AfDB Approves $40 Million Trade Finance Facility for Dashen Bank in Ethiopia

The facility will provide up to 100 percent guarantee to confirming banks for the non-payment risk associated with Letters of Credit and similar trade finance instruments issued by Dashen Bank.

The African Development Bank Group (AfDB) has approved a $40 million transaction guarantee facility to bolster Dashen Bank’s trade finance operations in Ethiopia. This initiative is aimed at supporting Small and Medium-Sized Enterprises (SMEs) and local corporates with their import and export trade finance needs, while also enhancing intra-Africa trade and contributing to the African Continental Free Trade Area (AfCFTA) agenda.

Facility Details

The facility will provide up to 100 percent guarantee to confirming banks for the non-payment risk associated with Letters of Credit and similar trade finance instruments issued by Dashen Bank. This support is crucial for facilitating trade and economic growth, especially in emerging markets.

Nnenna Nwabufo, Director General for East Africa at the African Development Bank, emphasized the importance of trade finance: “Supporting Trade in Africa is a key priority at the African Development Bank. Trade finance is an important driver of economic growth and is critical for cross-border trade, particularly in emerging markets. We are delighted to work with Dashen, a strong partner with extensive knowledge and network in Ethiopia, on a shared ambition to support the region’s trade.”

Dashen Bank’s Response

Asfaw Alemu, CEO of Dashen Bank, expressed enthusiasm about the approval: “After fulfilling the stringent due diligence requirements of the African Development Bank, we are delighted that its Board of Directors has approved a trade finance transaction guarantee facility of $40 million. This guarantee will be instrumental in expanding our bank’s trade services regionally and beyond.”

Alemu also noted the value of the due diligence process: “The best practices learned through our engagement with the African Development Bank have been invaluable. We look forward to strengthening our partnership and leveraging the AfDB’s resources and capabilities to support Ethiopia’s SMEs in key sectors like agriculture and manufacturing.”

Transaction Guarantee Product

The AfDB’s Transaction Guarantee Product is an unfunded instrument that provides up to 100 percent non-payment risk cover to confirming banks for trade finance transactions from eligible Africa-based issuing banks. This guarantee aims to support local African banks, particularly in low-income and transition states, by covering non-payment risks and facilitating trade finance.

This facility underscores the AfDB’s commitment to fostering economic development and regional integration through enhanced trade finance mechanisms.