DBE gets significant capital injection

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The Council of Ministers has approved to increase the authorized capital of Development Bank of Ethiopia.
According to the report released by the Council of Ministers it approved to increase the authorized capital of the bank to 28.5 billion birr by adding 21 billion birr. Currently the authorized capital of the Bank is 7.5 billion birr.
The decision by the cabinet reasoned that, “as the Development Bank of Ethiopia is a policy bank, and as such it needs to have the capacity to effectively implement the nation’s developmental policies; it is then imperative that its capital is raised sufficiently.”
“The new administration of the bank has been asking the government to increase the capital of the bank,” said Hayleyesus Bekele President of the bank adding that this will help it to increase the lending capacity of the bank.
The state owned development financial institution is supervised by the Public Financial Enterprises Agency and supports developmental projects mainly agricultural, industrial, manufacturing and foster the investment of private capital for productive purpose. One of the mandates of the bank is the provision of development credit to viable priority projects along with technical support through mobilizing resources from domestic and foreign sources.
Priority area projects financed by the Bank include commercial agriculture, agro-processing, manufacturing and extractive industries. DBE also extends a special line of credit for borrowers that operate in the textile, garment and leather and leather product industries. As an additional special line, the Bank offers credit for the procurement of raw materials in the pharmaceutical industry and to companies that supply products to corporate government entities.
The bank has reported that it has earned 951.6 million birr profit before tax during the last six months of the current fiscal year which is 228 percent increase from the last year same period.
The bank has also disbursed 4.4 billion Birr loan and collected birr 4.51 billion.
According to the president, the performance has shown increment in loan approval and collection by 4 percent and 125 percent, respectively, as compared to same period last year.
DBE has started implementing its five-year strategic reform plan based on studies. The strategic reform plan was designed by taking into consideration the homegrown economic reform of the country and the objective realities of the bank.
The bank’s NPL stood at 34 percent in the first half of the current fiscal year. In last fiscal year 2017/18, nonperforming loan ratio was at 40 percent.
“Increasing of the non performing loan of the bank and the amount of capital has been limiting the bank to give loan for other important sectors” said Haileyesus.
Shortage of foreign currency, termination of agricultural loan and political unrest around the country were point out as reasons of the rising ratio of NPL in the last fiscal years.
Rain fed agriculture investment and failure of rain fed commercial farms in some regions of the country is also one big player for the rapidly growing non-performing loan. As one of these reasons the bank has banned to give loan for rain fed agriculture starting from 2017.