The Ministry of Innovation & Technology has proposed commercial banks in Ethiopia hand over their unused funds from their movable assets loan portfolio for the upcoming National Innovation Fund.
According to The Reporter, the Ministry forwarded the idea to the National Bank of Ethiopia as a law introduced in 2020 that requires banks to dedicate five percent of their total loan portfolio towards movable assets has not been implemented well.
“If banks fail to provide the required amount of loans against movable assets, the money should be handed over to the Central bank and shall be used for innovation Fund,” the Ministry shared its proposal with The Reporter.
To ensure access to finance, the central bank obligates commercial banks to take farm products, livestock, financial instruments, intellectual property, and forest and landholding certificates as collateral to approve loans and submit a report.
However, banks have been unsuccessful in disbursing these loans failing to meet the five percent target. The Ministry believes that such funds should be used for the law’s original purpose and wants to use the money to support the startup ecosystem.
When passed into law, the Start-up Business proclamation, drafted by the Ministry of Innovation & Technology in collaboration with the Jobs Creation Commission for the past years, will see the formation of the National Innovation Fund.
The Fund will mobilize resources for the startups from the government, as well as loans, grants, and investments from private equity groups and angel investors. The mobilized funds will be used to incentivize startups by covering the cost of fees for intellectual property registration and guarantees given to the startups to get funding from financial institutions.