DBE sees capital quadruple
Raised to 28.5 billion birr
The Council of Ministers boosts the policy bank, the Development Bank of Ethiopia (DBE), through a capital injection of 28.5 billion birr, four times the preexisting capital of 7.5 billion birr. This decision was made at the Council’s extraordinary meeting held on May 7, 2020, The Reporter has learnt.
The decision by the cabinet reasoned that, “as the Development Bank of Ethiopia is a policy bank, and as such it needs to have the capacity to effectively implement the nation’s developmental policies; it is then imperative that its capital is raised sufficiently.”
Speaking to The Reporter, the Bank’s president Haileyesus Bekele stated that the main consideration for this raise is the need to comply with the international standards with regard to capitalization that matches asset levels.
He also said that the capital raised will help the Bank to easily interact with foreign banks and strong capital base is one of the preconditions that foreign banks present as requirement to work with the DBE. He further added that this is important for the Bank’s image.
This raise, according to Haileyesus, is part of the Bank’s five years reform plan which is aligned with the Home-Grown Economic Reform (HGER) plan of the government. As the HGER requires huge financial provision, the intention behind the capital raise is for the Bank to strengthen its provision of finance to investors.
Until 2018, the policy bank has been grappling with non-performing loans that reached up to 40 percent. This has started to moderately improve with the bank registering marginal increase in profit bouncing back from losses which it has sustained for years. Because of the mounting non-performing loans, DBE foreclosed investments in various sectors including textile and agriculture with the prominent examples being Ayka Addis Textile Plant of Turkey and Karaturi farms of India.
Concerned with the impacts of keeping the DBE afloat with loans from the central Bank, the International Monetary Fund (IMF) warned the National Bank of Ethiopia to stop financing the DBE.
Contributed by Brook Abdu and Dawit Taye