Sunday, May 26, 2024
BusinessCoffee exporters under the microscope in regulator crackdown

Coffee exporters under the microscope in regulator crackdown

The National Bank of Ethiopia (NBE) is probing claims that certain coffee exporters misused special lending benefits meant to facilitate their overseas trade operations.

Acting on a tip-off about potential irregularities from the Ethiopian Coffee and Tea Authority, the NBE directed domestic banks one month ago to conduct audits of loans and advances granted to 58 specific coffee exporters.

The banks have since submitted their audit findings to the NBE for further scrutiny. “We have received the audit results and are investigating based on their reports.” according to Frezer Ayalew, Director of Bank Supervision at NBE.

Signed by Frezer and addressed to all the banks by the end of August 2023, the letter ordered the banks to “conduct a detailed loan review assessment” against the list of 58 coffee exporters provided by the coffee regulating authority.

The central bank requested information from the banks including “the amount of granted loans and advances, their collateral types and amounts, loan utilization for the intended purpose, the amount of foreign currency allotted and generated, and their loan status until the end of July 2023.”

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The NBE mandated that the banks submit the audited reports by September 4, 2023, which Frezer confirmed was done accordingly. Now, the exporters await the NBE’s final verdict.

Prior to the NBE’s measure, the Coffee and Tea Authority had informed the banking regulator that during the last fiscal year alone, about 144 coffee exporters were given special privileges to take loans so that they didn’t face financial constraints in their efforts to earn the desperately needed foreign currency.

However, 58 coffee exporters did not send any coffee after accessing loans from commercial banks for their working capital. Only 37 exporters made proper use of the loaned money to export coffee, while the Authority claimed to have no information about the whereabouts of 49 exporters. 

Signed by Deputy Director Shafi Oumer, the letter from the Authority to the NBE declares that the certificates of competency for the 58 exporters are suspended, urging the same action be taken on the exporters by other regulating bodies.

“The loaned money wasn’t utilized for the export of coffee; therefore, the country did not get the planned foreign currency,” the Authority’s letter reads.

The last fiscal year was challenging for Ethiopia’s promising coffee export sector. From the export of 240,000 tonnes of coffee, about USD 1.33 billion was generated, an amount that is very less than the planned USD two billion and the preceding year’s revenue of USD 1.4 billion.

In the same year, several coffee exporters were reported to have failed to export, and hundreds of contracts were defaulted on as a result.

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