AfDB keen on private sector lending, currently facing capital constraints

Pierre Guislain
Pierre Guislain

The African Development Bank (AfDB) stated that it is exploring opportunities to work more with the private sector in Ethiopia. During his visit this week, Pierre Guislain Vice President of the African Development Bank in charge of Private Sector Infrastructure and Industrialization stated that, there is a huge opportunity to work with the private sector in the country despite challenges accessing finance.

“One of the major issues private companies face is access to finance; many companies don’t really have access to investment loans or it may be at a very high rate or short maturity time, it doesn’t really cover their needs for their investment purpose,” said Guislain.

The vice president also said that AfDB is keen to work with the Ethiopian Government on making the financial sector more open. “There is a significant demand for more private sector financing. Currently we are not active in Ethiopia in the financial sector but it is something we would be happy to further discuss with the Government. We want to know  how we can help the financial sector become more open and able to provide financing to the private sector,” he said.

During his visit Guislain held discussions with Ministers of Finance, Transport, Industry as well as stakeholders from the private sector. He also stated that the AfDB has five strategic priorities for its operations: Light up and power Africa; feed Africa, industrialize Africa; integrate Africa and improve the quality of life for the people of Africa.

The vice president also underlined that the bank currently faces capital constraints. “We are at this point capital constrained which means we cannot grow further without a capital increase so we hope that our shareholders will soon move ahead with certain process to allow us to increase our capital. Meanwhile what we will do to optimize our investments and lending is increase leverage,” he said.

The Bank commenced operation in Ethiopia in 1975 and has funded about 130 operations to date for a cumulative net commitment value of USD 4.6 billion in areas like  infrastructure, agriculture and private investments. The capital of the AfDB is 100 billion USD  and Ethiopia is a share holder with one and a half percent of the Bank’s capital

The Bank has invested USD 900 million in strategic energy projects such as the Ethiopia-Djibouti interconnection, Ethiopia-Kenya interconnection, rural electrification, and the Mekele-Dallol power transmission line.

Another USD 160 million has been provided to strengthen Ethiopia’s industrial capacity, notably in cement production and mining, consistent with the industrialize Africa priority. Guislain visited the Derba Cement plant for which the bank provided a USD 55 million loan.