British International Investment

Dashen Bank S.C.

East AfricaFinancial services

Dashen Bank is one of Ethiopia’s largest private sector banks.

Our investment

Description of the investment.

This is our first direct debt investment into Ethiopia, as the country's financial markets open up to international investment.

Given foreign exchange (FX) shortages in the country, access to this type of finance is lacking. The loan will help to drive agricultural exports and provide access to much-needed foreign exchange within Ethiopia.

The investment is in line with the Government of Ethiopia’s priorities both to increase agricultural exports and attract foreign investors.

Impact information

Applies to investments made from 2019 onwards. The tabs in this section define what we expect to achieve through the investment, assessing the potential impact of the investment against six dimensions of impact. You can find more details on our methodology of assessing impact here.

What?

Impact
  • Strengthen the capacity of domestic financial institutions by expanding businesses' access to foreign exchange (SDG 8.10)

  • Increase exporting companies' access to financial services, including affordable credit, and their integration into value chains and markets (SDG 9.3)

  • Achieve full and productive employment and decent work and higher levels of economic productivity, including a focus on high-value-add and labour-intensive sectors (8.2, 8.5)

How?

How?
  • Catalysing markets: Our investment will improve the enabling environment (for other investors) as it is the first by a foreign investor into the Ethiopian financial services sector.

  • Direct: The loan is targeted at Dashen Bank’s exporter book for capital expenditure, which will help these business to grow and export more. Benefits for owners and employees of these businesses include increased jobs and improved quality and safety of jobs. The foreign exchange funding to exporters will also bring benefits for their suppliers, such as increased demand for inputs and improved productivity.

Who?

Stakeholder Geography Characteristics
Exporters – owners and employees

Ethiopia

The employees of the exporters are largely manual labourers in the agricultural sector, many of whose salaries are below the $6.85 PPP poverty line. This is in addition to the general characteristics of agricultural sector workers (described under suppliers).

Exporters – suppliers

Ethiopia

Suppliers to the exporting companies are largely household farmers who have the highest poverty rates in Ethiopia (World Bank, 2019). Agricultural worker incomes are below $1 a day (ILO, 2021) and agricultural workers are low-income by the $6.85 PPP poverty line (Ethiopian Labour Force Survey).

How much?

Scale Depth/Duration

The loan will likely be taken up by approximately ten companies with an average of over 800 employees per company, securing their incomes (via business growth) and improving job quality in some cases. The suppliers to the exporting companies are largely household farmers with a broad range from 20 to 30,000 individuals per exporting company. Where companies are expanding, we would expect this number to increase slightly.

  • Duration: This will be aligned to the tenor of the loan (three years). The tenor of the loans to the exporters will vary. Impact is expected to last beyond the tenor of the loan as it will be used for capital expenditure for business growth.

  • Depth: This will vary depending on the company and the role of the employee but could include increased safety and learning new skills.

  • Duration (supplier): This will be aligned to the growth of the exporter and will depend on the suppliers’ relationship with the exporter.

Contribution/additionality

Contribution/additionality
  • Financial additionality: The investment makes BII the first foreign investor to provide funding to a private commercial bank in the country.

  • Value additionality: This will be provided through an environmental and social action plan (ESAP), supporting the bank's E&S processes.

  • Mobilisation: There is a strong case for mobilising other commercial and DFI investors by improving the enabling environment through the execution of a successful investment.

Risk

Evidence Risk

Data collection, especially on the agricultural exporters, could be difficult so assessing impact over time may be challenging.

External Risk

Political uncertainty, ongoing civil war, and a food crisis could all affect the macro environment, including the repatriation of funds.

Drop-Off Risk

Long-term, positive impact could be affected if the mobilisation thesis does not materialise and commercial capital does not replace DFI capital (creating a dependency on DFI funding).

Environmental and social information

  • Environmental and social summary

    A high-level description of the environmental and social aspects of the investment. This may include a summary of key environmental and social risks identified during environmental and social due diligence (ESDD); key elements of an environmental and social action plan (ESAP); or ways in which we plan to support the investee improve environmental and social standards, such as through their environmental and social management system (ESMS); as well as any other priority areas agreed with the investee.

  • Environmental and social risk

    A risk category rating, which indicates the level of environmental and social risk associated with an investment. For an explanation of the categorisations used, see here. We consistently provide an environmental and social risk category for all investments screened from 2023 onwards.

Environmental and social summary

We agreed on an ESAP focused on the development and implementation of an ESMS, as well as monitoring of E&S impacts on the bank's lending activities.

Environmental and social risk

Medium-High

Reporting and Complaints Mechanism

The Reporting and Complaints Mechanism allows anyone outside BII to report alleged breaches of the business integrity or environmental and social provisions of BII’s Policy on Responsible Investing. This includes breaches made by BII, a BII investee, or a portfolio company of a fund in which BII has invested. The Reporting and Complaints Mechanism Rules are available here. Reports and complaints can be submitted by email to [email protected] or by mail. See more details on our Reporting and Complaints Mechanism here.

For any other general enquiries contact us at [email protected]

  • Key facts

    First published

    When the investment was first published on the website database.

    :
    January 2024
    Last updated

    When the last quarterly update of the website database occurred.

    :
    March 2024
    Project number

    An identifier number shared by investments in the same project.

    :
    D6016
    Status

    The current status of the investment (green flag for active and red flag for exited).

    :
    Active
    Region

    The geographical region where the country is located. We currently invest in Africa, South Asia, South East Asia and the Caribbean. In 2023, BII’s investment mandate was extended allowing it to invest in regional funds linked to Ukraine, with the majority of activity expected to begin post-war. Investments outside these regions were made prior to 2012 under previous investment mandates.

    :
    East Africa
    Sector

    We prioritise those sectors that facilitate development and need our capital the most. Our priority sectors contribute towards many of the Sustainable Development Goals. They range from investing in the power infrastructure that will provide people with better access to electricity, to investing in financial institutions that direct capital to the individuals and businesses that need it the most.

    :
    Financial services

    We provide capital in the following ways: directly – through direct equity, direct debt, guarantees and other non-intermediated financial instruments; and indirectly – principally through investment funds.

    For direct investments and fund investments, this is the date BII committed capital to the investments. This is typically the date on which legal agreements are signed by all parties.

    For the portfolio companies of our fund investments, this is the date (either the month or the quarter) on which the fund committed capital to the portfolio company.

    For direct equity investments, this is the date at which British International Investment exited the investment.

    For debt investments, this is the date at which the final debt repayment was made.

    For funds, this is the date at which the fund was terminated.

    For underlying fund investments, this is the date at which the fund manager exited the investment.

    The total amount committed, per financial instrument, per investment, on the date BII becomes subject to a binding legal obligation to provide funding or assume a contingent liability. This information is provided in US dollars.

    For direct investments, this is the amount that BII has committed to the business or project. For fund investments, this is the amount BII has committed to the fund.

    The currency in which the investment was made.

    Investment type :
    Debt
    Start date :
    August 2023
    Amount :
    $10m
    Currency of investment :
    USD
    Domicile

    The company or investment fund’s place of incorporation.

    :
    Ethiopia

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