The Complicated Chinese PromiseđŸ€ž

PLUS: The Rise of a Juggernaut

Welcome to the 86th edition of ፍራንክ Digest!

Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.

Here’s what’s coming your way:

  • đŸȘœThe Infrastructure Debt Ladder

  • đŸ€” EthSwitch: Ethiopia’s Next Big Company?

  • đŸ–Œïž Big Picture

Thanks for reading!

Pushing Limits: Ethiopia x Chinese Debt

Investing

If you witnessed Ethiopia for the last couple of decades, you don’t need an economist to tell you that the country desperately needed infrastructure.

So when China showed up at the turn of century with deep pockets, Ethiopia understandably said, “ዹኔ ቆንጆ, let’s build.”

And build they did.

Chinese project financing has offered a pathway to build foundational infrastructure at a scale that few other lenders or partners could or would match.

Yet, the same model raises complicated questions about long-term debt sustainability, economic sovereignty and whether the promised economic transformation will really materialize.

In Ethiopia, Chinese financing has underpinned some of the largest and most transformational infrastructure projects of the past two decades. The Addis Ababa–Djibouti Railway, a 750-kilometre electrified standard-gauge line is emblematic. The rail link dramatically reduced cargo transit times and increased the country’s capacity to service both exports and imports.

Beyond rail, Chinese financing has backed hydro-power grid expansion, telecom infrastructure, industrial parks, roads and airport expansion. Industrial investments have also been significant in sectors such as steel, cement, pharma and textile.

Most recently, the Calub gas project in the Ogaden region is making headlines.

Spearheaded by China’s Poly Golden Concord Group Limited (A mouthful
yes. So just say Poly GCL), it aims to turn some of Ethiopia’s long-talked-about natural gas reserves into real fuel and fertilizer, right here at home. Two major imports and cash draining items for Ethiopia’s coffers.

All these investments have helped lay a foundation for industrialization, improved logistics and energy access. Prerequisites for sustainable long-term growth and increased global economic participation.

Promise vs Caution

China’s model of infrastructure financing is not unique to Ethiopia; there are parallels, both positive and cautionary, across other countries.

In principle, these are the sorts of investments that can set the stage for industrialization or at least significantly reduce infrastructure-driven drag on growth.

However, the success of these projects depends on not just building the infrastructure but how effectively we end up using them.

If global interest rates rise, funding tightens and demand for commodities dips. The risks associated with heavy reliance on external debt become more acute.

The World Bank recently published a report stating that many developing nations as a group were paying more to service loans than they were receiving in fresh disbursements, implying a net outflow of resources.

For some countries, this has translated into serious financial stress. Cases such as Ethiopia, Zambia and Djibouti illustrate the dangers of overleveraging: with devaluing currencies and revenue shortfalls, debt servicing can rapidly crowd out public investment in health, education or new development projects.

Countries must ensure that at least large projects deliver more than just employment and a spike in GDP numbers. There needs to be broad local value-addition in terms of skills transfer and local manufacturing inputs.

Over-investment in low-productivity or poorly planned infrastructure can lead to financial fragility rather than long-term growth.

Big Picture

For Ethiopia, the path forward should involve leveraging these assets to build export capacity, industrial diversification and domestic value-addition. Not simply accumulating more infrastructure for its own sake.

Debt should be treated consciously, not as a mechanism to expand projects indefinitely.

In other words: infrastructure must be a means, not the end.

ፍራንክ Picks 

The Growing Influence of EthSwitch

Fintech

The idea of sending money from one bank to another in a matter of seconds was considered almost hocus pocus. Witchcraft, blasphemy, black magic even. It was one of those subjects that, if you brought it up, around the dinner table, your chances of finishing your ጉርሻ were slim. 

Debates broke out and people were frustrated they couldn’t move money like they’d like. It was serious!  

And that was just 5 years ago.

Now, we seem to take it for granted, not fully understanding the magic behind it.

EthSwitch, the wizard pulling the metaphorical strings in the background, is quietly becoming one of the most important companies shaping the Ethiopian economy.

Established in 2011 by a consortium of banks, it has morphed into a juggernaut of an institution, one that moved ETB 741.1 billion (approximately $12.8 billion) in transaction volume as of June 2025. 

That’s a billion with a “B”, just fyi.

The company plays a big role on how money moves these days. It is, as its name suggests, a ‘switch’, sort of a toll operator that enables the flow of money from one account to another. 

The National Bank has recognized EthSwitch beyond its role as a gatekeeper. So it comes as no surprise that the regulator welcomed the new National Payment Gateway (NPG) with open arms and a big smile


EthSwitch showcased its new product to a room of heavy hitters and lawmakers. It claims that the NPG was a big leap forward of what EthSwitch has ever done before. Full disclosure - a lot of the features seem to already exist:

  • E-commerce enablement already available through Chapa, 

  • Interoperability through EthSwitch itself and Santimpay

  • Channel integration, combining mobile banking, internet banking and mobile wallet

  • Unified QR code payments (Static + dynamic QR), both available through EthSwitch themselves, SantimPay and Arifpay

Maybe we missed something here


On the other hand, for a select few countries, the ability to use locally issued cards to make small amount purchase abroad (‘a.k.a’ Reverse remittance) is a huge shift in policy. For the first time ever, your Birr can buy things that cost in Dollars. What a time to be alive!

In addition, EthSwitch is also working on a P2G (Peer-to-Government) payment network, where you will be able to pay for government services from any account, effectively ending the reliance on government owned institutions like Telebirr and CBE, who are currently the sole solution providers.

EthSwitch, the banks’ precious baby, is showcasing that the private sector will have a say in Ethiopia’s ambition goals of Digital 2030. Their involvement also showcases that individual investors owning financial institutions (i.e you and us) indirectly benefit form EthSwitch’s ascent.

But the private sector is beyond EthSwitch, it involves other partners and providers (e.g. Startups) that want a piece of the pie. Their participation is needed, where fresh and new perspective ideas collide, minting new products and services.

Yet that’s still not the case.

And a systematically important sector like finance is always prone to risk, best way to address that is to spread the risk, reduce the reliance on one player and strengthen the loose parts of the pipes. Will we get there, only time will tell.

But for now, the water is flowing and the flowersđŸŒ·are growing.

Big Picture

EthSwitch is quickly becoming the child that Ethiopia wished it had - healthy, growing like crazy and almost ready to take on anyone.

The latest unveiling of the National Payment Gateway showcased why the company is becoming such a pivotal player in the financial ecosystem. With payments at the core of its business, EthSwitch wants to conquer the rest of the system.

It’s importance to the economy will only grow in the coming years. Under the banks control, its health will depend on their health. Meaning a strong financial system, is a strong EthSwitch.

But there is a fear that one player is taking on all the responsibility on its shoulders. A better approach is to involve multiple actors from the private sector, spreading the risk and involving other hungry startups to the mix.

Thanks for sticking with us, ፍራንክ family! Keep those wallets smart and your inbox open - we’ll be sliding in next week!

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