RURAL FINANCE AND DEVELOPMENT ETHIOPIA

The project will finance the agri-food/bioeconomy sector and rural development sector in support of the EU's Multiannual Indicative Programme (and in particular the Green Growth pillar under the Green Deal Priority Area) and IFAD's third Rural Financial Intermediation Programme. The EIB will provide a Multiple Beneficiary Intermediated Loan (MBIL) to the Federal Democratic Republic of Ethiopia to be on-lent by the Development Bank of Ethiopia (DBE) to final beneficiaries (small-holder farmers) either via Micro-finance Institutions (MFI), Rural Savings and Credit Cooperatives (RUSACCO's) or their Cooperative Unions.

The objective is to increase access to finance for rural households, particularly smallholder farmers and women, and to establish sustainable rural financial institutions. Additional positive impacts expected from the project include enhanced productivity and value addition, leading to higher incomes and employment. Consequently, it will contribute to improved food security.

The objective of the project is to increase access to finance for rural households, in particular smallholder farmers and women, and to build sustainable rural financial institutions. The operation will be co-financed with the International Fund for Agricultural Development (IFAD) in the framework of their Rural Finance Intermediation Program (RUFIP).

The project will address credit constraints facing smallholder farmers due to information asymmetries and mitigate the effects of global market failures such as climate change and food insecurity. The operation will also minimize potential negative environmental externalities that may arise from agricultural activities.

The EIB financing will be channeled through the Ministry of Finance, the Development Bank of Ethiopia and Rural finance institutions (including MFIs, RUSACCOs and their Cooperative Unions) with adequate environmental and social management systems in place. Borrowers are expected to benefit from enhanced credit and improved product offer, with a focus on gender and climate risk insurance.

The EIB financing is offered with concessional conditions, including maturities which are beyond the usual, long grace periods and flexibility in terms of drawdowns. Furthermore, the project is not expected to crowd out the private market given the under-investment in the agriculture sector over the last years.

The operation is aligned with Ethiopia's National Financial Inclusion Strategy II (NFIS,2021) and with the EUD's Multi Annual Indicative Program under the Green Deal Priority Area, Green Growth component, promoting "climate resilient and nutrition sensitive agri-food value chains", and Governance and Peace Building, Economic Governance, "increased access to finance for MSMEs, digitally enabled and efficient financial systems as well as modern and accountable public institutions".

The operation will support the achievement SDG 1- No Poverty, SDG 2- Zero, SDG 5 - Gender Equality and Empowerment, SDG 8-Decent Work and Economic Growth, SDG10 ? Reduced Inequalities, and SDG 17 -Partnership and Goals.

The Bank provided support in the project preparation phase, including advisory services, and will closely monitor project implementation. In addition to the loan, the EIB is mobilizing TA to strengthen the Promoter's implementation capacities.

This operation is expected to contribute to climate action, particularly in supporting resilience of rural communities to adverse weather events (e.g. droughts, floods, pests) thus contributing importantly to adaptation objectives. Furthermore final beneficiaries will be requested to comply with applicable national and EU legislation, as appropriate.

Following standard EIB procedures for intermediated lending, the EIB will require participating intermediaries to take all the requisite measures to ensure that the procurement by the final beneficiaries is undertaken in line with applicable national and EU legislation, including the EIB Guide to Procurement.

The project is expected to contribute towards the achievement of SDGs 1 (No Poverty), 2 (Zero Hunger), 5 (Gender Equality and Empowerment), 8 (Decent Work and Economic Growth), 10 ? Reduced Inequalities, 13- Climate Action and 17 -Partnership and Goals; to which both the EU and the EIB are fully committed.