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Home Startups North Africa

Ethiopia’s National Startup Fund to get Unloaned Bank Funds

by Cynthia Nwanonyiri
2022/06/16
in North Africa
Ethiopia - techbuild

Credits: Business Insider Africa

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Commercial banks should send any unused capital from their transportable assets loan portfolio to the future National Innovation Fund, according to Ethiopia’s Ministry of Innovation and Technology.

According to a statement from the government, the request was sent to the Ethiopian National Bank because a rule issued in 2020 mandating banks to commit 5% of their overall loan portfolio to mobile assets has not been executed properly.

If banks fail to produce the appropriate quantity of loans against moveable assets, the money should be turned over to the Central Bank and used for the Innovation Fund, according to the Ministry.

When authorizing loans and filing reports, the central bank expects commercial banks to take farm products, livestock, financial tools, intellectual property, and forestry and landholding certificates as leverage.

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Banks, on the other hand, have not been able to distribute these loans, falling short of the 5% goal. The Ministry considers that such funds should be used for the law’s stated purpose, which is to aid the startup environment.

The National Innovation Fund will be established when the Start-up Business Proclamation, which has been drafted for years by the Ministry of Innovation & Technology in collaboration with the Jobs Creation Commission, becomes law.

The Fund will use government resources, as well as loans, grants, and investments from private equity firms and angel investors, to help entrepreneurs.

The funds obtained will be used to reward entrepreneurs by paying for the cost of intellectual property registration bills and guarantees granted to businesses for them to secure finance from banks.

Startups have long been regarded as an essential component of economic development. Its ability to produce jobs, lead to industrialization, and enhance national economic production is an indicator of its effectiveness. Ethiopia, as a developing country, stands to benefit from this area.

This initiative, led by the Ministry of Innovation and Technology in partnership with the Jobs Creation Commission, will allow Ethiopia to attract more innovative companies while simultaneously providing more work opportunities for the unemployed, benefiting the country’s economy.


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