The East African Development Bank is ditching the US dollar. After watching borrowers get crushed by exchange rate swings, the regional lender decided enough was enough. They're switching to local currency financing for East African Community member states, and the numbers suggest they might be onto something.
The bank signed $90 million in initial currency swap agreements with Rwanda and Tanzania. The strategy is brutally simple: eliminate exchange rate risks that were eating borrowers alive. When your loan balloons every time the dollar strengthens, you're not exactly motivated to keep paying. Non-performing loans had been piling up, choking growth and scaring off investors.
Currency swaps work through principal exchanges at pre-agreed rates with periodic interest payments. Borrowers access financing at better rates without gambling on forex markets. It's not revolutionary, but it works.
The impact on small and medium-sized enterprises has been substantial. Through 20 partner financial institutions, $99 million reached 11,185 SMEs, including 3,019 women-owned businesses. Uganda alone saw $52 million in loans supporting 12,542 SMEs. Women-led enterprises grabbed $52 million, with 9,400 women-owned businesses getting funded. Supply and value chain linkages benefited another 65,167 businesses.
The bank's growth metrics tell the story. New loan approvals more than doubled to $111.1 million in 2024 from $40 million in 2023. Disbursements jumped 45 percent to $38.2 million. Net profit fell 14 percent to $11.2 million, but that's almost expected when you're aggressively expanding lending. The cross-currency swap structure allows both parties to exchange principal and interest payments in different currencies while managing foreign exchange risk more effectively.
In June 2025, the bank secured a $40 million loan agreement with the Opec Fund for International Development. Twenty percent of SME Programme loans will be financed in local currencies through this partnership.
The bank has deployed $324 million across supported sectors to date. Sovereign lending dominates at 33.9 percent of total investments. Agriculture, forestry, and fisheries received just 1.2 percent, which seems backward for a region where farming feeds millions. The bank aims to more than double its balance sheet to $911 million by 2028 while targeting agriculture, transport, water, finance, education, industry, energy, and healthcare. Green and social bonds are on the menu for funding member state needs. The shift mirrors broader regional efforts to manage capital controls and reduce dependency on hard currency exposure. Regional central banks have pursued similar monetary strategies to stabilize their forex markets and protect local economies from dollar volatility.
