Addis Fortune (Addis Ababa)
Issayas Mekuria
31 December 2007
The Federal Ethics and Anti Corruption Commission is probing senior executives at the state-owned Development Bank of Ethiopia (DBE) who are suspected of abusing their positions by rescheduling and approving new loans without following proper procedure, sources disclosed.
In question are 250 mln Br of loans now worth 312 mln Br after accumulated interest.
The executives assumed leadership of DBE in February 2006, replacing seven bankers under the leadership of Moges Chemere who were deposed for alleged corruption after serving for seven years.
The new crew of executives, headed by Wondossen Teshome claim they are turning the bank's fortunes around, reporting more than 20 mln Br in profit during the last fiscal year. However, sources at the bank told Fortune that the profits are an illusion and that about 94pc of the bank's five billion Birr loan portfolio is in default.
The commission has received a tip that the current executives also overestimated the value of collateral for some of the loans they disbursed and that they have approved a loan that was rejected by the Bank's loan committee, sources told Fortune. The officials are also accused of granting new loans to creditors already failing to service existing loans with the bank.
As part of the investigation, the commission has last week seized documents from the bank related to 10 projects.
"It is hard to say whether the investigation will remain limited to 10 cases, as accusations have kept coming to the commission," a senior member of the commission told Fortune declining to give further comment on the pending case.
According to sources at the commission, the DBE officials overstepped their authority when they ordered the rescheduling of loans - as many as 12 times for some loans.
The Public Financial Enterprises Agency (PFEA), the entity supervising state-owned financial institutions, has ordered the DBE and other government financial institutions to submit a plan for reducing NPLs. Over the past 10 years, the DBE has accumulated 2.5 bln Br in bad loans, nearly half the 5.3 bln Br in loans it has disbursed to 30 creditors.
DBE was formed in 1945 as an agricultural and industry development bank after the Ethiopian government obtained a loan from the US. DBE has the role of providing medium and long-term loans to promote investments in the agricultural sector. The bank has 900 employees and 32 branches across the country, according to the 2006/2007 annual report.
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