Ethiopia’s lone policy bank is working to recover at least 15 billion birr in soured loans to businesses affected by conflict in Tigray and agricultural failures in Gambella.
The Development Bank of Ethiopia (DBE) aims to recover 11 billion birr from halted projects in Tigray and four billion birr in Gambella regions.
DBE classified Tigray loans as non-performing after losing contact with investors for two years due to the northern Ethiopian conflict. DBE president Yohannes Ayalew (PhD) says assessments show minor project damage.
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“After peace prevailed in Tigray, we have conducted assessment on our projects there. They are not completely damaged but minor damages. With additional loans and forex allocation to access inputs and spare parts, they can be back in operation. 80 percent of the investors have contacted us and working with us,” Yohannes said.
He says DBE has provided 18-month grace periods based on central bank approval. This will allow investors time to repair damage within that timeframe.
After the grace period, DBE can recover failed projects via auction. But for Gambela loans, Yohannes has no hope of reviving investments and instead plans selling viable projects to recover funds.
Excluding Tigray loans, DBE’s NPL stand at eight billion birr or eleven percent, half owed by Gambella commercial farms that received billions in financing.
Yohannes says he has little hope of salvaging investments in Gambella, instead planning to sell those projects and recoup the bank’s money.
The regional government originally provided the land to DBE for investment projects. After the farms failed and some investors fled, Gambella tried taking back the land while seeking unpaid taxes and fees from DBE that accrued over eight years.
However, DBE plans to recover its loans by transferring the lands to new investors – a plan Gambella strongly opposes.
“We do not have land in Gambella, we have projects. We have camps, irrigation pumps, tractors, equipment and manpower at the commercial farms in Gambella,” Yohannes told The Reporter.
He sees two options on the failed loans. Investors can resume operations and repay debts. Or DBE can auction projects, with capital investments as floor prices, to new investors who inject funds and cover debts.
DBE has provisioned for potential Gambela losses.
“If the owners of the investments in Gambela are not available to pay their loans, we will sell the lands and recover our loan. One way or another, we will recover the four billion birr loan,” said Yohannes. “We have put aside provision for the Gambella loans, so that the NPL will not affect our balance sheet.”
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