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Dev’t Bank Allots 3.4b Br for Industrial Development Loans

Management board approves a total of 5.1 billion Br to be given out in loans during
   this fiscal year

 

The management board of the Development Bank of Ethiopia (DBE) has approved 5.1 billion Br to be given out in loans this year with the majority of it, 3.4 billion Br, allotted for development projects in the industrial sector.

Initially, 4.01 billion Br to be given out in loans was proposed by Esayas Bahre, the DBE’s president, at the presentation of the bank’s performance to the management board on July 23, 2010.

The amount was changed following the announcement in early August of the proposed Growth and Transformation Plan (GTP) in which the government envisions huge increases in the industrial and agricultural sectors over the next five years.

The approved 5.1 billion Br is planned to be allocated to around 172 development projects this fiscal year, according to the new loan scheme the bank has put forth.

As the biggest lender to development projects in the country, the DBE plays a major role in achieving the goals set forth in the GTP, in which the country expects to double its agricultural output. At the end of the five years, the industrial sector’s contribution to the gross domestic product (GDP) is expected to be 17pc, up from its current contribution which stands at 13pc.

To this end, 3.4 billion Br, the lion’s share of the money approved to be given in loans, has been set aside for industrial projects while 1.7 billion Br is meant for projects in the agricultural sector and 8.9 million Br for the service industry.

The management board of the DBE, chaired by Melaku Fenta, director of the Ethiopian Revenues and Customs Authority (ERCA), has approved 3.5 billion Br of the 5.1 billion Br to be dispersed this year.

To increase the liquidity of the bank and enhance its lending capacity, Ministry of Finance and Development (MoFED) is planning to issue low value government bonds which the DBE will be responsible for.

Once they have been issued, bonds with a maturity date of one to five years will have a six per cent interest rate and those with longer maturity dates will have a seven per cent interest rate. All the income earned from interest on government bonds is tax free.

The government bonds are also meant to increase domestic savings, which is one of the goals set in the GTP.

The government plans to increase the share of domestic savings in the GDP to 15.5pc from the current nine per cent, according to the GTP, which is expected to be approved in the coming weeks by the new Parliament that started work on Monday, October 4, 2010.

“The bank has also prepared its own five-year strategic plan which is aimed at accelerating the implementation of the GTP by financing the important sectors of the economy,” Esayas said in a discussion with the bank’s clients on September 30, at Harmony Hotel in Addis Abeba.

During the discussion, the timely decisions of the officials of the bank, assigning respective experts to each project, and regular visits to projects were praised by its clients. Their concern over the non-flexibility of the DBE’s loan policy and some of the challenges they face in securing letters of credit (LC) during transactions was also raised.

The feedback will be taken into account in delivering better service to its customers, the bank’s president promised.

This kind of forum with respective clients has been held every six months since June 2009, following the Business Processing Reengineering (BPR) which the bank had conducted at around the same time.

“We are considering holding this forum on a quarterly basis,” Birhanu Taye, Business Promotion and Communications Process manager of the DBE, told Fortune.

 

 

By ZEKARIAS HADDUSH
FORTUNE STAFF WRITER

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