Ethiopia’s planned Agricultural Bank is expected to begin operations within the next three months, providing a dedicated source of financing for farmers and businesses in the agricultural sector, according to the Ministry of Agriculture.
Shimelis Tsegaye, Executive Director of Agricultural Mechanization at the ministry, told Capital that the lack of a specialised financial institution remains one of the major obstacles to modernising the country’s agriculture.
Agriculture contributes about 33 per cent of Ethiopia’s gross domestic product (GDP), but banks provide only around two per cent of the estimated 2.5 trillion birr needed each year to finance the sector, according to figures cited by the ministry.
Under the 10-year National Agricultural Finance Implementation Roadmap, the government plans to mobilise up to one trillion birr to expand agricultural financing.
Farmers and agricultural businesses have struggled to secure loans from existing financial institutions because of collateral requirements and demands for advance payments. The planned bank is expected to improve access to finance by allowing borrowers to use assets such as crops, livestock and other property as collateral.
Shimelis said financing was particularly important because of the high cost of agricultural machinery. Dairy mechanisation equipment can cost between 4 million and 15 million birr, while combine harvesters can cost as much as 30 million birr. Many farmers and agricultural businesses cannot afford such equipment without financial support, he added.
The Agricultural Bank is in the final stages of preparation and is being established as a state-owned institution under the guidance of the National Bank of Ethiopia. Shimelis declined to provide further details about its name, initial capital or planned service-delivery arrangements.
Meanwhile, preparations are under way to establish six agricultural mechanisation service centres in high-potential farming areas, with financial support from the African Development Bank.
According to Shimelis, the centres will be located in Bale and Salale in Oromia; areas around Bahir Dar and Erikum in Amhara; and sites in the Afar and Somali regions. The six centres are expected to cost a total of one billion birr.
The centres are intended to help young people establish businesses focused on agricultural machinery assembly and services. They are also expected to provide farmers with training in equipment use, maintenance and repair, as well as access to spare parts.
The ministry plans to establish 250 agricultural mechanisation service centres over the next decade. Nine are currently operational, while six others are reportedly under construction.
The planned Agricultural Bank and mechanisation service centres form part of broader efforts to improve farmers’ access to agricultural technology and finance—two longstanding challenges to raising productivity and modernising production.
