Ethiopia ’s Ministry of Innovation and Technology has proposed that commercial banks transfer any unused cash from their moveable assets loan portfolio to the future National Innovation Fund.

According to a ministry statement, the ministry forwarded the proposal to the National Bank of Ethiopia because a law passed in 2020 requiring banks to devote 5% of their total loan portfolio to mobile assets has not been adequately implemented.

“If banks fail to deliver the required amount of loans against moveable assets, the money should be handed over to the Central Bank and used for the Innovation Fund,” the Ministry said in a statement. 

To ensure financial access, the central bank requires commercial banks to accept farm products, livestock, financial instruments, intellectual property, and forest and landholding certificates as collateral when approving loans and submitting reports.

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However, banks have been unable to disburse these loans, falling short of the 5% target. The Ministry believes that such monies should be used for the intended objective of the law, and that the money should be used to assist the startup environment.

When it becomes legislation, the Start-up Business Proclamation, which has been written for years by the Ministry of Innovation & Technology in partnership with the Jobs Creation Commission, will result in the establishment of the National Innovation Fund.

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The Fund will mobilise government resources for businesses, as well as loans, grants, and investments from private equity groups and angel investors. The cash raised will be used to incentivize entrepreneurs by covering the costs of intellectual property registration fees and guarantees given to companies in order for them to obtain funding from financial institutions.

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Charles Rapulu Udoh

Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. 
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh