Ethiopian coffee farmers must have business plan, audited income to be eligible for the loan. 

The Cooperative Bank of Oromia (CBO) is going to offer 60 million birr in loans to coffee farmers’ cooperatives through a risk sharing agreement it signed last month with Rabo Bank Foundation (a Netherlands based bank) and its sister company Rabo Rural Fund.

Through the agreement the CBO can extend loans to farmers for which Rabo will guarantee 50 percent of the loan if defaulted.

Coffee farmers who wish to benefit from the offer are expected to form a cooperative to be eligible, Wondemageghu Neger, president of the bank, said.

To be eligible for the loans without putting down collateral the cooperatives and farmers must have audited income, a business plan, administrative experience, and a potential market, Wondemageghu said.

The CBO is now preparing rating criteria to create competition among the farmers who are eligible for the credit.

Through its 45 branches, which were 38 last year, the bank has distributed 623 million birr in loans.

Through the new agreement, Rabo and the CBO will equally share the risk if a debtor defaults on their loan.

The agreement will have multiple benefits for CBO and the country, whose export sector will enjoy letters of credit from Rabo Bank, Zemedeneh Negatu, managing partner of Ernst & Young-Ethiopia, said.

Other banks including Berhan International, Oromia International, Zemen and Wegagen have signed an agreement for a credit guarantee framework for micro finance institutions with KfW, a German development bank.

Source: Fortune