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The state owned Construction and Business Bank (CBB) is waiting to get the 500 million birr capital injection from the government by the end of the 2011/12 budget year after it accomplishes the preconditions in the coming three months.
The bank that evolved from the merger of the now defunct Savings and Mortgage Cooperation of Ethiopia SC and the Housing and Savings Bank (HSB) in 1975 received approval for the capital injection during the end of last fiscal year after three years of its proposal to the Public Financial Institutions Supervising Agency (PFISA). It has played a huge role in housing development in Ethiopia.
Sources at CBB told Capital that the capital injection was approved with preconditions. The major criteria for obtaining financing was expanding the number of CBB branches throughout the country.
Official sources at CBB told Capital that in the current budget year the bank plans to open 50 more branches in different parts of the country.
“From these, the first 30 branches have already opened within five months and other eleven are in the final stages of being ready for service,” CBB sources said. The CBB had 39 branches until the end of 2010/11 budget year and most of them concentrated in Addis Ababa.
“We are confident that the other 10 branches will open before the end of the budget year, which will end on July 7, 2012,” officials added. “After we accomplish the expansion we can access the capital injection approved a year ago by the agency.” At the end of this budget year (2011/12) the bank will have 90 branches.
After a long absence, CBB announced that it is back in the housing cooperative business as long term loan services are being reintroduced to the market.
The bank had planned to provide loans for residential houses in September 2011 but the plan was delayed because the capital injection was slower than expected.
Sources said that the loan for residential house projects will commence in the coming budget year when the bank can access the capital injection.
Currently, mortgage banks are in high demand. The bank’s primary focus is supporting construction for businesses with its support for residential construction contributing a small amount to its overall goal. The new loan program will be a relief for dwellers who do not have sufficient capacity to erect their own house even after they secure a plot from the government.
With this plan, dwellers who secured a plot from the city administration under the cooperative will benefit but the exact percentage of how much the bank will give is not known. Previously the minimum contribution has been 30% or more of the construction cost (purchase value) and the balance will be contributed by the loan provider. According to sources at the bank, the interest rate for the loan will depend on the declaration of the National Bank of Ethiopia. CBB delivered its 1.5 billion birr capital injection request in the 2007/08 fiscal year for PFISA. CBB is one of the three state owned banks, and banking and construction financing are its core business.
CBB’s total assets, loans, advances and deposits grew to 3.3 million birr, 1.7 million birr and 2.5 million birr respectively by the end of May 31, 2011. In 1994 the figures were 689.8 million, 510.0 million and 356.9 million birr respectively.
The 500 million birr is the second capital injection in the bank’s history, after 12 million birr was provided to it in 1994 by the Ministry of Finance, when the bank was transferred to its current status from HSB in September 1994.
The Development Bank of Ethiopia and Commercial Bank of Ethiopia are the other two state banks that support developmental and commercial businesses respectively.