Friday, June 14, 2024
BusinessPrivate businesses swimming in credit as policy bank switches gears

Private businesses swimming in credit as policy bank switches gears

Three firms account for nearly half of 25 billion in DBE disbursals this year

Lemi National Cement, Habesha Cement, and Kegna Beverage are among the top beneficiaries of a turnaround at the Development Bank of Ethiopia (DBE) favoring the disbursal of credit to private businesses rather than the customary public projects.

Combined, the three private firms received more than 10 billion birr in loans from the state-owned Bank, accounting for close to half of the 25 billion birr it disbursed over the first three quarters of the financial year.

Lemi National Cement, a joint venture between East Africa Holding and the Chinese-owned West International Holding, took more than 4.4 billion birr in loans from DBE over the first nine months of the fiscal year. Lemi National’s plant in the Amhara region’s North Shewa Zone is expected to produce more than four million tons of cement annually upon completion but it is not yet clear when that will be.

Habesha Cement has taken on 3.92 billion birr in loans from DBE over the reporting period as the company looks to rebound from a poor run of form that resulted in a multimillion dollar buyout of the South African Pretoria Portland Cement Company’s stake in the business in 2022.

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When prominent businessman Getu Gelete acquired the majority stake in Habesha Cement, the company had been struggling to service debts valued at USD 40 million it owed to DBE. It is unclear whether it had settled its accounts before taking on the new debt over the past nine months.

Kegna Beverage, a recently constituted share company, took close to 1.9 billion birr in loans from DBE over the reporting period, with all of the credit being disbursed over the third quarter. DBE approved five billion birr in fresh loans for corporate clients during that quarter alone.

The Bank’s loan distribution portfolio indicates 33 percent of credit was disbursed to clients in Oromia, 23 percent in Amhara, 16.6 percent in Addis Ababa, and 13 percent in Tigray. It disbursed no less than 25 billion birr in credit over the last nine months, close to 30 percent more than its executives had initially anticipated.

It also approved close to 45 billion birr in fresh loans over the same period, a fifth more than President Yohannes Ayalew (PhD) and his executive team had planned.

The disbursals push DBE’s outstanding loan portfolio to 92 billion birr. Its assets stand at 179 billion birr, while the Bank’s liabilities weigh in at 139 billion birr.

At 2.54 billion birr, it generated more than twice as much from forex fluctuating windfalls during this year’s reporting period than in the previous year. However, loan interest and interest on deposits of upfront payments collected from clients still account for the majority of DBE’s income.

The Bank generated four billion birr in revenues over the first three quarters, according to a report its executives presented to Parliament this week.

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