The African Development Bank (AfDB) has approved a $50 million Trade Finance Transaction Guarantee Facility for Awash Bank, one of Ethiopia’s largest private lenders, as part of its ongoing efforts to expand access to trade finance for Small and Medium-Sized Enterprises (SMEs) and local corporates.
This move comes a few days after the AfDB approved a $400,000 grant to bolster Ethiopia’s nascent capital market ecosystem.
The announcement, made Thursday via the Bank’s official LinkedIn platform, outlines the terms of the facility, which will provide up to 100% guarantee coverage to confirming banks. The guarantee will mitigate non-payment risk from the confirmation of Letters of Credit and similar trade instruments issued by Awash Bank.
AfDB says the facility is designed to ease the persistent shortage of trade finance in Ethiopia, particularly for SMEs engaged in import-related activities, and to unlock vital trade flows. The support is also expected to bolster investor confidence in Ethiopia’s private banking sector.
“This facility will support much-needed import trade finance requirements for SMEs and local corporates in Ethiopia,” the AfDB said. “It also supports intra-Africa trade, thus contributing to the successful implementation of the AfCFTA agenda.”
The initiative aligns with the Bank’s broader mandate to foster regional integration and private sector development through targeted financial instruments that promote sustainable trade and investment across the continent.
Lamin Drammeh, head of Trade Finance at AfDB, highlighted the strategic relevance of the intervention.
“Supporting trade in Africa is a key priority at the African Development Bank,” he said. “Trade finance is an important driver of economic growth and is critical for cross-border trade, particularly in emerging markets.”
Trade finance continues to be a major constraint across Africa, with the AfDB estimating an unmet demand gap of roughly $81 billion—much of which impacts SMEs. The new facility aims to mitigate the risks that often prevent international banks from extending trade lines to African counterparties.
According to data from Ethiopia’s Ministry of Trade and Industry, there are approximately 2.23 million active Micro, Small, and Medium Enterprises in the country as of February 2021. Micro-enterprises account for 71% of this figure, while small and medium enterprises represent 19% and 8%, respectively.
