Ethiopia's planned Agricultural Bank is expected to begin operations within three months, the Ministry of Agriculture said, aiming to create a dedicated financing channel for farmers and agribusinesses in a sector that accounts for about 33 per cent of gross domestic product.
Shimelis Tsegaye, Executive Director of Agricultural Mechanization at the ministry, said the absence of a specialised financial institution remains one of the major obstacles to modernising the country's agriculture. According to Capital Ethiopia, the bank is in its 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 disclose the planned bank's name, initial capital, or service-delivery arrangements.
The scale of the financing gap the new institution must address is substantial. Banks currently provide only about two per cent of the estimated 2.5 trillion birr needed each year to finance the agricultural sector, according to figures cited by the ministry. Under a 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, according to the source article. The planned bank is expected to improve access by allowing borrowers to use assets such as crops, livestock, and other property as collateral.
The cost of agricultural machinery compounds the financing challenge. According to Shimelis, dairy mechanisation equipment can cost between 4 million and 15 million birr, while combine harvesters can reach as much as 30 million birr — prices beyond the reach of most farmers and agricultural businesses without financial support.
Separately, the ministry said preparations are under way to establish six agricultural mechanisation service centres in high-potential farming areas, with financial support from the African Development Bank. 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.
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The centres are intended to help young people establish businesses focused on agricultural machinery assembly and services, while also providing farmers with training in equipment use, maintenance, and repair, as well as access to spare parts. The ministry plans to establish 250 such centres over the next decade; nine are currently operational, with six others reportedly under construction.
The account of both the bank's timeline and the mechanisation programme comes from a single ministry official. The Abay Times could not independently verify the projected launch date or the status of preparations. The two-per-cent bank financing figure, cited by the ministry itself, underscores the scale of the gap the new institution would need to close.
The government floated the birr in July 2024.
Sources: Capital Ethiopia.
