By easing these liquidity pressures, the facility is expected to unlock additional hard currency for domestic manufacturers and agri-processors who have struggled to procure essential inputs such as fertilizers, machinery, and spare parts.
“Trade finance is an important driver of economic growth and critical for cross-border trade, particularly in emerging markets,” said Lamin Drammeh, AfDB’s Head of Trade Finance. He described Awash Bank as “a strong partner with extensive knowledge and a robust network in Ethiopia.”
Awash Bank, which operates 947 branches and serves around 6.8 million customers, leads the industry in both profitability and capitalization. According to its president, Tsehay Shiferaw, the AfDB guarantee will “ease the burden of arranging cash collateral” and expand the bank’s capacity to support both exporters and importers.
The move also directly targets Ethiopia’s estimated $3.9 billion SME financing gap—one of the largest on the continent. World Bank data indicates that only about 11% of small enterprises in Ethiopia have access to working-capital loans, a figure less than half the Sub-Saharan African average.
This latest facility forms part of AfDB’s broader effort to close Africa’s trade finance gap, which the International Finance Corporation (IFC) estimates between $90 billion and $120 billion annually. In September last year, AfDB extended a €70 million risk-participation and credit line package to Morocco’s Bank of Africa, expected to generate around €300 million in trade over 3.5 years.
In the Ethiopian context, analysts suggest the Awash Bank guarantee could facilitate more than $350 million in trade flows over its four-year term, given the high turnover rate of short-tenor LCs. The initiative also aligns with the African Continental Free Trade Area (AfCFTA)’s broader agenda to deepen intra-African trade, in which limited access to foreign exchange remains a persistent obstacle.
AfDB will charge risk-based fees for each guaranteed LC, while Awash Bank anticipates increased fee income and enhanced liquidity ratios. However, financial experts caution that as Ethiopia prepares to liberalize its banking sector to foreign players, regulatory authorities must adapt prudential frameworks to keep pace with the growing appetite for trade-credit insurance and risk-sharing instruments.