The government is preparing to launch a new strategy to enhance financing for agriculture and housing, part of a broader initiative to improve financial inclusion and tackle economic challenges at the household level.
At a financial forum on Tuesday, July 22, Central Bank Governor Mamo Esmelealem Mihretu announced that an initiative focused on agriculture and housing financing would be introduced in the coming week.
This announcement follows Prime Minister Abiy Ahmed’s recent statements in parliament, where he highlighted the necessity for government intervention in the housing sector, akin to the support provided for the Grand Ethiopian Renaissance Dam (GERD).
Governor Mamo explained that the Ministry of Agriculture (MoA) and the National Bank of Ethiopia (NBE) have devised a strategy to enhance financing for agriculture, which, along with manufacturing and small businesses, has historically received a limited share of total credit allocations.
“This strategy is part of our effort to expand financial inclusion,” Mamo said. “In the current fiscal year, we aim to improve access to finance for agriculture, housing, small and micro enterprises, fintech, and uncollateralized funding.” He noted that additional details about the new initiative will be shared in the coming weeks.
The recently amended banking business proclamation, ratified in December 2024, permits the establishment of specialized banks tailored to sectors such as agriculture, housing, exports, and small businesses. This regulatory change is expected to attract greater investment in niche financial services.
Financial institutions like Goh Betoch Bank, which operates as a commercial bank but focuses on specific sectors, have advocated for a more supportive regulatory framework.
Goh, the country’s only mortgage-oriented bank, has requested long-term financing options, resource mobilization mechanisms, and the ability to create subsidiaries dedicated to housing development.
Experts have long contended that agriculture, despite being a cornerstone of Ethiopia’s economy, receives inadequate financing—accounting for less than 10% of annual loan disbursements.
A few years ago, the MoA proposed establishing a dedicated agricultural bank, and discussions on this topic are ongoing at the macroeconomic level.
Additionally, the government has announced plans to create a Housing Finance Corporation and a Housing Fund to provide sustainable solutions for housing financing.
The corporation, managed by the NBE, will oversee the fund, which will be financed through a 1.5% deduction from employee and employer contributions, as well as 5% of annual capital budgets from central and regional governments. Cities will also play a crucial role by facilitating land access for development.
Experts assert that these initiatives demonstrate the government’s commitment to addressing critical financing gaps and promoting inclusive economic growth.
Finance Forum
The Ethiopian government has urged the private sector to take a leading role in significant economic activities as part of its ongoing macroeconomic reforms.
Finance Minister Ahmed Shide emphasized that the government will focus on key development areas while encouraging private investment in other sectors.
“We cannot engage in all economic areas, so the private sector should step in to drive economic development as part of the reforms initiated a year ago,” he stated during a discussion with private sector representatives.
This message was echoed at a finance forum, where Water and Energy Minister Habtamu Itefa encouraged private investors to capitalize on opportunities in the energy sector, which has become increasingly lucrative due to recent reforms.
Mamo expressed optimism about stabilizing inflation, predicting it will decline to single digits in the current fiscal year, which began two weeks ago.
The latest report indicates that inflation stands at 13.9 percent.
The government’s emphasis on private sector involvement reflects a continued shift toward market-oriented reforms aimed at stimulating growth and ensuring economic stability in response to demands from international partners. Additionally, international stakeholders have urged the government to incorporate the private sector into the policy-making process.
