Banks struggle with rising bad loans amid security threats
Banks are facing significant challenges in collecting the loans they have provided due to security threats in various areas of the country. As a result, the number of bad loans is on the rise. The National Bank of Ethiopia, the regulatory body for financial institutions in the country, has highlighted these challenges faced by the banks in relation to loan provisions.
During a discussion forum titled "The Impact of Credit Provision on the Private Sector," held on April 11, 2024, Belete Fola, the Banking Supervision Directorate of the NBE, addressed the issue. Fola emphasized that borrowers in unstable areas affected by security threats are defaulting on their loans, leading to an increase in bad loans and a decrease in the loan collection rate. One of
The Ethiopian Authority of Civil Society Organizations (ACSO) has issued a new directive, Proclamation No. 986/2024, to facilitate the registration and operation of foreign-based organizations in Ethiopia. This directive allows these organizations to operate independently or collaborate with local non-governmental organizations, providing them with financial, material, and knowledge-based support. Previously, although foreign humanitarian organizations were permitted to operate in Ethiopia, there were no specific guidelines the major challenges highlighted by Fola is the reasons provided by borrowers for their failure to repay loans, as well as the credit limits imposed by the National Bank. In Ethiopia, commercial and development banks, along with small financial institutions, play a crucial role in providing loans to commercial companies. However, these borrowers face difficulties in realizing their full potential due to financial problems. The lack of funds becomes an obstacle for them to introduce new products, offer services, and remain competitive. Mesenbet Shenkute, the President of the Addis Ababa Chamber of Commerce and governing their activities. This new directive aims to clarify these organizations' legal obligations and rights within Ethiopia, enhancing the registration process and protecting their legal interests.
The directive was developed after consulting with over 50 domestic civil unions, addressing the ambiguities previously raised by foreign CSOS. It establishes a clear regulatory framework that governs the funding, management, and employment of foreign nationals within these organizations. Moreover, it specifies that foreign organizations and those established by foreign nationals in Ethiopia are prohibited
Sectorial Association (ACCSA), expressed concerns during the forum about how financial challenges hinder the private sector's ability to innovate and be competitive. "Lack of transparency in loan terms and conditions, lengthy loan approval processes, high interest rates, and limited loan options are some of the challenges faced by borrowers," she stated.
It is worth noting that commercial banks in Ethiopia mainly provide small and complex loans to the private sector. Surprisingly, out of the country's population of 120 million, only 3.1 million individuals have been able to access loans.
from engaging in political activities, such as supporting or influencing political parties, unless explicitly allowed by law. ACSO’S role is to oversee, support, and monitor the activities of civil society organizations operating within the country. The directive also emphasizes the importance of foreign civil society organizations in Ethiopia's development, aiming to boost capacity-building programs that involve collaborations between foreign organizations, local NGOS, and government bodies. Since its reorganization in 2019, ACSO has registered 2,455 new domestic and 214 foreign civil society organizations, with 1,899 existing ones being re-registered. This new directive is expected to significantly enhance the effectiveness of cooperation and development efforts by foreign and domestic civil society organizations in Ethiopia.