The European Investment Bank (EIB) is deepening its long partnership with Ethiopia at a time when the country is pushing ahead with reforms, climate finance, rural development and new efforts to crowd in private capital. In this interview with Capital’s Groum Abate, EIB Head of Representation to Ethiopia and the African Union, Leyla Traoré, discusses the bank’s expanding portfolio, support for smallholder farmers, green finance, grid modernization and the role of Team Europe in backing Ethiopia’s development priorities. Excerpts;

Capital: Can you tell me about the European Investment Bank’s (EIB) portfolio and the sectors it focuses on?

Leyla Traore: The European Investment Bank serves as the financing arm of the European Union, owned by the 27 EU member states. Our current portfolio is diverse and aligns with European Union foreign policy. We have been partners with Ethiopia for 40 years, having initiated our first operation there in 1982.

In terms of portfolio size, about two years ago, our cumulative investment in Ethiopia was around 400 million euros. Recently, our board approved projects worth more than euros 200 million, representing a 50% increase, which will bring the total investments to 600 million euros. This increase reflects our response to the financial sector and the significant reforms in Ethiopia, which facilitate more investment and development financing.

Regarding sectors, we strive to align our efforts with both EU foreign policy and Ethiopia’s most pressing development needs. We are particularly focused on the energy sector, where we have previously financed projects like Gilge Gibe 1 and 2 for electricity generation. Additionally, we support solar off-grid equipment financing throughout East Africa, including Ethiopia, and have been active in water projects as well.

We have been collaborating on the Urban Water Facility program with Italy and France, led by the Ethiopian government through the Ministry of Water and Energy. This initiative has successfully provided clean water access to 120,000 people in small towns and rural areas, which we take great pride in witnessing firsthand.

At the European Union – Ethiopia Business Forum, we announced a new financing operation focused on financial inclusion. Many people, especially in rural areas, lack access to financing for their activities, despite agriculture being a significant driver of Ethiopia’s GDP. To address this, we are working with the Development Bank of Ethiopia on a public sector operation worth 110 million euros to improve access to finance for rural farmers.

Additionally, we have partnered with Zemen Bank to mobilize 40 million euros aimed at supporting the agricultural sector, particularly for agri-exporters, given that Ethiopia is a major exporter of products like coffee and horticulture. We are committed to supporting these initiatives through our collaboration with Zemen Bank.

The final point I want to discuss regarding portfolio composition is our significant focus on climate finance. Unlike some others, we believe that climate finance and climate resilience are crucial for global support and investment. We view climate finance as the connective tissue of our portfolio, adhering to the highest standards in environmental and social criteria while integrating climate resilience throughout.

A notable example of our commitment is our support for the Central Bank and several commercial banks through the Greening the Financial Systems Programme, funded by Germany and Luxembourg. We are assisting the National Bank of Ethiopia in developing the country’s first national green taxonomy, which will serve as a framework to encourage investment in green initiatives. This approach is comprehensive, extending beyond agriculture to include energy and transportation sectors, where green components are essential. Ethiopia is already a leader in this area.

We aim to provide technical assistance to Ethiopia’s central bank to promote greener financial systems. This initiative will enable greater access to green finance within the country. By collaborating with the central bank and selected commercial banks, we are preparing them to finance green projects. For instance, when a farmer seeks funding from a bank for their operations, instead of being turned away, the bank will encourage resilience. They will prioritize financing options that help mitigate risks, such as supporting solar irrigation or drought-resistant crops. Our technical assistance ensures that the financial ecosystem, including small enterprises, is better equipped to adapt to climate challenges.

Capital: Is the 110 million euros a loan or a grant?

Leyla Traore: It is a loan, although it is somewhat more complex than that. We typically provide loans, similar to other multilateral development banks like the World Bank. However, the nature of these loans can vary. Our institution, along with other multilateral development banks, represents one of the most reliable funding sources a country or company can access. We offer competitive rates and operate differently from typical banks. Our funds are raised from the capital market, and we maintain a triple-A rating, backed by solid shareholders, who are the 27 member states of the European Union.

As a multilateral development bank, we are a supranational institution, engaging directly with the capital markets to fund our operations, securing very low rates. We pass on these market advantages to our beneficiary countries.

This is why we don’t simply refer to them as clients. While many would desire our services, we aim to work collaboratively as partners, focusing on the impact of development goals rather than profits. This approach represents that of Multilateral Development Banks (MDBs), and we are proud to be part of this MDBs family. We offer loans at very affordable rates available, and with long repayment terms—sometimes even 30 to 40 years—which commercial banks would rarely provide. Additionally, we typically include grace periods ranging from two to five years, allowing borrowers the necessary time to invest and achieve returns on their projects before repaying the capital.

This vision is what drives MDBs like ours. Despite the challenges in the global development landscape, we remain committed to our mission. For instance, for the RUFIP III program, we have mobilized nearly €110 million, with approximately €8.5 million coming from a grant managed by the European Investment Bank, aimed at providing technical assistance. This ensures sustainability and good governance, equipping both financial intermediaries and rural farmers with the resources and capacity building they need to effectively utilize the loans for viable projects.

Moreover, part of this grant funding supports a pilot initiative in Ethiopia, introducing climate risk insurance for farmers. This program is particularly crucial given the frequent occurrences of flooding and drought in the region, which can severely disrupt smallholder farmers’ investments. By embedding climate risk insurance into our offerings—funded through grant money for premiums—we provide protection for farmers against these risks. In the event of a drought or flooding, the insurance will cover the farmers’ loan repayments.

Capital: Can you elaborate a bit about the green taxonomy?

Leyla Traore: The development of the green taxonomy is currently underway and is not yet finalized. In essence, as we assess various countries, we observe that regions with established green taxonomies—such as those within the European Union—tend to receive a greater share of climate finance. This correlation is noteworthy, as the European Central Bank leads the EU’s efforts in creating a green taxonomy, while other countries and regions around the world have also developed their own frameworks.

This enables the country to reach a consensus on what constitutes “green,” what does not, and what elements of the grid will be long-lasting and resilient to climate change. It also ensures that these initiatives do not have adverse impacts on the environment and are often healthier, particularly in the context of green agriculture, which typically performs better.

Countries that achieve this consensus can then direct their investments toward more resilient options. They can engage with investors by presenting a comprehensive mapping or cartography of the nation’s resources and initiatives, reflecting a consensus across various sectors.

Both the private and public sectors agree on these definitions. For international investors looking to invest in green initiatives in Ethiopia, everything is in place: we have identified both existing and emerging green activities, creating a gradient of what is considered green. This serves as a powerful tool for discussions with investors about how to develop sustainably and resiliently.

Neglecting green activities in our development could jeopardize investments due to adverse climate events. Thus, it’s not just about being green; it’s also about being smart and considering returns. A green taxonomy allows a country to engage effectively with investors and attract climate funds, including from public sector green funds and international sources.

We are collaborating with Ethiopia under the Greening Financial Systems technical assistance programme, supported by funding from Luxembourg and Germany, and leveraging our expertise as a climate bank. Our consulting team, some of whom have worked on 25 taxonomies globally, is confident that Ethiopia will establish a state-of-the-art taxonomy.

Importantly, we allow the country to take the lead while we provide guidance based on our experience. The decision-making rests with them. Working closely with the Central Bank as our technical assistance counterpart, we have established a multi-ministerial approach that includes civil society and institutions like the Ethiopian Capital Market Authority. This is essential for attracting capital market investments in green initiatives, and we have formed a steering committee with various governance layers to involve all interested parties across the public and private sectors. We hope to finalize the green taxonomy in Ethiopia soon while supporting the leadership of the Central Bank and the government.

Capital: What new projects is the EIB prioritizing for Ethiopia in 2026?

Leyla Traore:  In 2026, we have several initiatives that we announced. I will start with the one we just announced on April 20, 2026, which is a EUR 110 million support program for rural financial inclusion of smallholder farmers in collaboration with the Development Bank of Ethiopia. This initiative was developed in partnership with the government and the International Fund for Agricultural Development (IFAD). We aim to enhance access to quality finance for the rural ecosystem, marking a significant new announcement for 2026.

Another initiative we expect to announce soon, currently under finalization, focuses on energy and electricity grid modernization.

The project, known by the acronym RISED, has already received EIB Board approval, and we are finalizing negotiations with the government. We hope to formally announce and sign it shortly. This project is crucial for modernizing the electricity grid. We are joining what we call Team Europe, which includes announcements from the French Development Agency (AFD) and the European Union. We are excited to contribute European Investment Bank (EIB) funding to this initiative, which aligns with our previous financing of the Gibe II project for electricity generation. While Ethiopia generates a significant amount of electricity, stabilizing the grid to ensure reliable power delivery is essential, and we are proud to be part of this effort.

Additionally, on April 20, 2026, we announced a new partnership made possible by recent reforms, allowing us to provide direct funding to commercial banks. This inaugural partnership between EIB, as a multilateral development bank, and commercial banks in Ethiopia aims to offer affordable finance to the private sector, particularly agri-export companies, in line with the new directives stemming from the reforms.

We also aim to expand our involvement in the private sector, exploring opportunities in digital telecommunications and continuing our focus on energy. Furthermore, we are interested in contributing to the health sector, specifically targeting primary healthcare. EIB previously financed a study through technical assistance to WHO Ethiopia, which collected data on primary healthcare across the country. This data will support the government in refining their primary healthcare improvement priorities. We are currently working actively to build on this momentum and ensure our contributions align with future plans.

This aligns with the European Union’s Global Gateway initiative, as we strive to work in harmony with the EU and our shareholders, the member states. Most of our initiatives are undertaken collectively with various Team Europe members.

Capital: What specific involvement do you have in the telecom sector?

Leyla Traore: Currently, we are exploring potential operations in the private sector that would facilitate the development of more telecom infrastructure. While discussions are ongoing, more information is available on our website. As for our priorities and sectors, we are looking at digital, energy, health, and the continuation of agri-finance within the agricultural value chain. Additionally, we emphasize gender equity, ensuring that women, who often lack access to finance, particularly in rural areas, can benefit from our efforts. We consistently consider how to maximize our development impact.

Capital: Is the private sector involved in the health sector?

Leyla Traore:  Not directly in this case. Primary healthcare is typically built and designed by public authorities in most countries, including Ethiopia. Ethiopia has several plans for developing primary healthcare, and our role has included supporting data collection in collaboration with the WHO Ethiopia network. We are proud to finance this effort, which contributes to the government’s plans. Based on these plans, we are actively designing a project that aligns with the government’s modernization and improvement efforts in primary healthcare. This sector is primarily public by design.

However, we are also committed to involving the private sector in development efforts, recognizing that it plays a crucial role in driving progress. For example, through our partnership with Zemen Bank, we aim to engage the private sector via local commercial banks, which have the necessary networks, knowledge of clients, and the capacity to meet the specific needs of Ethiopia’s private sector.

The second aspect is that we are launching a significant initiative that has not yet been designed or implemented in Ethiopia, but we are actively exploring it. The European Investment Bank (EIB) is partnering with the Gates Foundation and the European Commission on a program called the Human Development Accelerator, which you can also find in our documentation. We are considering several countries for implementation, focusing on local medicine and vaccine manufacturing, and Ethiopia may present opportunities in this area, particularly targeting the private sector.

Capital: How does the EU’s Global Gateway Initiative specifically support Ethiopia?

Leyla Traore: As I mentioned, our projects fall under the Global Gateway Initiative. These projects provide concrete support and align with the priority sectors I discussed, which are also key to Ethiopia’s development agenda. This alignment presents significant potential.

For instance, RISED project was highlighted at the recent business forum as part of the Team Europe initiative. The EIB has received approval for this initiative, and we are finalizing the details to formally announce and sign it. Regardless of EIB’s involvement, this initiative has been publicly announced and as being supported by the European Union and the French Development Agency (Agence Française de Développement). It represents concrete support for energy access and grid modernization across the country. This is a prime example of Global Gateway support from Team Europe actors, which includes us, EU member states, and the European Commission.

Additionally, projects such as RUFIP and Agri Finance, which we announced in collaboration with the Development Bank of Ethiopia, are a concrete part of the Global Gateway’s materialization in Ethiopia.

However, the projects have just been announced, meaning that they are still in the early stages of implementation. Nonetheless, I can provide a snapshot: both this initiative and the one with the Development Bank of Ethiopia aim to target 50% women and incorporate climate resilience. We are committed to ensuring that the most vulnerable populations have access to financing, as they currently face significant barriers in this area.

Capital: So, do you support agriculture, including coffee?

Leyla Traore: Yes, I believe the Zemen Bank initiative will benefit coffee significantly. This is an important point because Ethiopia is renowned for its high-quality coffee. Even before I came to Ethiopia, I was aware of its reputation; I would often encounter Ethiopian coffee in Europe and other countries. This indicates that agriculture is a key sector for Ethiopia’s GDP, with coffee being a vital subset. Many people, even those who may not know much about Ethiopia, recognize Ethiopian coffee, myself included. Our goal is to support coffee producers and exporters through our partnership with Zemen Bank. While coffee is essential, agriculture as a whole is a major export sector for Ethiopia, generating revenue and foreign currency for the country.

Capital: The EU recently adopted a resolution on deforestation that restricts Ethiopian coffee from entering the European Union.

Leyla Traore: I know there is considerable collaboration between the Ethiopian government, the private sector, and the European Union regarding this issue. The EIB is committed to supporting investment in agricultural exports, including coffee, and the overarching goal is to ensure sustainable coffee production and agricultural practices rather than imposing restrictions. We focus on providing support where it’s needed. We take pride in our partnership with Zemen Bank for this reason.