Lending cap lifted for commercial banks in Ethiopia

Apr 05, 2011

The lending cap previously imposed on commercial banks in Ethiopia has now been lifted.

According to the Addis Fortune, the limit was removed yesterday (Monday April 4th) having been in place since the beginning of 2009.

Furthermore, the National Bank of Ethiopia (NBE) - which increased the country's interest rate to five per cent at the end of last year - has called on commercial financial institutions to purchase 27 per cent of their annual loan disbursement in bonds.

The transactions must take place at the end of the fiscal year and the bonds will have a five-year maturity rate, as well as a three per cent rate of interest.

Speaking at a meeting held on Friday, officials from the NBE revealed the money used to make these purchases will be injected into national development projects.

A source told the publication that this will have a positive affect on banks as they will have the opportunity to finance long-term schemes instead of concentrating on short-term loans.