News: EU and IFAD provide Ethiopia with € 26.5 million in liquidity and debt relief to help finance agriculture in COVID-19 era

Home health checks by health extension workers from the Dire Dawa administration. April 2020

Addis Ababa, May 24, 2020 – The International Fund for Agricultural Development (IFAD) and the European Union (EU) will provide € 26.5 million in liquidity and debt relief to rural financial institutions to protect jobs and preserve livelihoods during the COVID-19 pandemic, according to a press release sent to Addis Standard.

In Ethiopia, the agricultural sector and rural populations are the most affected by COVID-19. The pandemic has reduced the agricultural workforce, limited access to inputs and productive capital, reduced production and productivity, and hampered access to markets and financial services. This has led to the loss of jobs, reduced access to food and increased domestic responsibilities for women.

Micro Small and Medium Enterprises (MSMEs) and cooperatives that play an important role in creating jobs and sustaining livelihoods in rural areas are also facing challenges related to the pandemic.

“Today’s new € 26.5 million project to support COVID’s on-time agriculture finance shows our support for Ethiopia’s economic development and job creation. This funding from the EU and IFAD will provide a new line of credit to agricultural SMEs and their farmers in the production areas of the country’s main agro-industrial parks, ”said Dominique Davoux, head of the Green Deal team, EU delegation in Ethiopia.

The current economic downturn requires additional support for the most exposed rural financial institutions in order to maintain their liquidity. The Ethiopian government has put in place mitigation measures to deal with the impacts of the pandemic, including support to the entire value chain, MSMEs and farmers’ cooperatives.

Under the IFAD-supported Rural Financial Intermediation Program III (RUFIP III), the government’s demand to provide liquidity to MSMEs experiencing scarcity will be met through assistance aimed at strengthening the resilience and sustainability of the financial sector. rural. Over 1.5 million clients of these rural financial institutions will benefit.

“The COVID 19 pandemic is affecting the most vulnerable members of the community through the loss of jobs and economic opportunities. As a vital part of the rural economy, MSMEs will be able to maintain their activities with a minimum of shocks and retain their employees, thanks to this assistance, ”said Mawira Chitima, IFAD Representative and Country Director. for Ethiopia. “IFAD is pleased to co-finance this effort with the EU and the Ethiopian government, as job protection is vital for resilience and supporting the financial sector is a key strategy.”

The Development Bank of Ethiopia (DBE) will receive an IFAD grant of € 13.8 million and an additional grant of € 12.7 million from the EU to improve its liquidity and support rural financial institutions ( IFR). The funding will enable RFIs to help their MSME clients keep their jobs, reduce the cost of interest on credit, provide support to farmers facing difficulties in meeting their contract farming agreements, absorb the penalty on overdue loan repayments and to provide liquidity to partially cope with the deferral of loan payments owed to DBE from RFIs.

“This support could be essential to maintain agricultural productivity in times of uncertain domestic and international food markets due to COVID,” Davoux said. “The EU contribution provides for an interest subsidy that will reduce the financing costs of RUFIP beneficiary companies affected by the COVID-19 crisis, thus increasing their resilience to withstand the crisis and maintain employment.”

The main partners of the project will include the Federal Agency for Cooperatives, the regional cooperative promotion offices, the Association of Ethiopian Microfinance Institutions and the National Bank of Ethiopia.

Since 1980, IFAD has invested US $ 795.5 million in 20 rural development programs and projects in Ethiopia, for a total amount of US $ 2.1 billion. These have directly benefited about 12 million rural households. AS / Shipping

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