IFC Backs Ethiopian SME Lending

The International Finance Corporation has agreed a $10m risk-sharing partnership with Dashen Bank S.C. aimed at expanding credit access for small and medium-sized enterprises in Ethiopia, with a focus on agribusinesses and women-led firms. The arrangement is designed to unlock up to $20m in new lending for businesses that often struggle to secure financing.

Under the structure, IFC will cover half of Dashen Bank’s potential losses on a targeted SME loan portfolio. The first-loss guarantee is supported by the IDA18 IFC-MIGA Private Sector Window, a mechanism intended to reduce risk and mobilise private capital in more challenging markets. By absorbing part of the downside risk, the facility allows the bank to extend additional loans while maintaining balance sheet stability.

Dashen Bank’s chief executive, Asfaw Alemus, described the agreement as a step towards addressing persistent financing gaps faced by smaller enterprises. He said the programme would enable the bank to increase lending volumes while managing credit exposure, supporting entrepreneurship, employment and financial inclusion. IFC vice-president for Africa, Ethiopis Tafara, said the initiative sought to strengthen access to capital for underserved segments, particularly women entrepreneurs and businesses operating in agriculture, which he described as central to Ethiopia’s growth trajectory.

The partnership forms part of IFC’s broader expansion in Ethiopia. In fiscal year 2025, the institution committed $605m across sectors including telecoms, agribusiness, manufacturing, renewable energy and logistics. These investments align with its 2030 strategy to promote job creation, sustainable development and increased private sector participation.

Rather than providing direct loans, IFC’s use of guarantees is intended to catalyse commercial lending by sharing risk with domestic financial institutions. The model aims to widen the flow of capital into the SME segment, giving smaller companies greater scope to invest in equipment, expand operations and enter new markets while reinforcing the resilience of Ethiopia’s banking system.