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After a 15 month break, the state owned Commercial Bank of Ethiopia (CBE) has started giving loans for projects and asking agriculture and manufacturing, exporters and hotel operators to bring their proposals to the bank.
The project loan is being offered by CBE for the fixed assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment.
Currently CBE hands out project loans at an 11.5 percent interest rate.
Medium and short term loans must be paid within three years while long term loans can be paid in between three and seven years.
On April 10, 2017, the National Bank directed CBE to stop giving out private investment project loans and ordered investors to instead apply at the state owned Development Bank of Ethiopia (DBE). Now both DBE and CBE are giving out project and working capital loans.
The change came about after discussions between CBE officials and the National Bank of Ethiopia.
Hotel investors who want a loan to build hotels in Addis Ababa under a franchise deal with an international brand are allowed to get the loan but other hotel projects outside the capital city are not obliged to deal with international brand hotels to get the loan.
Belehu Takele Corporate Communication director head of CBE affirmed to Capital that the resumption of project loans will benefit investors working in export, manufacturing and agricultural areas.
“The letter that we got from NBE ordered us to provide the project loan and for DBE to manage it strongly and resuming the loans will help our customers have more options,” he said.
A source at CBE told Capital that the project loan will attract more investors to do more work in the country.
“This is good news for people trying to own hotels or other large projects in the country, after we started giving out loans many people have come to our office with their proposals.”
State owned Commercial Bank of Ethiopia was on pace to earn 8.8 billion birr in profits by the middle of this fiscal year. They are behind their goals because of lack of hard currency, the devaluation of the birr and low export earnings. During the first half of the fiscal year they earned 3.67 billion birr and 28 percent of that amount came from hard currency exchange. The 15 percent devaluation of birr last October cost CBE over a billion birr. In the 2016/17 fiscal year CBE earned close to 32 billion birr in revenue. Of which the gross profit before tax was 14.6 billion birr. The bank has collected USD 4.5 billion via remittances export trade and other businesses.