Accion is supporting Dashen Bank to build an innovation hub that aims to expand digital banking services to micro, small, and medium enterprises (MSMEs) through a range of new products and a focus on women-owned businesses.

Ethiopia’s nearly two million MSMEs are important drivers of its economy, yet only 6% of microenterprises and 1.9% of small enterprises have access to formal credit. The financing gap in the MSME sector of the country is estimated to be $4.2 billion. 

Unemployment, low incomes, and a lack of financial education remain key reasons for a lack of access to formal financial services. 

Again, only 39% of women — compared to 55% of men — have an account at a formal financial institution, preventing them from accessing the evolving digital financial ecosystem and contributing to the country’s economic growth.

Dashen Bank has long been at the forefront of introducing innovative digital financial products and services in Ethiopia. It was one of the first banks in the country to launch a digital wallet, which helps small business owners make frictionless transactions. 

Now, with the new innovation hub being built with Accion, the bank aims to develop new solutions, embedded in existing supply chains for MSMEs in Ethiopia that still largely transact in cash, have few assets, and as a result, remain largely invisible to big banks. 

The innovation hub is one of the strategic pillars of the Bank’s sixth strategy plan designed to enhance its capacity to support MSMEs. This move is aimed at driving financial inclusion and fostering economic development through innovative digital solutions.

Asfaw Alemu, chief executive officer at Dashen Bank shared, “Despite their critical contribution to the country’s economic growth, small businesses, particularly those led by women, face significant financing challenges. This is largely due to high reliance on cash-based transactions leading to insufficient formal financial records of their business operations and women’s lack of ownership over assets to meet collateral requirements. 

“Through this partnership, we seek to address these challenges, build our operational capacity, enhance our credit offerings to meet the needs of small business owners, and develop a range of digital products and value propositions to help them access the resources they need to grow their businesses successfully. This landmark project underscores our commitment to staying always one step ahead, further cementing our reputation as an industry leader in Ethiopia’s financial sector.”

According to Yohannes Million, chief digital and information officer at Dashen Bank, “Our innovation hub aims to serve as a catalyst for empowering MSMEs by providing them with tailored digital banking solutions. Based in a dedicated facility, it will drive change as a platform where technology and financial services intersect to fuel progress and improve operational efficiency for our customers.”

Through strategic partnerships with those supply chains, Accion will help Dashen develop new products designed for MSMEs, using AI to crunch new types of data and develop new credit scoring models that are better suited to the realities of MSMEs, including those that are women-owned. 

Backed by this new data and extensive research, the innovation hub will build solutions such as credit from their existing suppliers via embedded finance products, and non-financial tools, such as business management support.

Dashen Bank has recently issued a tender to initiate the construction of this forward-looking facility. The innovation hub represents another bold step by the bank toward transforming Ethiopia’s banking landscape, demonstrating its unwavering commitment to harnessing the power of technology to drive progress and support economic empowerment. 

As part of its future roadmap, Dashen Bank will organize an innovation workshop for its leadership and staff, which will explore opportunities in cutting-edge technologies, including artificial intelligence, in collaboration with a globally recognized technology partner.

Raliat Sunmonu, vice president, Middle East and Africa, Accion Advisory said, “Ethiopia is one of Africa’s fastest-growing economies, and small businesses play a vital role in propelling its growth. 

“Through this collaboration with Dashen Bank – a leader in financial innovation – and other strategic partners, we are helping build a more inclusive ecosystem for MSMEs in Ethiopia. Together, we can deploy artificial intelligence and other tech tools to help remove bias and other roadblocks faced by micro, small, and medium enterprises, especially those led by women.”

Subhashini Chandran, senior vice president of Social Impact for Asia Pacific, Europe, Middle East and Africa, Mastercard Center for Inclusive Growth said: “Ethiopia is at a pivotal point in its journey to drive economic growth through inclusive and relevant services for micro and small businesses. Digital financial services are a critical component of that journey. 

“For the last decade, the Mastercard Center for Inclusive Growth has been working to advance financial inclusion around the world. We are excited to partner with Accion and Dashen Bank to develop inclusive financial services that can support the growth and resilience of small business owners in Ethiopia.”

This initiative is part of Accion’s 8-year partnership with the Mastercard Center for Inclusive Growth that supports the transformation of financial service providers, digital platforms, and fintechs, and aims to help 23 million people across 25 countries benefit from the digital economy.

British International Investment (BII), the UK’s Development Finance Institution (DFI) and impact investor, and FMO, the Dutch entrepreneurial development bank, today announced their joint commitments of up to US$20 million each to Dashen Bank (Dashen) – one of Ethiopia’s largest private sector banks.

The loan will help to drive agricultural exports and provide access to much-needed foreign exchange (FX) within Ethiopia.

BII and FMO are supporting Dashen Bank to help bolster the country’s agricultural sector, which employs 80 per cent of the population, contributes 39 per cent to GDP and generates 90 per cent of its foreign currency from exports.

By providing much needed capital for the expansion of growing businesses, the development finance-backed facility enables Dashen to provide USD-denominated loans to cover the costs of importing machinery – supporting farmers towards increased productivity in areas such as harvesting, logistics, and processing and boosting exports earnings. 

Broader financial support for agricultural enterprises – from producers of cut flowers and coffee to livestock – will enable innovation, business growth, improved quality and safety standards, and value addition.

It will also create significant economic potential, contributing to more financially inclusive growth, in a country where only 45 per cent of the population has access to bank accounts.

DFI collaboration is key to private sector development. Through this commitment, BII and FMO become the first foreign financial institutions to provide long-term funding to Ethiopia’s financial services sector under the new intermediation directive for banks issued by the National Bank of Ethiopia in 2021. This is part of their collaborative efforts to help catalyse the market, build confidence amongst international and domestic investors so as to mobilise more private capital.   

This partnership will also help Dashen to enhance their governance, risk management, Environmental and Social, as well as gender practices and bring these to the highest standard in the country.

Asfaw Alemu, CEO of Dashen Bank said: 

“We are pleased for achieving this historic milestone. With the exemplary co-lending of BII and FMO, Dashen Bank is breaking the ice in the materialization of the directive for foreign loans intermediation. The forex denominated financing will enable Dashen Bank, one of the top four private sector banks in Ethiopia serving over 5 million customers with a footprint of 800 plus branches, to support export-oriented agribusinesses. On top of the badly needed foreign currency, the lessons learnt through the rigorous due diligence process will help us set the bar high when it comes to sustainable financing in Ethiopia. We are extremely grateful to our partners BII and FMO for putting their trust on Ethiopia’s agricultural sector, and Dashen Bank’s capacity to deliver results.”  

Stephen Priestley, Managing Director and Head of Financial Services at BII commented on the transaction:

“We are proud to be amongst the first movers in a financial market opening up to international investment with this transformative commitment. BII has been a pioneer investor in Ethiopia for the past 50 years. Our partnership with FMO and Dashen Bank forms part of a mobilisation plan that creates untapped opportunities for DFI and commercial investment into Ethiopia’s financial services sector for years to come.”

Marnix Monsfort, Director of the Financial Institutions Department at FMO:

“We are very excited by this pioneering opportunity to support Dashen and Ethiopia in attracting Foreign Direct Investments and USD funding. By providing much needed foreign currency for on-lending to the bank’s agriculture/exporting clients, FMO aims to contribute to job creation and financial inclusion of rural communities. We thank both Dashen and BII for this great collaboration.’’

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