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1. Background

The Ethiopian government is implementing a rural based development strategy with the expectation of rapid and equitable development of all its peoples. This strategy is multidimensional and integrated where inputs; processes and outputs in the rural socio-economic are treated in totality

The strategy recognizes that energy is one of the critical inputs for enhancing economic productivity and also building the human capital through the provision of critical social services including potable water, health and education. Expanding modern energy services, particularly electricity, in rural areas will accelerate the economic and social development process.

The government has formulated a national rural electrification strategy where both the public electricity service company (EEPCO) and the private and non-government sector will be involved in extending services to the rural population. Implementation of the public sector rural electrification program is already in progress and hundreds of rural towns will be the beneficiaries of this program in the coming five years.

The second private-led rural electrification strategy focuses on electrification of rural areas not to be covered by EEPCO's system expansion plan for the next ten years. This strategy will be implemented through a newly established Rural Electrification Fund (REF), the resources of which will be made available to viable projects and eligible private and non-government project promoters on a loan basis.

The Rural Electrification Fund is administered by the Ethiopian Rural Energy Development and Promotion Center (EREDPC), which serves as the Rural Electrification Fund Executive Secretariat. A Rural Electrification Board (REB) directs the activities of the Secretariat.

The Secretariat will provide loan and technical assistance to eligible rural electrification Project Promoters. The Secretariat will disburse, track and collect the loan finance to the Project Promoters through an intermediary finance institution or Trust Agent.

The Development Bank of Ethiopia (Trust Agent) is the financial intermediary between the Rural Electrification Fund and Project Promoters. The Development Bank of Ethiopia disburses funds during project implementation and later recovers loans in line with the loan agreement agreed upon by the Secretariat and the Project Promoters.

Scope of Service for the Development Bank of Ethiopia (Trust Agent)

The Development Bank of Ethiopia, as the financial intermediary between the Secretariat and the Project Promoters, has been providing the following services.

• 
Evaluate the creditworthiness of Promoters Project
• 
Prepare a disbursement and repayment schedule for each project
• 
Release funds to Project Promoters according to disbursement schedule
• 
Conduct independent supervision to ascertain that projects are implemented to an agreed upon schedule and cost
• 
Recover loans according to the loan agreement
• 
Conduct periodic loan repayment follow-up
• 
Conduct periodic reviews of the financial performance of projects
• 
Communicate regularly with Project Promoters regarding their financial status

2. Terms and Conditions lending under the Rural Electrification Fund

Project Identification

The Rural Electrification Executive Secretariat will handle this specific task. The potential or prospective areas for launching will therefore need to be identified by the Secretariat itself. This specific task may involve:

• 
Identification of potential areas suitable for launching the project in relation to the availability of the necessary and basic infrastructure, especially access road
• 
Areas suitable from the point of view of potential renewable energy sources like rivers, wind and sunlight

Projects will, therefore, be identified and application given the go-ahead by Rural Electrification Executive Secretariat.

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