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The Development Bank of Ethiopia (DBE) is to
disburse long-term loans to regional states for
infrastructural expansion. Road projects in the
regions selected would be given priority within the
new scheme, a senior management staff at the Bank
told Fortune.
“Five road projects have been studied and shelved
without implementation due to a major budget
constraint we have,” Yaregal Aysheshem, president of
the Benishangul Gumuz Regional State, told
Fortune. “The Bank’s latest scheme is a great
advantage to us.”
Headed by Wondwossen Kebede, DBE’s management has
incorporated various credit packages in the past one
and a half years. Included in these packages is the
collateral management concept, a type of credit
system which is not widely known in the Ethiopian
banking industry. The Bank has set out to implement
this credit facility system to tannery companies as
of July 2007.
The Collateral Management Loan System is a way of
advancing rehabilitation loans that would benefit
companies that took credit advanced from DBE and
become loan defaulters due to a lack of working
capital rather than the absence of markets.
“Regions that enjoy a conducive investment
environment and potential could not attract
investors due to access barriers that followed from
lack of roads,” said a senior management staff at
DBE. “Giving priorities to places that have managed
to command the interests of investors, the Bank has
planned to advance loans to finance road projects
enhancing infrastructure in these regions.”
The Bank is undertaking mechanisms by which it can
grant credit to regions at a lower interest rate
that will be repaid on a long-term commitment with
the taxes the regions collect.
“The studied five road projects require about 500
million Br budget,” said Yaregal. “These roads are
specially needed in sections of the region that
produce oil seeds.”
Ninety five per cent of the around one million
population of Benishangul subsist on farming; most
of them engage in the production of oil seeds, a
sector Yaregal stressed is suitable to the region.
“However, lack of access to the market is
discouraging the farmers from producing more crops,”
complains Yaregal.
However, not all individuals agree with what the
Bank has planned to do. Though the government has
denied that the cause of the inflation is excessive
monetary expenditure for huge infrastructure
projects, some experts still believe that it is the
major factor which brought the pervasive price
hikes.
“Bank’s have had significant influences in
intensifying the inflation through huge expenditures
in big projects,” an economist told Fortune.
“I believe DBE has to wait until the inflation calms
down before disbursing the loans.” He stated his
concern that the increase in money circulation in
regions could further rising prices.
The management of DBE will soon begin a detailed
study with its own experts concerning the proposed
loan it is planning to disburse. However, the
proposal is first presented to the Board of
Directors headed by Melaku Fenta, minister of
Revenue.
Established in 1909 under the name of The Societe
Nationale d’Ethiopie Pour le Development de
l’agriculture et de Commerce, DBE is responsible to
support the government’s development strategy.
In 2006 the Bank credit policy was revised for the
seventh time and the new one comes based on the
government’s agriculture-led industrial policy.
“If we should work to support this policy, the
infrastructure developments can have a major roll in
the country’s economic growth,” said the Bank’s
senior management staff.
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