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The Ethiopian Government has developed comprehensive agricultural and economic development plans that have contributed to the country’s substantial growth in agriculture, industry and services. There has also been tremendous growth in the number, diversity and market share of private businesses in the Ethiopian economy. However, basic challenges such as unskilled labor, high transport costs, limited availability of financial and telecommunications services, and land tenure insecurity require further attention.
Private Sector Development
Despite progress, private sector investments lag far behind those of government, and the country continues to rank lowest in the region according to the World Bank’s Ease of Doing Business Index. USAID’s five-year Economic Growth and Private Sector Development Support Strategy aims to help create the necessary environment for private sector growth.
USAID works with producers, processors and suppliers to reduce the time and cost to import and export goods and to build private sector capacity and competitiveness. USAID also fosters private sector development by enabling a more stable and inclusive financial system. This is achieved by promoting discussion between private and public institutions and improving business development services for small and medium enterprises.
Ethiopia’s farmers lack access to finance, which they need to modernize their practices and purchase or lease machinery. Ethiopian banks generally require collateral valued at a minimum of 100 percent of the value of the loan, plus interest, which is unattainable for most farmers. Since all Ethiopian land belongs to the government, farmers cannot use the land they lease as collateral and banks do not accept crops or other farm stock as collateral.
USAID encourages growth of the private sector and microenterprises in Ethiopia by improving access to finance and credit for underserved populations. USAID’s development credit portfolio focuses on women, diaspora and local entrepreneurs engaged in small- and medium-sized business activities in agriculture and health.
To expand access to credit in the agricultural and health sectors in Ethiopia, USAID established a loan portfolio facility shared by four commercial banks. For agriculture, the program supports the banks in extending credit to agricultural cooperatives, livestock marketing groups, private sector agro-processors, and private sector commercial horticulture producers. In health, with funding provided by the President's Emergency Plan for AIDS Relief, USAID will increase lending to private health sector enterprises, particularly those providing HIV/AIDS and TB services. Loans will enable private clinics, pharmacies and hospitals to make quality improvements and expand services to more people living with HIV and TB.
Last updated: February 27, 2014