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The Federal Ethics and Anti Corruption Commission is
probing senior executives at the state-owned
Development Bank of Ethiopia (DBE) who are suspected
of abusing their positions by rescheduling and
approving new loans without following proper
procedure, sources disclosed.
In question are 250 mln Br of loans now worth 312
mln Br after accumulated interest.
The executives assumed leadership of DBE in February
2006, replacing seven bankers under the leadership
of Moges Chemere who were deposed for alleged
corruption after serving for seven years.
The new crew of executives, headed by Wondossen
Teshome claim they are turning the bank's fortunes
around, reporting more than 20 mln Br in profit
during the last fiscal year. However, sources at the
bank told Fortune that the profits are an
illusion and that about 94pc of the bank's five
billion Birr loan portfolio is in default.
The commission has received a tip that the current
executives also overestimated the value of
collateral for some of the loans they disbursed and
that they have approved a loan that was rejected by
the Bank's loan committee, sources told Fortune.
The officials are also accused of granting new loans
to creditors already failing to service existing
loans with the bank.
As part of the investigation, the commission has
last week seized documents from the bank related to
10 projects.
"It is hard to say whether the investigation will
remain limited to 10 cases, as accusations have kept
coming to the commission," a senior member of the
commission told Fortune declining to give further
comment on the pending case.
According to sources at the commission, the DBE
officials overstepped their authority when they
ordered the rescheduling of loans - as many as 12
times for some loans.
The Public Financial Enterprises Agency (PFEA), the
entity supervising state-owned financial
institutions, has ordered the DBE and other
government financial institutions to submit a plan
for reducing NPLs. Over the past 10 years, the DBE
has accumulated 2.5 bln Br in bad loans, nearly half
the 5.3 bln Br in loans it has disbursed to 30
creditors.
DBE was formed in 1945 as an agricultural and
industry development bank after the Ethiopian
government obtained a loan from the US. DBE has the
role of providing medium and long-term loans to
promote investments in the agricultural sector. The
bank has 900 employees and 32 branches across the
country, according to the 2006/2007 annual report.
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