IFC Access to Finance TF (2014-2022)

Some of the results achieved under the program include. Leasing: Over several years IFC trained Leasing Clients and Managers of Turnkey Projects and attempted to supported improvements to the legal framework. Although some important directives (especially for foreign investors) have been issued, the new leasing proclamation has not yet been ratified. However in the past four years, approximately US$ 194.2 million in new leasing loans have been disbursed to some 14,370 clients (including about 2,480 SMEs). These numbers, although well below the leasing market potential of US$ 1.05 billion estimated by IFC, indicate significant progress, especially given the severe operational constraints faced by leasing companies such as limited availability of foreign currency. Credit reporting systems (CR): The CR Project's ultimate objective has been achieved: a new cresdit reporting system (CRS) has been created that collects borrower data from most Ethiopian MFIs, leading to a substantial expansion of the CRB coverage. First, the regulatory framework was changed and secondly, the National Bank of Ethioia (NBE) developed a new CRS internally for finanacial institutions. The CR Project fully aligned with national development priorities and is consistent with the priorities and needs of both the central bank and financial sector stakeholders. In collaboration with the NBE A2F established the regulatory and institutional framework for the national CRS. The project further implemented financial literacy and awareness raising campaigns targeting financial institutions and the leasing sector to promote awareness and acceptance of the reporting system by the banking sector. By the end of 2022 5% of the Ethiopian adult population have their credit information registered in NBEs credit system. Bureau coverage was only 0.4% at the start of the program in 2019. 108 financial institutions including MFIs are participating the reporting system. At the start of the program only 18 institutions were reporting. Over 450,000 enquiries have been registered in the system. An accumulative value of approx 3 billion USD has been mobilized, of which approximately 539 million USD is for women borrowers. 1,9 million borrowers recorded in the system are women. Secured Transaction Credit Reporting (STCR): The first key objective of the STCR project was achieved, as a comprehensive legal framework for secured transactions was developed and adopted. In June 2019, the Movable Property Security Right Proclamation (n 1147/2019) was ratified as the sole legal basis for facilitating the provision of credit using movable assets as collateral, repealing pre-existing sectoral legislation on commercial mortgages or other forms of pledging movable assets to banks. The second key objective of the STCR Project was already achieved in early 2020, when an interim version of the registry with basic functionality was launched. By February 2022, the total number of active registrations was 34,826, well above the project target of 25,921. Commodity Collateralised Financing: The overall objective of the program was to promote the use of commodity inventories in warehouses as collateral to access short-term financing for farmers. The legal & regulatory framework was established for the Warehouse Receipt Framework (WRF) and IFC successfully onboarded both private and public actors including The Ethiopia Agricultural Transformation agency, The Ethiopia commodity exchange and the Ministry of Trade and Regional integration. The opening up of the warehouse sector to foreign investment allowed for the establishment of a joint venture between Vallis Group and Akkas Logistics which allowed for third party warehouse operations. Six warehouse insurance products have been introduced. Six commodities have been trialed, chickpeas, maize, barle, soybeans, teff and wheat in 3 regions Oromia, Amhara and SNNPR. The WRF is recognized by both farmes and financial institutions to have potential to bridge the financing gap in the agriculture sector. Political and institutional commitment is strong for the WRS. The first warehouse receipt under the WRS pilot was issued by the Cooperative Bank of Oromia to the Hitossa cooperative union at the end of 2021. By February 2022, the four banks participating in the WRS pilot had approved financing of around 250 million birr (US$ 5.7 million) based on up to 70% of the value of the deposits. 105 Of these, 91.9 million birr (US$ 2.1 million) had been disbursed to over 20 clients (including not only agro-processors and cooperative unions, but also primary cooperatives and individual farmers) by the end of April 2022. 67 000 farmers have been reached. Agribusiness Development Support: Heineken: The Heineken Project successfully achieved its key objective of strengthening the malt barley supply chain in the targeted areas in the Oromia region. By completion, the Heineken Project had directly supported, as targeted, some 40,000 unique farmers (30% women) covering around 30,000 hectares in the six target areas in the Oromia. 71 of the 80 unique aggregators trained/coached by the Heineken Project improved their operations in the targeted ALP areas (including record keeping, planning and member engagement). The efforts of the Heineken Project ultimately resulted - at least partly, if not mostly in the directly supported farmers producing over 300,000 metric tons of malt barley. It should be noted however that the lack of a national alliance does not seem to have significantly affected the malt barley production in the country as a whole. Finally, the Heineken Project assisted an initial diversification of the crops used by the brewing industry. In particular, with IFC support and in collaboration with suppliers, Heineken piloted the use of alternatives to malt barley - including cassava, coffee, finger millet, maize grits, rice, sorghum, and sugar. The Heineken Project can be considered a relatively cost-effective intervention. For every US dollar spent overall, the Heineken Project, generated around US$ 40 in sales revenues for farmers. Luna Livestock value Chain: The Luna livestock is the first program in Ethiopia with backward integration of livestock (goat) producers. There are more activities to report in the last year of the program after a period of uncertainty and challenges related to the conflict and partner interest. The program has relocated twice. Activities reported are related to infrastructure upgrading and certification processes. Luna showed positive results in implementing regulations for food safety and certification at factory level. Other successes have been noted in testing and trialing new vaccination approaches for goats. Challenges with regards to electrification and road infrastructure and water supply. There has also been a mismatch in the planning with regards to the factory and the outgrower scheme not being ready simultaneously. The project will continue to June 2025 with funding from other sources. Corporate Governance /CG): Although IFC supported some capacity building for regulators, the CG Project did not achieve its objective of developing a regulatory CG framework. Work under this component primarily targeted the NBE and involved the introduction of IFCs toolkit on disclosure and transparency. Even if this legal reform was not supported by the CG Project, it introduced a series of improvements with respect to the former law which dating back to 1960 was especially inadequate for smaller companies. ]

The Ethiopia Private Sector Development Multi-Donor Initiative (MDI) is a joint funding platform that aims to promote private sector development in Ethiopia. The MDI has two pillars: Pillar I Investment Climate (IC), which seeks to improve the investment climate; and Pillar II Access to Finance (A2F), which aims to enhance access to finance for, and promote investments targeting, SMEs. Current donors to the MDI are Canada, Italy, the Netherlands, Norway, Sweden, the United Kingdom, and the United States. Since Sweden has two contributions to two different programs (ICII and A2F), this Completion Memo addresses Access to finance. As outlined by the A2F Pillars theory of change , the program has the overall objective (macroeconomic impact) of increasing access to finance for un(der)served actors, including MSMEs and agribusiness value chain players (with a particular focus on smallholder farmers, women and youth), in order to create jobs as well as increase productivity and income towards, ultimately, promoting the twin goal of poverty alleviation and shared prosperity. In support of the overall (and ultimate) objective, the A2F Programs specific objectives (market impacts) are to: (i) promote a more robust and efficient financial infrastructure and system; (ii) support a more diversified and competitive financial sector; (iii) strengthen agribusiness supply chains. To this end, the Advisory Services (AS) component of the program aims at providing support to the development of financial infrastructure, capacity building for financial institutions to scale up their SME portfolio, and for other private sector companies, especially SMEs, to assist them in increasing their access to finance. A2F includes nine distinct projects in seven areas: 1. Ethiopia Agribusiness o Ethiopia Grains Agri-Business Development o Ethiopia Heineken o Luna Livestock and Outgrower Development 2. Ethiopia Credit Reporting o Ethiopia Credit Reporting (Project 2) 3. Ethiopia Secured Transactions Collateral Registry o Ethiopia Secured Transactions Collateral Registry 4. Ethiopia Leasing o Ethiopia Leasing 5. Ethiopia SME Banking o Ethiopia SME Banking (Enat Bank) 6. Ethiopia Commodity Collateralized Finance o Ethiopia MDI Commodity Collateralized Finance 7. Ethiopia Corporate Governance o Ethiopia Corporate Governance