Ethiopia Explores Capital Equipment Lease Finance to Boost Domestic Manufacturing

Ethiopia’s annual expenditure of Birr 1.3 billion on production machinery, primarily imported, has sparked discussions on leveraging capital equipment lease finance to bolster the country’s manufacturing sector.

Currently, 91 percent of these machines are sourced from abroad, highlighting a significant reliance on international markets for crucial manufacturing equipment. In response to this trend, the concept of “Capital Equipment Lease Finance” has emerged as a potential solution, offering manufacturing enterprises access to machinery through a lending system.

Under this model, manufacturing enterprises receive machinery on loan, gradually paying off the loan until they own the equipment outright. Spearheaded by the Development Bank of Ethiopia in collaboration with an independent project, this initiative aims to provide financial support for the purchase of machinery, with backing from the World Bank.

The Ethiopian Enterprise Development (EED) emphasized the significance of the project in addressing Ethiopia’s machinery procurement needs. It revealed that over the past few years, more than 32,000 production machines were acquired through the Ethiopian Development Bank and the project, with an estimated value of approximately Birr 16 billion.

By facilitating the purchase of machinery from local manufacturers through the Ethiopian Development Bank and Capital Equipment Lease Finance, EED emphasized the potential to mitigate challenges associated with companies and promote domestic industry growth.

Source: Sheger FM 102.1

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