LocationsEthiopia
Spotlight - Credit Risk Guarantee Fund
July 3, 2026
Overview
The Credit Risk Guarantee Fund (CRGF) was a flagship intervention under the Innovation for Development (I4D) project, designed to address one of the most persistent constraints faced by startups and SMEs in Ethiopia: limited access to finance. The facility was established in 2023 by UNDP in partnership with the Development Bank of Ethiopia (DBE), with the objective of reducing lending risks for financial institutions and expanding access to credit for underserved enterprises.
The CRGF is backed by a US$1 million guarantee fund, enabling participating financial institutions to extend loans with reduced collateral requirements. This approach incentivizes lending to early-stage and growth-oriented businesses that would otherwise struggle to secure financing. The intervention emerged within a broader ecosystem context where financing for innovation remained limited and traditional lending practices constrained startup growth. By embedding the CRGF within a wider ecosystem approach that includes policy reform, capacity building, and entrepreneurial support, the project aimed to ensure that improved access to finance translated into sustainable business growth and innovation outcomes.
| Initial phase (2023) | Expansion phase (2024-2025) |
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Implementation Approach
The CRGF was structured as a partnership-driven facility, with DBE serving as the guarantee issuer and working with 13 commercial banks and microfinance institutions (MFIs) who received training on the operation of the scheme, supported by UNCDF. The facility was rolled out in two phases.
Since the CRGF was implemented in a dynamic environment it has evolved significantly over time, and the phased approach allowed the project to iteratively refine the operational processes. Key operational adaptations included:
Expanding financial institution participation, including onboarding major commercial banks.
Strengthening lender capacity, including targeted training for loan appraisal officers.
Improving pipeline development, with more structured identification and preparation of eligible.
enterprisesAdjusting facility parameters, including loan size and collateral requirements.
Key Results
By the end of 2025, the CRGF had demonstrated tangible progress in expanding access to finance for startups and SMEs that traditionally face barriers to formal lending. A total of 37 startups and SMEs secured loans through the facility, mobilizing ETB 85.7 million in financing and helping enterprises access working capital and growth finance under more manageable risk-sharing arrangements.
The CRGF covering 50% of the collateral requirements of the loan, guaranteed ETB 42,850,000 (~$291,310) so far.
Sustainability and Institutionalization
Based on the decision of the Guarantee Fund Management Committee, the fund has been extended until the end of 2026 to address additional business already in the pipeline. However, the CRGF demonstrates strong progress toward sustainability and institutional embedding:
- The facility has transitioned to UNDP’s Innovative Finance Lab, which will oversee operations
beyond the project lifecycle i.e. 2026 and beyond
- It is being integrated into broader national efforts, including alignment with a national Credit Risk
Guarantee Fund framework
- The Government and financial institutions have developed operational capacity and familiarity with
risk-sharing mechanisms
Strategic Insights
The CRGF has generated several strategic insights for future programming:
- Risk-sharing mechanisms are effective in unlocking lending: By reducing collateral constraints, the
CRGF increased willingness among financial institutions to engage with startups and SMEs.
- Finance must be complemented by capacity support: The integration of mentoring and business
readiness support was critical in enabling enterprises to successfully access financing.
- Financial sector engagement requires continuous capacity building: Training and technical support
to lenders were essential to ensure effective implementation and uptake.
- Blended finance requires both risk mitigation and liquidity: The experience shows that reducing
risk alone is not sufficient. Financial institutions also need the capacity, confidence, and liquidity to
lend effectively.
Abenezer Cheffo’s founder journey began in 2021 when he won the UNDP Innovation Competition which gave him the first real opportunity to turn his idea into a business. Through the programme, he gained practical mentorship, business development support, and international exposure, including an experience-sharing visit to Israel in 2022, which helped sharpen his vision for building Trip Way. A major turning point came in 2024, when he secured an ETB 3 million loan from Hibret Bank through the Credit Risk Guarantee Fund (CRGF), giving the business the capital it needed to move forward. Since then, the company has continued to grow through expansion to regional transportation centers, collaboration with Adama Science and Technology University to engage interns, and improved internal practices that strengthened its operations and long-term potential.
Tsion Eshetu founded Active Advertising in 2018 after noticing a visibility and branding gap among Ethiopian companies, believing that strong, visible businesses are what drive a growing economy. Today, the agency is one of Addis Ababa’s established creative agencies, delivering brand identity, digital marketing, and event production for 60+ clients across Africa. In May 2025, she secured an ETB 2 million loan through the Credit Risk Guarantee Fund, giving the business the capital to expand its team. With the loan, Active Advertising recruited new talent across marketing, branding, advertising, and printing, allowing it to take on more clients and deliver more personalized campaigns. Tsion now hopes to secure a larger loan in the next round to diversify her client base and grow the range of services on offer.
Zeneb Kassa’s founder journey began after years working in Ethiopia’s tech sector, including at the national carrier, Ethio Telecom, where she built deep expertise in networking, security systems, and technical installation. Drawing on that experience, Zeneb built Zak ICT Consultancy from the ground up, with a long-held dream of expanding into e-commerce. A major turning point came in 2025, when she secured a $2 million loan through the Credit Risk Guarantee Fund, giving her the capital to finalize her e-commerce platform and stock two stores with product. Since then, the business has grown around this new digital storefront. Zeneb now hopes to secure additional financing to purchase electric motorbikes, bringing delivery in-house and cutting the cost and reliance on external transportation partners.
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