The African Development Bank (AfDB) Group has approved a $40 million transaction guarantee facility for Dashen Bank in Ethiopia. This facility aims to support Dashen Bank’s trade finance activities, particularly for Small and Medium-Sized Enterprises (SMEs) and local businesses.
The guarantee will also promote intra-Africa trade, advancing the African Continental Free Trade Area (AfCFTA) agenda. The approved facility will provide up to 100 percent guarantee coverage to confirming banks.
This will protect them against non-payment risks associated with confirming Letters of Credit and other trade finance instruments issued by Dashen Bank. This significant financial support will enable Dashen Bank to expand its services to a broader market.
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Supporting SMEs and Intra-Africa Trade
Nnenna Nwabufo, the AfDB’s Director General for East Africa, emphasized the importance of trade finance in Africa. She noted that it is crucial for cross-border trade, particularly in emerging markets.
“Supporting Trade in Africa is a key priority at the African Development Bank,” Nwabufo said. She added that the partnership with Dashen Bank aligns with their shared goal of boosting trade in the region.
Dashen Bank’s CEO, Asfaw Alemu, expressed the bank’s satisfaction with the approval. He stated that the guarantee facility is vital for expanding their trade services across the region and beyond.
Alemu also highlighted the invaluable lessons learned through the due diligence process with the AfDB. He believes these insights will help Dashen Bank achieve its strategic goal of becoming a leading bank in Africa.
The transaction guarantee facility from AfDB is an unfunded instrument. It provides up to 100 percent non-payment risk coverage for trade finance transactions conducted by eligible African issuing banks. This facility will primarily benefit banks operating in low-income countries and transitional states.
By covering the non-payment risks, the AfDB ensures that local African banks can confidently engage in trade finance activities. This support is particularly important for SMEs in sectors such as agriculture and manufacturing, which are critical for economic growth in Ethiopia.
The partnership between AfDB and Dashen Bank is expected to strengthen Ethiopia’s trade infrastructure and contribute to the country’s economic development.