The Development Bank of Ethiopia (DBE), which is dubbed as policy bank of the government, has ambitiously planned to avail 112 billion birr finance for priority projects during the second Growth and Transformation Plan (GTPII).
DBE’s president, Esayas Bahere, in an exclusive interview with The Reporter, explained the bank’s core responsibility of supporting the government’s key investment sectors such as manufacturing, agriculture and agro processing. To this end the bank plans to increase its credit supply to 112 billion birr – triple times higher than the loan it provided in the first round GTP which was concluded in July this year.
The bank, in the first GTP, planned to approve 44 billion birr loan of which it aspired to disburse 38 billion birr of it and collect 14 billion birr of the loan. However, it managed to achieve 80 percent of it, the president said.
During the first strategic period, the bank approved 39 billion birr loan and disbursed 26 billion birr and managed to collect 13 billion birr of the loan, according Esayas. “DBE doesn’t have the experience of lending beyond 10 billion birr in its earliest strategic periods, thus our achievement in the first GTP was enormous,” Esays told The Reporter. The bank had been criticized with its poor loan collection capacity. Its None Performing Loan (NPL) a few years back was above 40 percent significantly reduced over time and presently reached 14 percent.
In an ambitious move, the bank plans to avail 112 billion birr credit for the second GTP that will start in this fiscal year and will expire in 2020. Out of the total approved loan the bank intends to disburse 104 billion birr finance specifically to the country’s priority sectors. With regard to debt collection, it aspires to collect 40 billion birr in the coming five years. According to Esayas, DBE will emphasize on supporting small and micro manufacturing industries throughout the nation using the recently introduced capital lease financing. This approach was introduced last year to equip small scale industries with machineries and capital goods in a long-term lease arrangement.
Some 20 percent of the total loan will go to supply machineries to these small scale industries within the five years strategic period, Esayas elaborated. To effectively realize this plan, the bank will open 75 branches in various parts of the country with the coming five years and many more in the coming future, he said. In a parallel but an expected move, the bank has amended its credit policy aiming to support the local private sector that has shortage of capital compared to foreign investors.
Thus, the existing 70/30 arrangement is now slightly altered to 75/25 only to local investors interested to invest in the banks priority economic sectors, Esayas affirmed. That means those local investors interested in the priority areas are expected to have 25 percent equity while the remaining will be covered by the bank thorough a long-term credit.
To solve a lopsided competition between the local and foreign private sectors, DBE will mount up its equity requirement on foreign investors from the existing 30 percent up to 50 percent in the coming few years, the president said.
[www.fanabc.com]