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Agricultural Finance: Ethiopia

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Feed the Future Ethiopia Value Chain Activity

Livestock Businesses Expand Exports Through USAID’s Loan Guarantee Program

Feed the Future Ethiopia Value Chain Activity supports a range of agribusiness companies to access loans through USAID’s Development Credit Authority (DCA) loan portfolio, which provides a loan guarantee to banks and financial institutions to incentivize lending to otherwise underserved borrows such as smallholder farmers. FTFE VCA identifies potentially viable agribusinesses that are looking to expand, and works with them to develop detailed technical and financial proposals. After receiving capacity building support and training from FTFE VCA, the companies present their applications to five USAID contractor banks for additional review and due diligence. The banks closely consult with FTFE VCA to learn more about the potential applicants and FTFE VCA’s commitment to providing technical support, grants, and market facilitation.

So far, two export-oriented livestock companies have received ETB 40 million from Addis International Bank to expand their businesses, establish new plants, and create new job opportunities.

One successful loan application was approved in April 2018 for livestock export company Temesgen Retebo Integrated Farm in Hossaena, SNNPR. Temesgen Retebo owns and manages the 300-hectare farm, which is engaged in export-oriented commercial livestock fattening. He said the loan will increase the farm’s capacity to expand its outgrower scheme to reach 10,000 smallholder households. They will also work through direct market links with embedded services such as vet services, livestock feed, and other related support.

The company recently signed a deal to export to Senegal for the first time. Senegalese company ETS DAMEL signed an agreement with Integrated Farm to buy 1,200 shoats (sheep and goats). The farm will use Ethiopian Airlines cargo planes to deliver the initial order. According to the agreement, an additional 1,200 to 3,000 shoats will be exported by sea through Massawa port when it becomes fully operational.

Temesgen says his company is also under negotiation to supply live animals to an Indian company that has two modern abattoirs in Ethiopia. “We are currently discussing the price of the cattle, goats, and sheep. I hope we will agree soon and start supplying the animals to the abattoirs,” he said.

Abyssinia Slaughter Service House is currently exporting 850,000 kilograms of meat to the UAE and Saudi Arabia, generating more than ETB 100 million per year. Despite this steady production, the plant is only operating at 30 percent capacity; they hope the loan will help them perform at maximum capacity.

Another successful recipient of a DCA loan is Kegna General Trading PLC, who received ETB 35 million from Addis International Bank. Kegna, located in Adama woreda, Oromia, works in export-oriented commercial livestock fattening. The company recently completed the construction of a certified meat processing plant with a slaughtering and processing capacity of 45 cattle and 400 shoats per hour. With the loan, the plant is expanding operations to export cold/frozen meat, offal, and skin to the Middle East. Kegna buys cattle from 1,000 smallholders and 10 unions in Oromia.

Ato Demis Lemi, founder and owner of Kegna, plans to strengthen the existing export business to countries such as Saudi Arabia, Oman, and the UAE. "The loan is an opportunity for us to increase our exports and meet the expectations of our customers. We were performing under capacity because of lack of capital," he said.

FTFE VCA is currently supporting DCA loan applications for four additional agribusinesses. The companies – Abyssinia Slaughter Service House PLC; Ali Halake Goat and Sheep Marketing PLC; Azalech Tesfaye Coffee Roasting, Grinding, Packaging and Marketing PLC; and Endalkachew Nigatu Dairy Farm and Milk Processing PLC – are in the pipeline to receive additional working capital under the DCA loan portfolio.

Abyssinia Slaughter Service House is currently exporting 850,000 kilograms of meat to the UAE and Saudi Arabia, generating more than ETB 100 million per year. Despite this steady production, the plant is only operating at 30 percent capacity; they hope the loan will help them perform at maximum capacity.

Another potential candidate for the loan, Ali Halake Goat and Sheep, fattens animals on 200 hectares of land. The company plans to export 30,000 goats per year to the Middle East.

Azalech Coffee Roasting company intends to expand its operation from 40 to 140 tons of processed coffee per year with the additional capital. From the dairy sector, Endalkachew Nigatu Integrated Farm and Milk Processing has proposed to establish a dairy processing plant to produce butter, cheese, ice cream, pasteurized milk, and yoghurt for direct supply to local markets.

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