Ethiopian Enterprise Development Spurs 150,000 MSME Jobs, $1.6B in Import Savings

The Ethiopian Enterprise Development, a state-owned enterprise which has seen its role evolve significantly over the past five years, has helped nearly 2752 Medium, Small, and Micro Enterprises get established over the past nine months. The Enterprise’s report for the period also outlines saving nearly 1.6 billion dollars through import substitutions while creating almost 150,000 new jobs along the way. The figures signal a significant shift for a country that spent nearly 5.07 billion dollars on imports in the last quarter of 2023/24.

During a press briefing held at Enterprise’s headquarters last week, Deputy Director Abdulfeta Yusuf highlighted an operational focus on value addition and rural industrialization. He said helping MSMEs with financing through commercial banks has helped create a sustainable income source for several local communities.

“Over four billion birr has been spent on machinery,” Abdulfeta told Shega.

The Enterprise reported facilitating nearly six billion birr in loans to MSMEs to cover operational and administrative costs.

“Most of them would have shut down without the intervention,” the deputy says. 

Abdulfeta indicated that nearly 95% of the loans disbursed to enterprises have been paid back over the past nine months. The Deputy Director partly attributed the increased financing to new requirements by the National Bank of Ethiopia, which expects some portion of disbursement to flow to emerging businesses.

Ethiopia’s MSMEs have historically struggled with access to finance due to high collateral requirements, steep borrowing costs, and limited access to banking services, among others. Another research conducted by the UNDP showed a six-billion-birr financial gap in 2021.

Recent efforts to bridge this gap have included the UNDP’s launch of a $1 million Credit Risk Guarantee Fund (CRGF) at the Development Bank of Ethiopia in 2023. The CRGF guarantees 50% of loans made to ICT-sector startups by banks and MFIs, thereby reducing collateral requirements and encouraging lending. Over a dozen financial institutions have begun providing collateral-free loans to MSMEs by applying alternative ways of assessing creditworthiness.

EED’s prioritization of MSMEs over the past nine months has included preventing the shutdown of nearly 518 enterprises on the precipice of closure. The 83-year-old Enterprise adopted its recent orientation following a Council of Ministers regulation in 2022, which restructured its objectives. The focus on boosting local capacity aligns with the “Ethiopia Tamirt” initiative started by Prime Minister Abiy Ahmed (PhD). Last week, the PM said industrial production capacity has increased from 41% to 61% over the past three and half years.