CBE restarts agricultural working capital loans


The state owned Commercial Bank of Ethiopia (CBE) reversed course and began accepting agricultural loans again after a one month of suspension. Commercial farmers in Amahara, Benishangul, Afar, Gambella , Tigray, Oromia who were previously instructed to obtain working capital from the Development Bank of Ethiopia have now been told to get working capital from CBE.
According to sources, CBE is now giving loans to commercial investors who previously started processing loans.
“The suspension came after confusion between CBE and DBE, on who and how should handle working capital loans for agriculture. We were told a month ago to quit and now we are told to restart. Our bosses told DBE officials that it is better for working capital to be managed by CBE and after long discussions DBE agreed and allowed CBE to handle the loans.”
Usually working capital loans are given to investors to prepare land, buy and sow seeds and cultivate and market crops.
Most working capital loans for agriculture are often requested from commercial farming investors who produce sesame, corn and cotton.
CBE previously announced that it would continue providing working capital loans which has the purpose of financing the everyday operations of a company. However project loans for fixed assets which are purchased for long-term use are not likely to be converted quickly into cash, such as land, buildings, and equipment.
CBE currently focuses on short term capital working loans with an interest rate of 9.5 percent for manufacturing, agriculture and others which the borrower returns the money in less than three years.
“The freeze came suddenly, people who started processing project loans at CBE then had to go to DBE and start the process over, which takes up to six months. Some people had hopes that CBE would give them a loan but that went with the wind so they were not able to get machines or land that they needed for business.”
However, according to the sources, the frozen project loans caused many companies including hotels, new factories and commercial farms to lose money from machine leases and rent.
The GTP 2 strategy points out that all agriculture and project loans will be overseen by DBE while the working capital loans for manufacturing and service will be conducted by CBE.