Dashen Bank, a progressive Ethiopian bank and one of the largest banks in the private sector, received $40 million from British and Dutch banking institutions. Indeed, British International Investment (BII), the UK’s development finance institution (DFI) and impact investor, and FMO, the Dutch entrepreneurial development bank, today announced their joint commitments of up to $20 million each to Dashen Bank. The loan is set to help drive agricultural exports and provide access to much-needed foreign exchange within Ethiopia.
The loan came, obviously, with a set of conditions. These conditions entail: 1) a five-year term; 2) a 3% interest rate; 3) the loan is secured by a portfolio of agricultural export loans; 4) Dashen Bank is required to maintain a minimum capital adequacy ratio of 15%; 5) Dashen Bank is required to provide technical assistance to its borrowers on good agricultural practices and risk management; and 6) Dashen Bank is required to report to BII and FMO on a quarterly basis on the use of the loan proceeds.
The loan is conditional upon Dashen Bank meeting all of the above conditions. If Dashen Bank fails to meet any of the conditions, the loan may be called in early. In addition to the above conditions, BII and FMO are also requiring Dashen Bank to take steps to improve its environmental and social performance. And these steps include promoting sustainable agricultural practices that minimize the use of pesticides and fertilizers; protecting water resources and biodiversity; and ensuring that the loan proceeds are used to benefit local communities.
BII and FMO believe that these conditions are necessary to ensure that the loan is used in a responsible and sustainable manner. They are also confident that Dashen Bank is committed to meeting these conditions.
The loan is a first for Ethiopia's financial sector and is expected to have a significant impact on the country's economy. Dashen Bank is a pioneer in digital banking and serves over 5 million customers through a network of more than 800 branches. The loan will enable the bank to expand its lending to exporters, which will help to boost agricultural exports and create jobs.
The loan is also expected to help to improve the foreign exchange liquidity in Ethiopia. Dashen Bank is a major importer of agricultural inputs, such as fertilizers and seeds. The loan will help the bank to import these inputs, which will be essential for boosting agricultural production.
The loan is a welcome development for Ethiopia, which is currently facing a number of economic challenges. The country is in the midst of a civil war, which has disrupted economic activity and caused widespread displacement. The loan will help to mitigate the impact of the war and support Ethiopia’s economic recovery.
In addition to the $40 million loan, the UK and Dutch DFIs are also providing technical assistance to Dashen Bank. This assistance will help the bank to improve its lending practices and risk management. The technical assistance is expected to make the loan more effective and help to ensure that it has a positive impact on the Ethiopian economy.