erformance Report 2021/22 F.Y Page 31
Third Quarter & Nine Months Performance Report 2021/22 F.Y In view of operating units, out of the total NPLs of Birr 20.43 billion, Birr 9.07 billion (44%) is found at the corporate level while the remaining 56% is on the hands of districts. From districts, the largest NPLs amounts in the quarter are found at Gambella, CRMD IV, Mekele, PRLR II, CRMD II, Nekemte, Bahir Dar, and PRLR-I in their order. 3.5.4 NEW ENTRANTS TO NPLS Table 3-9 indicates that 21 projects entered to NPLs during the third quarter with total outstanding balance of Birr 553.84 million. During the nine months period, a total of 102 projects have entered into NPLs status with outstanding amount of Birr 4.78 billion. From this, 46 projects with Birr 4.37 billion outstanding balance accounts in project finance and Birr 0.41 billion outstanding balance accounts to 56 lease financing projects. Of the total new entrants to NPLs, projects in Tigray region holds 87% of the new entrant with portfolio of Birr 3.83 billion. TABLE 3-13: NEW ENTRANT TO NPLS DURING THE THIRD QUARTER 2021/22 (In 000 Birr) [Development Bank of Ethiopia] Page 32
Third Quarter & Nine Months Performance Report 2021/22 F.Y 3.5.5 RE-INSTATED LOANS FROM NON-PERFORMING TO PERFORMING LOAN During the third quarter, 70 projects with a total loan outstanding amount of Birr 587.2 million have been re-instated to performing loan status from NPLs status. Accordingly, the total re- instated loans during the last nine months period reached 108, with a total loan outstanding amount of Birr 856.7 million. Total list of re-instated loans of the Bank during the third quarter is presented in table as follows:- TABLE 3-14: LIST OF RE-INSTATED LOANS DURING THE THIRD QUARTER 2021/22 In 000 Birr [Development Bank of Ethiopia] Page 33
Third Quarter & Nine Months Performance Report 2021/22 F.Y Table 3-14: Cont‟d… [Development Bank of Ethiopia] Page 34
Third Quarter & Nine Months Performance Report 2021/22 F.Y Table 3-14: Cont‟d… [Development Bank of Ethiopia] Page 35
Third Quarter & Nine Months Performance Report 2021/22 F.Y 4. FINANCIAL PERFORMANCE 4.1 RESOURCE MOBILIZATION 4.1.1 FOREIGN EXCHANGE TABLE 4-1: FOREIGN EXCHANGE PERFORMANCE AGAINST PLAN FOR THE THIRD QUARTER (IN 000 USD) 2021/22 III Quarter Previous 2021/22 Cumulative (I+II+III) Quarter Plan Actual Prf.% Foreign Currency cash flow Plan Actual Prf.% Actual Change 1 2 3=2/1 4 5= 5 6 7=6/5 (2-4)/4 Export Proceed 8.19 5.06 62% 5.59 -9% 23.71 15.32 65% 0.55 0.6836 123% FDI 0.19 0.68 351% -- 0.4 98% 93.92 0.39 61% Incoming Grant - -- - 57.66 Loan - 62% - 10 - 7.76 29% 119 - 114% 131.91 74.05 Other ( Specify) - -- -- 149.75 100% - Total 8.38 15.74 188% 13.35 18% 5.21 0.63 113% 5.22 440% Sales (For projects) - 52.99 - 45.82 16% - 0.03 137.12 155.63 Payment (For Bank Purpose) - 0.07 0.48 -85% -82 -19 Outgoing Debt Settlement - -- 5.22 Other (Specify) - -- - Total - 53.06 - 51.52 2.99% Net inflow/Out flow 8.38 -37.32 -445% - 38.17 -2.23% 4.1.1.1 FOREIGN CURRENCY /INCOMING During this quarter, the Bank purchased foreign currency amount to 15.74 million USD. Its achievement is 188% of the planned target. The foreign currency purchases are mainly from loan and export proceeds. During the nine months, a total of 74.05 million USD was purchased, of which 61% was obtained from loan, while 65% is from export proceed of exporting projects financed by the Bank, 123% from FDI and 98% from grant. 4.1.1.2 FOREIGN CURRENCY PAYMENT/OUTGOING The Bank paid out/sold foreign currency of 53.06 million USD in the third quarter and 155.63 million USD during the nine months. The foreign exchange payment is by far higher than the proceeds from exports and the Bank highly relies on other sources for its foreign exchange demand. [Development Bank of Ethiopia] Page 36
Third Quarter & Nine Months Performance Report 2021/22 F.Y 4.1.2 BOND SALES TABLE 4-2: BOND SALES PERFORMANCE AGAINST PLAN FOR THE THIRD QUARTER (In Million Birr) 2021/22 III Quarter Previous Quarter 2021/22 Cumulative (I+II+III) SALES Plan Actual Prf.% Actual Change UNIT 1 2 3=2/1 4 5=(2-4)/4 Plan Actual Prf.% 113 68 27 5 6 7=6/5 DBE - HO 7 2 60% 4 151% DBE-Districts 414 79 29% 104 -50% 263 138 52% CBE 5 3 19% 1 -24% 17 7 41% MFIs 540 152 60% 136 200% 967 221 23% Total 28% 12% 13 5 38% 1,260 371 29% During the quarter under review, the Bank planned to generate Birr 540 million funds from GERD Bond sales and generated Birr 152 million, showing a performance of 28% against the target. Accordingly, the total GERD Bond that is outstanding as of March 31, 2022, is Birr 11.63 billion. In addition, the Bank is start selling its own bond commencing from January 2022. Thus, for the third quarter under review, DBE bond sales show a total principal outstanding balance of Birr 7 billion. 4.1.3 BORROWING There is a Birr 14.04 billion borrowing plan from foreign sources in this quarter. Of this, Birr 503.24 million is actually borrowed from foreign sources, which is 36% of the target. Hence, the main source of funds for operation will be from sales of corporate bond, which secured by that a government guarantee. TABLE 4-3: BORROWING PERFORMANCE AGAINST PLAN FOR THE THIRD QUARTER (IN MILLION BIRR) 2021/22 III Quarter Previous Quarter 2021/22 Cumulative (I+II+III) Particular Plan Actual Prf.% Actual Change Plan Actual Prf.% NBE 12 3=2/1 4 5=(2-4)/4 5 6 7=6/5 MoF - 6,999.00 0% - 0% Total 14,041.97 503.24 4% 202.22 149% 6,000.00 6,999.00 117% 202.22 3610% 42,543.06 505.27 1% 14,041.97 7,502.24 53% 48,543.06 7,504.27 15% [Development Bank of Ethiopia] Page 37
Third Quarter & Nine Months Performance Report 2021/22 F.Y 4.1.4 DEBIT SETTLEMENT The Bank repaid Birr 2.58 billion for settlement of loan from the NBE during the quarter which is 95% of its target and Birr 0.14 billion settled to MoF which is 149% of its target. The overall performance of the Bank‟s loan settlement in the third quarter is amounting to Birr 2.72 billion, which is 97% performance. TABLE 4-4: DEBIT SETTLEMENT PERFORMANCE AGAINST PLAN FOR THE THIRD QUARTER (In Millions of Birr) 2021/22 III Quarter Previous Quarter 2021/22 Cumulative (I+II+III) Actual Change Particular Plan Actual Prf.% Plan Actual Prf.% 4 5=(2-4)/4 NBE 1 2 3=2/1 5 6 7=6/5 MoF 4,032.39 -36% Total 2,700 2,579.5 95% 8,6 7,816 94% 267.19 -48% 92.33 4,299.58 37% 93 139.5 149% 414.90 527 127% 2,794 2,717.17 97% 8,692.64 8,341 96% 4.2 INCOME STATEMENT The Bank‟s income in the nine months is grown by 9% when compared to performance in nine months of the previous year and it is Birr 5.6 billion in figure, which is 86% of the target. In same period, the Bank made a total expense of Birr 3.45 billion, which is 88% of its target. The total expense is increased by 11% when compared to performance in same period of the previous year. Thus, the Bank registered a gross profit of Birr 2.15 billion, showing 6.45% growth when compared to performance in same period of the previous year. And a net profit of Birr 452.58 million is registered during the past nine months. As compared from previous year similar period performance the net profit has declined by 62%. The declines in the net profit is attributed to high provision held for loans with projects found in the Tigray Region. However, the net profit of the nine months is Birr 2.9 billion if the loans of projects in Tigray region with their provision expenses are excluded from the statement. [Development Bank of Ethiopia] Page 38
Third Quarter & Nine Months Performance Report 2021/22 F.Y TABLE 4-5: SUMMERY OF INCOME STATEMENT FOR PERIOD ENDED MARCH, 2021/22 (IN „000 BIRR) TABLE 4-6: SUMMERY OF INCOME STATEMENT EXCLUDING TIGRAY REGION (IN „000 BIRR) 4.3 ASSET, LIABILITY AND CAPITAL As indicated in the table below, the total asset of the Bank is increased by 7%, reaching about Birr 128.87 billion compared to the balance in same period of last year. It is also increased by 7% when compared to the previous quarter. Similarly, the total liability of the Bank is increased by 9% when compared to the previous quarter. Moreover, the total Capital of the Bank is similar to the planned target for the quarter and equivalent to the amount in same period of the preceding year. TABLE 4-7: SUMMARY OF FINANCIAL PERFORMANCE AGAINST PLAN FOR THE THIRD QUARTER (IN MILLION BIRR) III Quarter 2021/22 2020/21 Same Quarter 2021/22 II Quarter Chan.% Particular Plan Actual Pr. Actual Chan.% Actual Total Asset (%) Total Liability 130,037.81 128,872.95 99% 119,020.90 8% 120,195.17 7% Total Capital 100,556.81 96,632.24 89,032 9% 88,316.12 9% 32,240.71 96% 29,989 8% 31,879.05 1% 29,481.00 109% [Development Bank of Ethiopia] Page 39
Third Quarter & Nine Months Performance Report 2021/22 F.Y 4.4 PRUDENTIAL INDICATORS The CAMEL rating result of DBE is very low for the past years due to poor ratings obtained on asset quality, on earning and on management. However, it is known that there is substantial improvement in ratings of most measures during the first quarter. In addition to the CAMEL rating, the Bank evaluates its performance against standard of Association of African Development Finance Institutions (AADFI) to meet international standards. TABLE 4-8: SUMMARY OF FINANCIAL PRUDENTIAL INDICATOR PERFORMANCE AGAINST AADFI’S STANDARD Sr. Type of Ratio AADFI's Actual as Previous Change= Remark No. Prudenti at March Year Same (a-b)/b 31/2022 period (b) al standard (a) 1 Capital Adequacy >15% 41% 43.3% -5% 1.1 Capital to risk weight Asset <4% 3:1 2.8:1 8% 1.2 Debt to Equity Ratio <15% 33.5% 35% -4% 2 Asset Quality 02:01 3:5 2:4 49% 2.1 NPLs to total Loans 2.2 Current ratio NA 9.1% 4% 128% 3 Profitability and efficiency >1% 2.3% 1% 130% 3.1 Return on Equity (ROE) 3.2 Return on Asset (ROA) <4% 0.32% 0.27% 19% 3.3 Administrative expense to average asset 3.4 Non-interest income to Ave. asset >5% 10.53% 9.59% 5% 3.5 Interest Margin >4% 2% 2% 0% TABLE 4-9: SUMMARY OF CAMEL RATING AS PER NBE STANDARD Sr. Component Ratings 2020/21 2021/22 Prf. No. Actual Plan III Qtr.* 75% 80% 1 Capital Adequacy 43 4 40% 50% 2 Asset quality 54 5 100% 63% 3 Management 52 5 4 Earnings 52 4 5 Liquidity 11 1 Average ratings 5 2.4 4 * NBE CAMEL rating of 1rd qtr. 2021/22 is taken [Development Bank of Ethiopia] Page 40
Third Quarter & Nine Months Performance Report 2021/22 F.Y 5. EXTERNAL FUND AND CREDIT MANAGEMENT PERFORMANCE During the third quarter, a loan amounting to Birr 1.27 billion was planned to be approved, Birr 1.34 billion to be disbursed, and Birr 264.08 million to be collected from the five credit lines. Accordingly, the Bank is able to approve Birr 1.75 billion (137% of the target), disburse Birr 1.61 billion (120%), and collect Birr 1.35 billion (513%), which is great achievement in all aspects. In addition, the total outstanding loan balance under these programs reached Birr 9.07 billion as of March 31, 2022. From sector point of view, Birr 0.29 billion is held by mining and energy, Birr 3.14 billion is held by RUFIP program, Birr 3.26 billion is held by SMEs, and Birr 2.37 billion is held by WEDP. TABLE 5-1: SUMMARY OF EXTERNAL FUND MGT. WHOLESALE PERFORMANCE (In Million Birr) Credit III Quarter Cumulative(I+II+III) Operation Plan Actual Prf. % Plan Actual Prf. % Approval 1,271.44 1,746.08 137% 4,018.48 4,289.07 107% Disbursement 1,343.48 1,613.33 120% 3,598.61 3,119.63 87% Collection (P+I) 1,353.53 513% 3,369.42 514% Outstanding 264.08 9,072.87 93% 655.87 9,072.87 93% Follow up 9,730.96 30 67% 9,730.96 78 87% 45 90 [Development Bank of Ethiopia] Page 41
Third Quarter & Nine Months Performance Report 2021/22 F.Y 6. CAPITAL EXPENDITURE TABLE 6-1: SUMMARY OF CAPITAL EXPENDITURE PERFORMANCE (IN „000 BIRR) The Bank‟s a capital expenditure during the reporting quarter is Birr 51.67 million which is 17% performance against the planned target. During the nine months period, Birr 92 million of capital expenditure is executed, which is 20% of the planned target. Building Construction and Maintenance The third quarter‟s plan of building construction and maintenance is Birr 117.75 million and the actual performance is only Birr 0.035 million which is a performance of 0.03%. Transport Equipment and Vehicles The total budget held for the third quarter to transport equipment is Birr 44.96 million whereas actual execution is Birr 21.83 million (49% of the target). Information Technology The third quarter‟s plan of information and technology is Birr 103.57 million but the actual performance is only Birr 21.16 million, which is 20% performance. Computers and Accessories The total budget allocated for the third quarter to computers and accessories is Birr, 25.17 million and actual performance is only Birr 8.53 million, which is 34% of the planned target. Office furniture and equipment The third quarter‟s plan is Birr 20.06 million but actual performance is only Birr 0.11 million, which is 0.5% of the target. [Development Bank of Ethiopia] Page 42
Third Quarter & Nine Months Performance Report 2021/22 F.Y 7. HUMAN RESOURCE MANAGEMENT PERFORMANCE The Bank‟s number of total staff as of March 31, 2022 is 2,242 As compared to the size of staff in the second quarter, the number of employees increased by eleven. Out of the total staff 70.83% (1,588) employees are professionals and high-level supervisors, 15.03% (337) are semi- professional, administration and clerical, 5.22% (117) are technical and skilled employees and the remaining 8.92% (200) employees are manual and custodian. During the third quarter, the Bank filled vacant posts for 21 positions from external recruitment and 10 positions by transfer & promotion. Among the 10 vacant posts filled from internal sources, 9 are filled by transfer & one vacant post is filled by promotion. On the other hand, 10 employees left the Bank in the quarter, out of which four are resigned, one is dismissal, four are left for retirement and one is deceased. Capacity development is one of the Bank‟s strategic focus areas which is planned to be performed in the strategic period. Therefore, during the quarter under review, it was planned to train 2,360 employees on various local and foreign training programs. Accordingly, a total of 378 employees are trained on various training programs and it is 16% of the planned target. Three trainings on finance, technical and other areas are conducted in this quarter. TABLE 7-1: SUMMERY OF TRAINING AND DEVELOPMENT COST Description Plan Actual „000 Local short-term training 8,662.71 4,472.05 Per. Foreign training and exposure visit 19,307.98 52% Education 154.50 0 0% Total 28,125.19 72.55 47% 4,544.6 16.2% TABLE 7-2:SUMMERY OF EMPLOYEES UNDERTAKING THEIR EDUCATION Type Head office Branch Cumulative PhD 1 - 1 Postgraduate 23 7 30 Bachelor 0 0 0 Diploma 1 3 4 ACCA 1 0 1 Total 26 10 36 [Development Bank of Ethiopia] Page 43
Third Quarter & Nine Months Performance Report 2021/22 F.Y One of the values of the Bank is organizational learning. To this end, the Bank gave education opportunity to a total of its 36 employees in the fiscal year. TABLE 7-3: SUMMARY OF HUMAN RESOURCE MANAGEMENT PERFORMANCE N Activity Type QIII Previous Cumulative Change o 2021/22 Quarter I+II+III 150% Plan Actual Per % (QII) Plan Actual -87% -73% Actual -33% -43% Existing/Beginning External 21 3% 5 28 1 Recruitment Internal 10 100% 4 35 - 31 0.06% 9 63 - Total Resignations 10 4 80% 6 19 13 -37% 2 Separation/Attrition Retirement 10 15 0.49% Dismissal 5 4 100% 7 17 Death 1 - - 24 1 4.5% 4 1 - 3 4 4 2.4% Total - 10 16 4 35 - 2,242 111% 2231 47 2,242 End balance no of 9 100% 2,239 employees 2,239 3 Managerial position by Male Female Total 13.5% Total 302 Gender 263 39 302 16% 289 1,181 378 369 4 Training for Employees 2,360 5,634 [Development Bank of Ethiopia] Page 44
Third Quarter & Nine Months Performance Report 2021/22 F.Y 8. CORPORATE AND DEVELOPMENT AFFAIRS 8.1 CORPORATE AFFAIRS The Bank‟s performance is currently evaluated based on BSC framework and the extent to which the stated objectives are achieved or not is also assessed in quarterly basis. The Bank also evaluates effectiveness of the employed performance evaluation method on-going basis in view of its completeness to address challenges and weaknesses. Generally, the Bank undertakes regular monitoring and evaluation works so as to get lesson learned from what was performed to improve its efficiency and effectiveness in its service delivery. In such regards, the Bank‟s BoM and Management undertake regular meetings to discuss on different issues so as to make the necessary actions and decisions. 8.2 BOM The BOM had discussed and gave direction on the following issues during the 3rd Quarter (From January 1 to March 31, 2022): Comment on draft Board Minute (No. 391/2021); General information provided by the President of the Bank; Discuss and make decision on the revised Bank's credit policy document; Discuss and make decision on the revised Bank's lease finance policy document; Signed Board Minutes No. 390/2021; Discuss on the 1st Quarter CAMEL rating report of the National Bank; Discuss and make decisions on requests to fill the vacant posts of senior management positions by recruitment. Discuss on and approve the proposal to establish an Interest-Free Bank Service Directorate which is presented by the Board Human Resources Sub-Committee; Discuss on and approve performance report of the second quarter and six months of 2021/22 fiscal year, which is presented by the Board‟s Risk and Finance Sub- Committee; Discuss on and approve Risk Management report of the first quarter of 2021/22 which is presented by the Board‟s Risk and Finance Sub-Committee; Discuss other issues raised by the Board memmbers. [Development Bank of Ethiopia] Page 45
Third Quarter & Nine Months Performance Report 2021/22 F.Y 8.3 EMC During the third quarter, the Executive Management Committee mainly discussed on: Report of Compliance and Risk Management Directorate for the first quarter of 2021/22; Six months performance report of the Bank; Proposal of the Discipline Committee regarding employees who breach of the Bank's Covid-19 protocol; Debts to be Written off and on projects that have been affected by security problems; Report of Compliance and Risk Management Directorate for the Second Quarter 2021/22; Report of Audit Directorate for the Second Quarter 2021/22; Proposal for donating out-of-service office supplies to charity organizations; List of loans in the blacklist of the NBE; Long outstanding suspended accounts; Second Quarter and Semi-annual BSC Performance Evaluation Review Report; Recommendation for determining the office layout of the Bank; Status of rectification Action Plan for NBE Onsite Examination Findings; Legal advice and comments on the Executive Management Committee Charter; Terms of Reference of Asset and Liability Management Committee (ALCO). [Development Bank of Ethiopia] Page 46
Third Quarter & Nine Months Performance Report 2021/22 F.Y 9. GOOD GOVERNANCE The Bank strongly believes that ensuring good governance in its work environment is a matter of survival and sustainability with a far-reaching impact on its performance. To this end, it has been making various efforts described as follows. Regarding Corruption and Enforcing Code of Conduct To prevent failures to complete work within the deadline set by the Bank, corrective action and penalty have been taken (salary discount, warning letter) on some employees. Good progress is being made by monitoring the Team Leaders and Directors of the Bank to ensure that they are able to carry out their responsibilities effectively concerning bullying of customers and reluctance to perform services in accordance with established standards. Regarding the General Internal Process At the Bank level, an inquiry committee is established to investigate and report issues related to good governance and rent-seeking attitude. Concerning human resources prolong the process, roll over, and give time to make decisions instead of responding quickly to labor issues that require a decision. Decisions were made on time in accordance with the Bank's rules and regulations. In connection with loan work as well as project research and evaluation, failure of some customers to pass the KYC assessment designed based on principles and procedures set by the Bank and inability to meet required checklists are obstacle to the loan process but efforts are made to consult customers. To prevent corruption, the Bank made an effort in identifying prone areas and enforces the law through compliant investigation. An effort is made to aware new employees to make them to understand reform strategic plan, policies, procedures and guidelines of the Bank. Employees are being informed to respect the Bank‟s working hour and code of conducts and to be fully engaged on their work. The entire Bank‟s staffs have been well informed so as to exhibit ethical behaviour, and combat rent- seeking attitude. Quarterly follow up report is being regularly conducted on the Bank‟s good governance and integrated corruption prevention plan. [Development Bank of Ethiopia] Page 47
Third Quarter & Nine Months Performance Report 2021/22 F.Y 9.1 DEVELOPMENT AFFAIRS As a policy Bank, DBE plays prominent roles mainly in providing medium and long-term loans to development projects in the government priority areas. Indeed, by financing economically and financially viable projects, the Bank contributes to the economic growth, as widely recognized, which is a prerequisite for poverty alleviation. Here are some aspects of the development affairs of the Bank. 9.2 SOCIO-ECONOMIC BENEFITS During the quarter under review, the Bank targets the following set of core targets and goals in its lending operations: Increase of production; Creating employment opportunities; Tax source to the government; Foreign currency earnings/savings. As of March 31, 2022, the total number of employment opportunities created by DBE financed projects in 2021/22 fiscal year on a permanent and temporary basis is 7,511. Of this 7,229 are on a permanent and 282 are on a temporary basis. Besides, there is an expectation that RUFIP would also create a significant number of jobs, which is difficult to quantify the exact number of jobs created due to the lack of data. With respect to tax revenue generation, the projects financed in the quarter under review are expected to generate about Birr 183.60 million revenue to the government treasury in form of tax. Even though there is no foreign exchanged is generated during the reporting period, most of the financed projects have great contributions in import substitution and greater impact on the socio-economic development of the country. 9.3 PRIVATE SECTOR DEVELOPMENT The private sectors are obviously the engine for the economic development of the country and have significantly been increasing through time in terms of labor, output, and investment outlay. Hence the private sector projects have been contributing to poverty reduction through increasing shares of GDP, employment creation, generating revenue in the form of tax to the government [Development Bank of Ethiopia] Page 48
Third Quarter & Nine Months Performance Report 2021/22 F.Y and foreign currency earnings. Considering theses impacts of the private sector, the Bank mainly focuses on financing priority area projects in the private sector with preferential interest rate. FIGURE 9-1: DISTRIBUTION OUTSTANDING BY SECTOR AS AT MARCH 31, 2022 15% Public Enterp. 76% 8% Cooperative Private 1% Micro-Enterp. Accordingly, as of March 31, 2022, the total loan portfolio of Birr 60.89 billion, the lion’s share of Birr 46.34 billion (76%) in the private sector, whereas that with public sector is Birr 4.79 billion (8%). The remaining Birr 9.07 billion (15%) is share of microenterprise and Birr 678.07 million (1%) is that with cooperatives. 9.4 CORPORTE SOCIAL RESPONSIBILITIES The Bank continued to extend a helping hand through its corporate social responsibility engagements in the form of various programs and events during the third quarter. Accordingly, the Bank provided the following assistances in the quarter. Birr 250,000 to “Ethiopia’s Search for Economic Independence” (Abyisinia Magazine); Birr 60,000 to Amhara Sectoral Association; Birr 9,000,000 to Addis Ababa Culture and Tourism Bureau (ለሂሩት አባቷ ማነው ፊልም); Birr 200,000 to Ethiopian Press Agency; Birr 3,600,000 to Ethiopian Broadcasting Corporate (ሀገርና ጥበብ); Birr 150,000 to Oromia Special Zone (for Horse racing festival); Birr 300,000 to Alif Consulting; Birr 9,000 to W/ro. Bogalech Abebe, who is aged and doesn’t have a close relative to look after. [Development Bank of Ethiopia] Page 49
Third Quarter & Nine Months Performance Report 2021/22 F.Y 10. CHALLENGES The following are some of the main challenges encountered by the Bank to properly discharge its intended objectives. For clarity purposes, the challenges were grouped into two major groups; namely, Internal Bank specific and External challenges. 10.1 BANK SPECIFIC/ INTERNAL/ Poor office layout and working environment to handle customers effectively. Non-considering of market value in valuation of assets for collateral purpose becomes area of complaint. Lack of updated & well-organized information for KYC assessment to properly identify credit worth customers and to protect the Bank’s interest from potential risks. The inability of the Bank to have an updated database for evaluation proforma invoices during procurement of investment items. Underestimation of logistic costs (sea freight, inland transport costs, and bank charges) due to calculation based on the value of the imported items rather than the actual costs. The Bank remuneration package has not been revised compared to the industry scale thus retaining competent personnel is challenging thus remuneration scheme of the Bank. Poor performance in timely and efficiently utilize capital expenditure. 10.2 EXTERNAL CHALLENGES-STAKEHOLDER RELATED Instability of the north regions and other parts of the country has adversely impacted monitoring of projects located in the areas and so as the ceased credit operations. The COVID-19 pandemic disturbed the supply chains across the globe and impacted projects implementation due to restrictions of expert travels. Shortage of foreign exchange to finance procurement of imported capital goods in time and delay of projects implementation as the result. Inability of some loan applicants to fulfil required documents and meet requirements of the Bank to proceed to the next level of loan processing. Electric power supply problem and /or repeated power interruption. Limited financial capacity of some promoters to cover investment cost escalation during projects implementation, which emanated due to design changes and exchange rate fluctuation. [Development Bank of Ethiopia] Page 50
Third Quarter & Nine Months Performance Report 2021/22 F.Y 11. WAY FORWARDS NBE should give special policy measure to mitigate challenges of DBE’s project in war throne area. The Bank should take proactive measures and strategic decisions in order to minimize the probable risks in collaboration with concerned stakeholders. Strengthen fund mobilization and make efforts to improve export proceeds. Projects with market problems should place a good marketing strategy and shall work towards improving quality of their products and search for potential customers. Policy intervention to consider contingency budget while appraising projects for covering to cover additional budget that born as result of fluctuation in foreign exchange rate . Strengthening and updating machinery database to validate submitted proforma invoices for procurement of investment items of projects. Conduct forums as well as experience sharing programs with different government organs stakeholders, and collaborators to streamline the Bank’s service. Remuneration scheme of the Bank should be revised as per the existing/upgraded packages of the industry, Undertake research on agriculture sector viability challenge and its incentive support to mitigate the challenges. Give attention to timely and efficiently finalize capital expenditure as per planned, Create special task force to undertake close follow up on lagged indicators of CAMEL rating especially to improve Management perspective of CAMEL rating. [Development Bank of Ethiopia] Page 51
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