lifted.

Criticism has also been levelled at the banking sector for being awash with cash that entrepreneurs are unable to access.

[ENDS]