Addis Ababa May 22/2021 (ENA) The International Fund for Agricultural Development (IFAD) and European Union (EU) will provide 26.5 million Euros worth of liquidity and debt relief to rural financial institutions in Ethiopia to protect jobs and safeguard livelihoods during the COVID-19 pandemic.
According to a press release sent to ENA, in Ethiopia, the agriculture sector and rural people are the most impacted by the COVID-19.
The pandemic has reduced agricultural labor, limited access to inputs and production capital, reduced production and productivity, and obstructed access to markets and financial services, it stated, adding that it has led to loss of employment, reduced access to food, and increased domestic responsibilities for women.
Moreover, Micro small and medium enterprises (MSMEs) and cooperatives who play an important role in creating jobs and sustaining livelihoods in rural areas are also facing the challenges due to the pandemic.
Green Deal Team Leader, EU Delegation in Ethiopia, Dominique Davoux said “today’s new project of 26.5 million Euros to support agriculture financing in time of COVID shows our support to Ethiopia’s economic development and job creation.”
This EU and IFAD funding will provide new line of credits to agricultural SMEs and their farmers in the production areas of the main agro-industrial parks of the country, Davoux added.
This support could be key in maintaining agricultural productivity in time of uncertain national and international food markets because of COVID, Davoux said.
Furthermore, Davoux stated “the EU contribution provides for an interest rate subsidy that will reduce the costs of finance for RUFIP beneficiary enterprises affected by the COVID-19 crisis, thereby increasing their resilience to withstand the crisis and maintain employment.”
The current economic slowdown requires additional support for the rural financial institutions who are most at risk, to maintain their liquidity, it stated, and added the government of Ethiopia has put in place mitigation measures to deal with the impacts of the pandemic including support to the entire value chain, the MSMEs and farmers’ cooperatives.
Through the IFAD-supported Rural Financial Intermediation Program III (RUFIP III), the government’s request to provide liquidity to MSMEs experiencing shortages will be met with assistance to enhance the resilience and sustainability of the rural financial sector, it was indicated.
Meanwhile, more than 1.5 million clients of these rural financial institutions will benefit.
IFAD Representative and Country Director for Ethiopia, Mawira Chitima said COVID 19 pandemic is affecting the most vulnerable members of the community through loss of jobs and economic opportunities.
“As the life blood of the rural economy, MSMEs will be able to sustain their business with minimum shocks and retain employees, thanks to this assistance,” Chitima added.
The Country Director pointed out that IFAD is happy to co-finance this effort with the EU and the government of Ethiopia, because protecting jobs is vital for resilience and supporting the financial sector is a key strategy.
According to the release, Development Bank of Ethiopia (DBE) will receive a 13.8 million Euros IFAD grant and an additional 12.7 million Euros EU grant to improve its liquidity and support rural financial institutions (RFIs).
The financing will enable RFIs to help their MSME clients retain workers in employment, reduce the interest cost of credit, provide support to farmers facing challenges meeting their contract farming arrangements, absorb the penalty on defaulted loan repayments, and offer liquidity to partly meet the deferment of loan installments due to DBE from the RFIs.
IFAD has invested 795.5 million USD in 20 rural development programs and projects in Ethiopia worth a total of 2.1 billion USD since 1980 directly benefiting around 12 million rural households.