Ethiopia has secured a €110 million (US$130 million) loan from the European Investment Bank (EIB) to finance a nationwide rural development project aimed at expanding access to credit for micro and small enterprises, the Ministry of Finance announced Wednesday.
The Rural Finance and Development Project is designed to strengthen Ethiopia’s agricultural and economic sectors by channelling funding through rural financial institutions, including microfinance institutions and cooperatives. The initiative seeks to foster sustainable practices, enhance livelihoods, and improve economic resilience in rural communities, where nearly 80 percent of the population resides, according to World Bank data.
“The signing of this historic financing marks a significant strengthening of the long-standing partnership between Ethiopia and the European Investment Bank,” the Ministry of Finance said, highlighting the strategic importance of expanding rural finance to support inclusive growth.
In addition to the EIB loan, the project benefits from co-financing by the International Fund for Agricultural Development (IFAD) and the European Union. IFAD will contribute a $35.1 million grant and a $4.8 million loan, while the EU will provide a $10 million technical assistance grant and an additional $9.6 million grant, with IFAD responsible for implementation.
The project will channel resources to smallholder farmers and rural businesses through a network of financial intermediaries, aiming to reduce barriers to credit and expand access to agricultural insurance. Authorities hope this will improve rural incomes, strengthen food security, and mitigate the economic impacts of climate change and local instability.
Ethiopia has been pursuing structural reforms to expand rural finance. In June 2025, the government launched its first Rural Finance Services Unit in partnership with international stakeholders. The unit is tasked with removing systemic market obstacles that limit access to financial services in rural areas, including loans, insurance, and technical assistance for smallholder farmers.
“This project is a key step toward inclusive rural development,” said an EIB spokesperson. “By strengthening rural financial institutions, we can empower small enterprises and farmers, create jobs, and build economic resilience across Ethiopia’s countryside.”
The collaboration reflects Ethiopia’s long-standing partnerships with international development partners. Over the past several years, the country has worked with IFAD and the EU on financing programs in agribusiness, bioeconomy, and rural development. Authorities aim to leverage these programs to enhance economic opportunities, reduce rural poverty, and support sustainable agricultural practices.
The Ethiopian government also expects the project to generate indirect economic benefits, including increased entrepreneurial activity, improved market linkages, and the creation of new income streams for rural households. By targeting micro and small enterprises, officials hope to empower local communities and promote inclusive growth, particularly among women and youth, who represent a large proportion of rural economic actors.
The EIB loan is part of a broader European commitment to support Africa’s rural development and economic transformation. Similar initiatives across the continent aim to expand access to finance, enhance agricultural productivity, and improve resilience to climate and market shocks.
As Ethiopia rolls out the Rural Finance and Development Project, authorities stress the importance of effective implementation and coordination among stakeholders to ensure funds reach intended beneficiaries and generate meaningful impact. Officials say the project represents a milestone in Ethiopia’s efforts to modernize rural finance systems and support long-term socio-economic development across the country.
