Thursday, April 18, 2024
NewsLabor Minister blames banks for withholding SME credit, seeks help from Parliament

Labor Minister blames banks for withholding SME credit, seeks help from Parliament

  • Ethiopian domestic workers in Saudi outnumber Filipino counterparts.

Officials at the Ministry of Labor and Skills have accused commercial banks of failing to provide adequate levels of credit to small enterprises and requested Parliament’s assistance in ensuring equitable access to finance.

Minister Muferiat Kamil shared with MPs the difficulties small enterprises face in accessing loans despite government commitments during the presentation of the Ministry’s half-year performance report to the standing committee for Human Resource Development, Employment, and Technology Affairs mid this week.

The federal government has directed commercial banks to channel at least 10 percent of their annual loan disbursements to SMEs, doubling the previous threshold. Yet, banks have failed to avail the promised credit over the first half of the fiscal year that began in July 2023, according to the Minister.

“It is a question of justice,” said Muferiat. “These enterprises have to get the opportunity of finance. We don’t have a problem with their provision of credit to large  firms but if they forget to recognize the small enterprises, both growth and the economy will be unhealthy and compromised”

The Minister called for collaborative efforts to help resolve the credit issues for SMEs.

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These enterprises often fail to meet commercial banks’ bloated collateral requirements. It is what led regulators at the central bank to first introduce a mandatory threshold for credit provided to SMEs.

However, the executives of commercial banks argue the 14 percent growth cap placed on their annual loan disbursements by the same regulators has affected their loan portfolio.

During a recent parliamentary address, Prime Minister Abiy Ahmed (PhD) told MPs that 83 percent of the 170 billion birr in total credit disbursed by banks over the first half of the financial year went to the private sector. This led to the creation of over a million new domestic jobs and 150,000 additional job opportunities overseas, according to the PM.

Meanwhile, Muferiat indicated that Ethiopia has surpassed the Philippines as the leading supplier of domestic workers in Saudi Arabia. She puts the figure down to speed and efficiency in sending migrant workers to the Middle East.

This is a bargaining chip, an indication of working for more, and an additional benefit to sending more Ethiopians abroad, according to Muferiat.

Her Ministry is looking to create 4.4 million jobs for the fiscal year, 3.9 million domestically, and 500,000 overseas.

Security issues and organizational setbacks meant that only 1.5 million job opportunities were created in the first half of the year, according to Muferiat. Close to 200,000 of these were overseas.

The Minister indicated there are talks underway to send more Ethiopian migrant workers abroad.

[speaker]
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