Wednesday, January 18, 2023
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BusinessPolicy lender struggles with NPL

Policy lender struggles with NPL

DBE’s non-performing Loan at historic high of 40 percent

The Development Bank of Ethiopia (DBE), the mammoth state-owned development banker, has reported a marginal increase in its net profit as its nonperforming loans (NPLs) basket reaches a historical high of 40 percent, The Reporter has learnt.

The Bank which is also a policy lender in Ethiopia managed to make a 367 million birr net profit in the report period; whereas its NPL levels increased from a mildly inflated 25 percent last year to 40 percent this year. The current NPL is far larger than the National Bank of Ethiopia’s (NBE) requirement of 15 percent.

The Bank, in its report, attributed the increasing in NPL to a failure of loans disbursed to large commercial farms and a shortage of foreign currency. As the result of the shortage, some mega projects which were financed by the Bank failed to repay the loans they took from the Bank, read the statement issued by DBE.

Over the report period, the Bank has generated a foreign currency of USD 66.4 million, a decline from the previous year by more than 50 percent.

It is to be recalled that on the nine-month performance report of bank, DBE has indicated a marked improvement in its NPL basket from the previous year (28 percent to 20 percent).

According to the same nine-month performance report, out of the total NPL basket, the majority is accounted for by two sectors: manufacturing and commercial farming. At the same time, the Bank approved 8.3 billion birr loan, which is 2.7 billion birr below the target it has set for the period.

From the approved loans, 4.8 billion birr was disbursed during the period, which is below the planned disbursement of 7.8 billion birr.

As of January 2018, DBE’s NPL was 8.6 billion birr in value.

In the same bid, the Bank over the past one year has borrowed 70.13 billion birr from various sources whereas its total loan and advance increased from 33.8 billion birr to 39.43 billion birr.

 The Bank has a vision to expand its loan disbursements rate to 112 billion birr by the year 2020.

Yet, the Bank showed no increase when it comes to loans and advances over the past three months where it is reported to be at 39.15 billion birr.

Established back in 1909, as The Societe Narionale d’ Ethiopie Pour le Development de l’ agriculture et de Commerce, DBE was focused on agriculture and trade in its early days. In 1994, the Bank was reestablished as Development Bank of Ethiopia. 

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