The Development Bank of Ethiopia (DBE) has introduced the fourth credit policy of its 98-year history.
 

The new policy, which has 64 pages, was approved by the Board of Management, chaired by Minister of Revenue, Melaku Fenta, in October; it has become operational this month.

It prioritises export, manufacturing industries and agro-processing sectors, and has demoted coffee, oilseeds, pulses, and gums from their position of traditional importance. Hides and skins have also been excluded from the prioritised list of all manufacturing industry products. 
 

There are ways, however, by which the excluded elements could benefit from the new policy. The policy states, under its Agro-Processed Products subheading, that “cleaning and processing of export crops, such as coffee and sesame seeds” is included as possible beneficiaries of medium to long-term loans DBE will extend under the policy.
 

When the Bank was first established in 1909 as Societe Nationale d’Ethiopie pour le Development de l’Agriculture et de Commerce (National Society of Ethiopia for the Development of Agriculture and Commerce), it had a policy intended to encourage the development of the feudal-capitalistic regime of Emperor Haileselassie.
 

It had another policy in 1976 emphasising state-owned agricultural and industrial institutions; this policy, which was operational until the fall of the Derg, had drained capital, requiring the EPRDF government to inject a 100-million Br budget support.
 

DBE got its third policy in 1999 to facilitate credit service for the private sector. This was part the country’s objective of encouraging private sector development based on national development goals.
 

Although this is the first time that specific sectors have been prioritised by policy, for the past three years, the bank had been treating sectors deemed of primary importance by the government with special priority. The government had facilitated a financial reserve of 1.5 billion Br to be provided in loans to these sectors. This money was obtained from the Commercial Bank of Ethiopia (CBE) by bond.
 

Various prerequisites to get access to loans have also been incorporated into the new policy. Those beginning a new investment will have to come up with 30pc of the capital requirement of their project in order to benefit from 70pc loan from the DBE.
 

However, the new policy has excluded the old requirement that the investors needed to deposit the 30pc in a blocked account with the bank. The new approach has it that 30pc “shall be placed upfront or gradually over an agreed upon time (maximum of six months after signature of covenant agreement).”
 

The new policy also states the loan approval and loan appraisal responsibilities of the bank’s branch management; and the bank president has been precluded from any involvement in the process.
 

“I think it is good for the beneficiaries that the system, which required meeting the president for all kinds of loans, and where you would be lucky to have access to the president, is now changed,” said a banking expert.
 

Accordingly, main branches in Addis Abeba, Awassa, Bahir Dar, Dire Dawa, Mekele, Nazareth and Nekemt are now authorised to approve loans amounting to a maximum of three million Birr, while 24 other branches in Zone and Woreda towns of various regions have been given a ceiling of one million Birr.
 

Loans of three to 10 million Br will be handled by the Departmental Loan Committee at the head office, while anything beyond that will go to the Main Loan Committee. 
 

“The Corporate Planning and Risk Management Vice President and the Risk Management Department Manager will be the chairs of the main and Departmental loan committees, respectively,” states the policy.
 

The policy has drawn criticism for not including a deadline for the loan approval and appraisal processes, which has always been a reason for disappointment.
 

“This is a weakness of the new policy,” said the expert.
 

DBE currently has non-performing loans which exceed its capital. National bank experts say, however, that the bank has been doing well in having loans returned since its management was replaced and restructured. The previous management, which was led by Moges Chemere, was dismissed in March 2005.
 

Regarding new loan requests, however, the bank’s Board of Management had been waiting for the new credit policy to be approved.

“The new management will be tested now,” said sources in the bank.