Loan suspension weighs heavy on investors

The suspension of loans that was approved with ongoing dispersals in the pipeline has been cited as a bottleneck for activities particularly from project investors whilst the National Bank of Ethiopia (NBE) says it understands their concern but insists for patience.
It was recalled that NBE, the central bank, imposed a restriction on fresh loan approval and disbursement with selected type of collaterals.
The text message sent by Frezer Ayalew, Banking Supervision Director of NBE, on Wednesday August 11 for financial firm executives ordered banks to suspend releasing any fresh loans for clients who use real estates and similar properties as collateral.
However in past weeks the central bank is easing the loan and advance provisions for selected sectors, gradually, in different phases. For instance early this week the horticulture sector has got a relief to access finance from banks and similar measures have been taken for different businesses.
However investors, who are engaged on projects like the construction sector, expressed their concern by expressing the suspension on their sector is taking more time.
They said that they understand the decision of the government at the inception but through time it has been damaging their business.
One of the investor who demands anonymity said that his project was on going through the finance that was approved and has started dispersing from its client bank.
“Meanwhile the project activity gradually halted since the next round of disbursement was yet to be released because of the NBE decision. Now I have been forced to lay off the employees including daily laborers,” he said.
Some other investors are sharing similar situation which is being faced on their projects. They said that several projects have already been trapped because of lack of finance, “It is easy to spot in the city, construction projects like ongoing building constructions and expansion projects for instance suspending their activity.”
“We have already invested our equity and have also started accessing loan from banks but the decision has stopped our project and we need the central bank to consider our challenge and give the solution for the same,” they said.
They said newly started projects may not be affected like the on-going projects due to that special attention shall be required for projects that have holistic impact on the economy.
Bank executives that Capital spoke to accepted the claim and said that loans that were on the dispersing pool have been stopped like other loans as per the order of NBE.
They said that it is clear that the decision shall have effect for such kind of activities, but the order to suspend loans has effect for banks, borrowers, and government in general.
They said that is supposed to be relaxed gradually, but support the idea of NBE that shows visible changes on the illegal activities mainly on the parallel market that is automatically dropped.
“Yes it hurts the economy, lay off occur and even affects the government tax but in principle the measure of NBE is appropriate since it can control the biggest danger in the country,” a bank president told Capital. He recommended the business community to see afar and possible further economic sabotage and national treats besides their interest.
He added that the central bank closely examines the projects and eases its decision.
NBE on its side disclosed similar comment with banks. “The disbursement of loan is crucial for the economic development, while the current measure of NBE is temporary,” Solomon Desta, Vice Governor of NBE said.
“The decision of the government is selecting one of the two challenges,” he added.
Solomon promised that NBE will continue easing the measure with close follow up.
He told Capital that the issue would be all about a priority of sectors, “we recommend investor to be patient.”