By Hanad Abdi - Reporter
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JIGJIGA, 24 October 2026 The Development Bank of Ethiopia said on Friday it was preparing a new framework under which businesses would access development finance through banks and other financial institutions rather than applying directly to the state lender.
The World Bank-supported restructuring would change the bank’s role: instead of selecting projects to finance, it would provide funding to institutions that assess businesses and lend to them.
Commercial banks, microfinance institutions and equipment-financing companies could become channels for delivering the funds to businesses. The framework would also include risk-sharing mechanisms and credit guarantees, the bank said.
For a small manufacturer or agro-processor, the most visible change could be where they seek financing. If implemented, the framework could allow them to apply for development loans through a bank they already use, rather than relying on a single institution.
The model would draw on financial institutions’ branch networks and existing customer relationships to reach more businesses while reducing administrative costs.
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A central question, however, is who would bear the losses if borrowers fail to repay. The extent of guarantee coverage would influence how carefully participating lenders assess businesses.
If the guarantee covers most losses, intermediaries would retain less risk, potentially weakening their incentive to scrutinise borrowers’ repayment capacity.
The plan comes as Ethiopia’s financial sector expands, with the Ethiopian Securities Exchange admitting new trading members.
The bank has yet to publish details of the framework, including eligibility requirements for participating institutions, financing costs, the share of losses covered by guarantees and the implementation timetable. It has also not clarified how its existing direct loans would be managed.