German development bank to provide $7.6 million to develop Ethiopia's microfinance

July 6 (Bloomberg) -- Kreditanstalt fuer Wiederaufbau, the German development bank, agreed to provide 6 million euros ($7.6 million) to help develop Ethiopia's microfinance industry. The lender, known as KfW, signed an agreement today with Zemen Bank and is in talks with three other banks about joining the initiative, Ronald Steyer, director of KfW's Ethiopian operations, told reporters today in the capital, Addis Ababa.

Under terms of the accord, KfW will provide 4.5 million euros as loan guarantees for commercial banks to lend to microfinance institutions, and spend 1.5 million euros providing technical assistance to lenders.

"The deal will play a meaningful role toward economic development in Ethiopia as it will address the major obstacle of access to finance," Steyer said.

Ethiopia has 30 microfinance institutions that offer loans averaging 1,500 birr ($110) to about 2 million customers at interest rates of 12.5 percent to 25 percent, according to CapitaLink, an Addis Ababa-based facility backed by the German government.