FMO, the Dutch entrepreneurial development bank and British International Investment (BII), the UK's Development Finance Institution (DFI) and impact investor, and, today announced their joint commitments of up to US$20 million each to Dashen Bank (Dashen) – one of Ethiopia's largest private sector banks. The loan will help to drive agricultural exports and provide access to much-needed foreign exchange (FX) within Ethiopia.
BII and FMO are supporting Dashen Bank to help bolster the country's agricultural sector, which employs 80 per cent of the population, contributes 39 per cent to GDP and generates 90 per cent of its foreign currency from exports.
By providing much needed capital for the expansion of growing businesses, the development finance-backed facility enables Dashen to provide USD-denominated loans to cover the costs of importing machinery - supporting farmers towards increased productivity in areas such as harvesting, logistics, and processing and boosting exports earnings.
Broader financial support for agricultural enterprises – from producers of cut flowers and coffee to livestock – will enable innovation, business growth, improved quality and safety standards, and value addition. It will also create significant economic potential, contributing to more financially inclusive growth, in a country where only 45 per cent of the population has access to bank accounts1.
DFI collaboration is key to private sector development. Through this commitment, BII and FMO become the first foreign financial institutions to provide long-term funding to Ethiopia's financial services sector under the new intermediation directive for banks issued by the National Bank of Ethiopia in 2021. This is part of their collaborative efforts to help catalyse the market, build confidence amongst international and domestic investors so as to mobilise more private capital.
This partnership will also help Dashen to enhance their governance, risk management, Environmental and Social, as well as gender practices and bring these to the highest standard in the country.
Asfaw Alemu, CEO of Dashen Bank said: “We are pleased for achieving this historic milestone. With the exemplary co-lending of BII and FMO, Dashen Bank is breaking the ice in the materialization of the directive for foreign loans intermediation. The forex denominated financing will enable Dashen Bank, one of the top four private sector banks in Ethiopia serving over 5 million customers with a footprint of 800 plus branches, to support export-oriented agribusinesses. On top of the badly needed foreign currency, the lessons learnt through the rigorous due diligence process will help us set the bar high when it comes to sustainable financing in Ethiopia. We are extremely grateful to our partners BII and FMO for putting their trust on Ethiopia’s agricultural sector, and Dashen Bank’s capacity to deliver results.”
Stephen Priestley, Managing Director and Head of Financial Services at BII commented on the transaction: "We are proud to be amongst the first movers in a financial market opening up to international investment with this transformative commitment. BII has been a pioneer investor in Ethiopia for the past 50 years. Our partnership with FMO and Dashen Bank forms part of a mobilisation plan that creates untapped opportunities for DFI and commercial investment into Ethiopia’s financial services sector for years to come.”
Marnix Monsfort, Director of the Financial Institutions Department at FMO: “We are very excited by this pioneering opportunity to support Dashen and Ethiopia in attracting Foreign Direct Investments and USD funding. By providing much needed foreign currency for on-lending to the bank’s agriculture/exporting clients, FMO aims to contribute to job creation and financial inclusion of rural communities. We thank both Dashen and BII for this great collaboration.’’