IFAD to Support Financial Intermediation Programme in the Federal Democratic Republic of Ethiopia

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IFAD to Support Financial Intermediation Programme in the Federal Democratic Republic of Ethiopia

Press release number: IFAD 02/02

Rome, 14 January 2002 – A USD 88.7 million project in the Federal Democratic Republic of Ethiopia – ‘The Rural Financial Intermediation Programme’ will receive a USD 25.7 million loan from the International Fund for Agricultural Development (IFAD). A loan agreement was signed today at the Fund’s Headquarters by Ms. Halima Mohammed, Ambassador of Ethiopia to Italy and Mr. Klemens van de Sand, Assistant President of the Fund.

The majority of the programme target group comprises rural households living far below the internationally recognized absolute poverty threshold of USD 1 per day. These beneficiaries are approximately 1.5 million poor rural households that will gain access to improved and reliable financial services either as clients of microfinance institutions (MFIs) or as members of rural savings and credit cooperative societies (RUSACCOs). Poverty in beneficiary households is mainly due to their: limited asset base, lack of access to reliable financial services, frequent droughts, and political and social unrest.

The Rural Financial Intermediation Programme aims at alleviating rural poverty through a sustained increase in agricultural production, productivity and family incomes. Its primary objectives are to enhance outreach and financial deepening by MFIs through institutional development and through the provision of equity and credit funds; develop a community banking framework by promoting the establishment of grassroots, people-owned and – managed rural financial cooperatives. In addition, it aims at promoting linkages between the rural financial network and the Ethiopian banking system.

The programme will enable beneficiaries to participate in the programme as it will support MFIs in creating a structured process of client training, with a view to building confidence and reinforcing a culture of credit discipline. It will also support annual exchange visits by about 14 000 centre and group leaders, where they will share experiences on successful microfinance activities in other parts of the country. This programme will be cofinanced by the African Development Bank.

With this programme, IFAD will have financed 10 projects in the Federal Democratic Republic of Ethiopia, for a total loan amount of about USD 148 million.

IFAD is a specialised agency of the United Nations with the specific mandate of combating hunger and poverty in the most disadvantaged regions of the world. Since 1978 IFAD has financed 603 projects in 115 recipient countries and in the West Bank and Gaza for a total commitment of approximately USD 7.3 billion in loans and grants. Through these projects, about 250 million rural people have had a chance to move out of poverty. IFAD makes the greater part of its resources available available to low-income countries on very favorable terms, with up to 40 years for repayment and including a grace period of up to ten years and a service charge of 0.75% per year.