July 22, 2017 - The Development Bank of Ethiopia has finally got the go-ahead from the National Bank of Ethiopia to establish a company which will mainly deal with management of assets under its ownership, according to the Reporter.
The bank has been in consultation with the central bank as well as the Ministry of Trade to get the permission for this service.
The new company, which is called Ethiopian Capital and Investment PLC, has been established with a capital of 10 million birr, where DBE owns 99.9 percent of the company.
This has come following DBE’s legal and institutional limitation to administer factories and companies, which were confiscated from borrowers because of failure to pay loan borrowed from the Bank.
As of June 30, 2016, The Bank’s total outstanding loan was 31.63 billion birr. From this, the share of agriculture sector was 6.17 billion birr and manufacturing 21.35 billion birr. Mining and energy took 795.4 million birr, while the rest went to financial services, other services and staff loans. In the same reporting year, the total loans and advances represent 54 percent of the total assets of the Bank.
In addition, during the same fiscal year, DBE approved 11.84 billion birr and disbursed 6.33 billion birr for various projects. Yet, the Bank collected 4.11 billion birr from its clients.
Given their significant number and dispersed location, the companies have created a limitation on DBE to look after the performance as well as administrative issues of companies under its pocket.
Having this the new company will deal with issues including asset management, tax and settle payments to third parties. Moreover, it will deal with making purchases of raw materials on behalf of companies under its jurisdiction.
Ethiopian Capital will look after defaulted textile companies including ELSE Addis PLC, Dire Dawa Textile and few more flower farms which are now being foreclosed. It is to be recalled that ELSE was abandoned by its former investors from Turkey.
The investors escaped from Ethiopia without paying one billion birr from loan, tax and payments from purchase of raw materials such as cotton.
Following this it was difficult for DBE to look after this factory.
Such and related limitations pushed the Bank to establishes the new PLC.
Since the appointment of Getahun Nana, following the removal of Esayas Bahre, the Bank has passed through different structural as well as institutional reforms.