FC Africa Partners with Lion Bank to Launch First Blended Finance for Conflict-Affected MSMEs

By Betegbar Yaregal December 19, 2025

FC Africa has brokered Ethiopia’s first blended finance partnership specifically designed for conflict-affected regions, initiating a pilot project to provide uncollateralized loans to micro, small, and medium enterprises (MSMEs) in Mekelle and Abala. The agreement involves Lion International Bank, which will disburse the loans through its digital platform, Alegnta.

blended finance which is a strategic model that uses public or philanthropic funds to de-risk investments, making projects in challenging sectors more attractive to private capital. In this case, it enables a private bank to lend to high-risk, underserved businesses it would typically avoid.

The initiative aims to overcome the severe credit constraints faced by businesses whose operations were disrupted by conflict, lack of traditional collateral, or weak credit histories. It specifically targets enterprises run by returnees, internally displaced persons (IDPs), and host community members, with the goal of restoring livelihoods and stimulating local economic recovery.

The pilot is being implemented under the five-year ER-CAP Programme (Economic Recovery in Conflict-Affected Areas Programme). This programme is funded by the Government of Sweden and led by Mercy Corps in partnership with the Danish Refugee Council and FC Africa.

The ER-CAP Programme focuses on restoring livelihoods in conflict-affected areas such as Tigray, Afar, and Amhara by supporting the businesses of IDPs, returnees, and host communities.

The blended finance structure combines private capital from Lion Bank with public concessional funds, which act as a de-risking mechanism to encourage lending in high-risk areas. The model is supplemented by technical assistance to strengthen enterprise readiness and build the bank’s confidence in these underserved markets.

FC Africa, a leading economic development consulting firm formerly known as First Consult, designed the partnership.