The Commercial Bank of Ethiopia (CBE) announced it is working to make interest rate adjustments on borrowing. Officials of the state-owned bank told The Reporter that the final document stipulating up to two percent interest rate increments has been sent to the Board for approval.
According to CBE’s Strategic Planning and Monitoring Director, Meshesha Deme, the bank has been providing loans for both private and government institutions below the market borrowing interest rate.
The bank has so far loaned over 784 billion birr to various public and private institutions at the average interest rate of 8.6 percent, while the market borrowing rate reached 14 percent, said Meshesha.
The director, addressing performance issues, stressed the need for people to understand and not forget the role the bank plays in supporting the economy. It provides the largest share of credit to national projects as well as private borrowers.
Most of the money loaned out has been disbursed with very minimum interest rates to support mega and small projects of the nation, Meshesha said.
Once the adjustment is made, the bank can compete with existing banks as well as banks that are in the pipeline.
Furthermore, the Bank is considering service charge fees on some of its services which were offered and provided for free, or in some cases with low tariff.
Meshesha said that in a bid to develop the banking and saving culture among people, the bank used to cover all costs and offer its services for free. According to the director, this new directive for service charge fee was prepared along with the ongoing interest rate adjustments tabled to the board.
The director mentioned that bank account holder’s payment, mobile money, online banking, cash transfers, mobile banking, and other services of the bank are either provided with minimum cost or at no cost at all. Thus, the bank is adjusting systems to setup a minimum payment mechanism for some of its services and to make a slight payment enhancement on other services with low tariff.
According to Meshesha, currently, the bank’s default debt has reached 11 billion birr. He further noted that the current interest rate adjustment will take into account the vulnerability of the borrower.
The bank is working to reach 1 trillion birr in assets in the current budget year. Currently, it has a net worth of about 877 billion birr.
It has more than 63,000 employees working in more than 1,600 branches across the country.