Hey crew, here’s to another week of cutting through the noise and focusing on what actually moves financial minds forward.

Just the stuff affecting wallets, business & the economy:

🌹 Love, War, and Other Expensive Things

🙌 The SMEs Prayers Are Answered

Here’s to the 127th weekly edition

Let’s dive in.

Well that subject line is incomplete actually: they say all is fair in love and war.

And a gentle correction to the spelling, around here it is all is fare, as in the price, the cost, the bill that turns up long after the excitement wears off.

Start with love.

For the romantic kind, somebody reading this made dinner for two last week, and ate both.

For the important kind: our national devotion to ጥሬ ሥጋ and kitfo.

We just spent Meskel proving it, gathering around a ችቦ and then attacking a plate of raw beef like it personally owed us money.

ቅቤ, ሚጥሚጣ, the whole holy trinity.

Worth every birr, whatever your cholesterol level says.

And it is a lot of Birr.

Love is not fair, folks, and at up to 8,000 birr per kilo in certain ቁርጥ places, neither is the price of beef.

Which brings us, to a subject that changed dynasties, formed nations and often times than not split families apart.

Let’s be clear, we do not do politics here, and we are not about to start.

We do one thing: money.

So let us stay in that lane and ask a simple question: what is the cost of conflict to everyone?

Everyone already knows that any type of conflict is expensive. Thrilling insight, we know. The interesting part is which bill you notice, and which one quietly robs you for a decade.

Start with the bill you can see.

When the war ended in 2022, the Ministry of Finance put reconstruction estimates from around 20 billion dollars, up to a total damage closer to USD 44 billion. Schools, clinics, roads, power lines.

Real things, gone, each with a price tag fairly straightforward to estimate.

Those numbers got headlines, as it should have.

Now the bill nobody hands you.

Some very patient economists at the University of Oxford studied that same war and estimated the economy will end up roughly 125 billion dollars poorer by 2027 than it would have been if the fighting had never happened.

Sit with that one.

The rubble you can see cost about 20 billion. The growth that never happened cost up to six times more.

That second number is the sneaky one; the most difficult to quantify, the painful one in an economic sense.

It is the factory that never opened, the salary you never got, the business you would have started, the price that stayed high a year too long, the foreign investor who took one look at the headlines and booked a flight to Nairobi instead.

Nobody gives you a receipt for a future that failed to show up. We just pay for it anyway, in slower everything, for years.

The same research found the economy lost somewhere between 7% and 12% of a full year's output, and that ordinary household spending fell by as much as 15%. That is families buying less of everything, kitfo very much included.

So no, we did not write this to break the news that war is bad. You worked that out on your own.

We wrote it to point at the part that hides.

Destruction is loud, and it ends. Lost growth is silent, and it stays like gum stuck on the soles of your shoes.

Ethiopian business owners, especially those of the Small and Medium fraction, are not used to walking into their local bank, pulling up a chair across the business manger and articulating these simple words: ብድር ለመጠየቅ ነው

And yet, that move we see in the movies might be coming to a branch near you

Well, this is in anticipation of a new kind of bank that’s about to hit the block.

A bank that has the word ‘Youth’ in it.

It’s going to be called Ethiopia’s Youth Entrepreneurship Investment Bank (YEIB)

Not exactly going to win any branding awards but the people who came up with the name did their best to squeeze in the most amount of information into that name.

And kudos to them!

YEIB is under formation, meaning it’s still too shy to go out in public but it will muster up the courage to do so soon, according to an executive from the Ministry of Labor and Skills (MoLS).

The MoLS actually has a partner in crime, the Job Creation Expansion team. They are the ones directly responsible for the success of the upcoming bank.

That department has slowly been making waves and the current move can be compared to a tsunami.

The main character energy is being provided by the African Development Bank (AfDB), under a project called AMD4J.

Looking closer, this has been brewing for a while now:

EIH* = Ethiopian Investment Holding, the behemoth babysitting giants like ELPA, ET and Ethio Tele.

The powers that be have said that YEIB will be following AfDB’s framework which ‘combines long-term equity and quasi-equity capital’ (quasi-capital is a mixture of debt/equity with debt converting into equity based on performance - like Convertible Notes)

SMEs are fragile, banks are scared to touch them and that risk will not magically disappear.

That’s where the Public Credit Guarantee Scheme comes in.

Think of it as some sort of insurance if one the SME’s boss in question calls the bank one day and says ‘So about that monthly payment….looks like I will be suspending that indefinitely, my bad’

Not what a lender would like to hear.

On paper, it’s a great idea.

Small businesses have a voice and financial needs. The bank will be catering to that need.

AfDB needs results so the money will be loaned out and put to work.

The formation of the bank will create jobs (provided regulatory approval from the National Bank of Ethiopia) and spur economic activity for the financially overlooked. 

And to have a successful business model, the bank would need to make money. Grants can only last so long.

To do that, lending regulations have to be established rigorously: due diligence, site visit, borrower profile and loan repayment monitoring. Might as well use FrankScore for all of that (Shameless plug here 🤷‍♂️)

If you ask us, we are supportive of the movement and we can’t wait to see what the requirements are because, you know, we also gotta eat.