DBE suspends agri loans once again
As controversy surrounding loan provision to commercial farms engulfs the nation’s policy lender, the Development Bank of Ethiopia (DBE), the bank has once again decided to suspend any loans and advances for new customers involved in large scale rain-fed commercial farming activities.
In a letter signed by Getahun Nana, president of DBE, on January 9, 2017, all the district offices of the Bank were instructed not to give loans for new customers venturing into rain-fed agriculture.
“Unless and otherwise explicitly instructed, the bank has herewith suspended all loans for rain-fed large commercial farms,” reads the letter.
This is not the first time that Development Bank of Ethiopia has decided to hit the break on loan provision for commercial farms. It is to be recalled that, in March, 2016, DBE, under the leadership of the former president Esayas Bahre, took a similar action and stopped the provision of loans for both new and expansion commercial farm projects.
The bank took such actions because of a brewing controversy regarding the performance of loans it provided to the sector. This is particularly concerning loans provided to commercial farm investors in Gambella Regional State.
The Gambella commercial farm case even grabbed the attention of the executive body including the Prime Minister Office.
Following claims and counter claims over the way loans were provided to the sector and how they were being used for untended purpose by the investors, the bank had to go through a number of changes including the removal of Esayas from his position and replaced by Gethaun.
The report compiled by a team of experts from different government office and chaired by Alemayehu Tegenu, minister of Cabinet Affairs at the Office of the Prime Minister, revealed that loans provided for commercial farm investors in Gambella were used for the unintended proposes. In addition, the report revealed that the overall performance of the sector was rather disappointing.
The report was highly criticized by the investors involved in the sector. They were heard discrediting the report for being less comprehensive and shallow in its understanding of the sector.
Following this, the bank went through a series of reshuffles and managerial changes. This year alone, the bank removed four vice presidents who served under Esayas. Instead, the bank has brought new faces to the top leadership position.
The bank has also reshuffled different midlevel manager and directorial positions.
The letter did not mention a timeline as to when the bank would resume provision of the loan.
“We have decided to stop loans for new customers because first we have to adjust those we have already provided,” Kifle Haileyesus, strategic and change communication director of DBE told The Reporter.
Established 1909, DBE is considered as a policy bank performing in line with a policy orientation of the government.
As of June 30, 2017, DBE reported 323.85 million birr net profit, a 13.3 percent decline from its previous year performance.
In addition, 2016’s performance was also still far from the Bank’s net profit of 681.4 million birr, reported in 2015. During the 2016 fiscal year, DBE has registered 373.5 million birr net profit, significantly, lower than its 2015 performance. To the contrary, from 2011 to 2015, the bank was able to improve its profit for five years in raw. In this regard, the Bank has reported 204 million birr and continued to increase the amount till it experienced its first decline in 2016.