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    Credit policy of dbe

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
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    Download as pdf
    11 views34 pages

    Revised Credit Policy Feb 2018

    Uploaded by

    Tarekegn
    Credit policy of dbe

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    Download as pdf
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    a ge DEVELOPMENT BANK OF ETHIOPIA INTERNAL MEMO POlmemo/031/2018 February 7)2018 ViPresidents Work Units Under President President President Advisor Revised Credit Policy ‘Aiached please find the Bank’s revised credit policy approved by the National Bank of Ethiopia. The policy wil soon be presented to the Board for endorsement. ‘As you know, the revisions are made in consultation with the Government and thus are effective since July 17, 2017 (immediatly after the meeting Chair by H.E. The Prime Minister.) “Thus you are hereby instructed to continue the application ofthe revised policy as approved by the National Bank of Ethiopia. Best Regards Getahun Nana DEVELOPMENT BANK OF ETHIOPIA CREDIT POLICY CP/001/2017 December 2017 Addis Ababa Table of Content 1. Preamble 2, Issuing Authority. 3. Shot Title en 4. Definition of Terms. 5, Scope ofthe Credit Policy 6, Authorities & Responsibiies 61 62. Board of Directors (BOM). ‘The President 7. Loan Exposure Limits. a 72. 23. 1A. 78. Single Borrower Loan Limit. Group Loan Limit. ‘Loan Concentration Limit Loan Approval and Administration Limit Secto/Sub - Sector Limit 8. Credit Produets, Services and Mode of Financing. a su 512, B13. 22. 821. 822, 823. 24, 825, 826, 227. 83, 83.1 ‘Term Loans. ‘Long-Term Loan. Medium Term Loan ‘Short Term Working Capital Loan (Other Credit Services Facilites. Co-Financing/Spndicate Financing Guarantee Services ‘Special Program Loans. Managed Funds. ‘Whole Sate Lending. Lease Financing, ‘Loan Buy Out Mode of Financing, New Loan, 0 u 2 83.2, Additional Loan. 833, Expansion Loan. Areas of Lending 9.1. Projeet Financing. 9.1.1, Commercial Agriculture 9.12. Agro-processing Industries 9.13. Manufacturing Industries 9.14, Mining and Extractive Industies eno 9.13, Hospital Services 9.2, Lease Financing Lending Terms and Conditions. i 10.1, Proportion of Debt and Equity in Project Financing... 102, Interest Rates, Fees and Charges 102.1, Interest Rate secnnven 1022. Penalty Fee and Other Charges. 1023, Grace Period. 103. Repayment Period. i 104, Accelerated Debt Repayment. 103, Collateral, 106, Insurance I 107, Other Terms and Conditions Loan Process 111, Customer Sourcing és 11.2, Due Diligence or Know your Customer (KYC) Assessments 113, Project Appraisal and Loan approval e 1A, Concer forthe Environment Credit Administration. 12.1, Compliance Checks for Equity /Loan Utilization. 122, Projects Costs and Financing. 123. Project Supervision and Follow-Up. 124. Loan Reallocation Rearrangement. 125, Loan Reschedaling 106. {terest Capitalization. 10 n u 4 “ “ 6 8 16 16 wv wv ” v v 18 18 18 9 19 29 9 12.7, Loan Review, Grading and Loan Loss Provisioning 128, Loan Transfer 129. Presentation of Proforma Invoices or Approved Bid Analysis Documents 12,10, _ Releasing Fund forthe Procurement of Machinery and Equipment. 12.11, Maintenance and Provision of Financial and Other Recon. 12.12, Opening Current Accounts 12,13, Import/Export Transaetions 12,14, Events of Default 13, Projet Rehabilitation and Loan Recovery 11 Rehabilitation of Sick Projects and Loan Recovery 14, Administstion of Taken -Over Projects 15, Write-off Write Back IS, Write-off.. 182, Write Bock — 16. Handling of Exception 16.1. Guiding Pinsiplennsonnnnns 162, Approval of Exceptions. 17. Accountbiliy ee 18 Auditing, 19, Appeals by Customers es 20, Repeal nati 21, Bffetive Date and Issuing Authority ‘Annex 1 20 20 20 a ae 2 n 23 2 2 tl th 2 2s 25 5 26 26 26 26 26 a ‘Acronyms/Abbreviation 1. *BOM™ the Board of Management of Development Bank of Ethiopia 2. “DBE” the Development Bank of Ethiopia 3. “NBE® the National Bank of Ethiopia 4. “SMEs” Small and Medium Enterprises 1, Preamble Development Bank of Ethiopia's (DBE) mission is supporting economic growth and development {in Ethiopia by providing medium and long-ierm finance to investment projets inthe Government priority areas. ‘The Bank provides finance to encourage mainly private sector investment in commercial agriculture, agro-processing, manufacturing and mining and extractive industries. It also supports SMEs through capital goods lease/hire purchase financing. Furthermore, though, DBE generally doesn’t consider service sector as its priority areas for lending, it exceptionally finances hospital projects ‘The Bank shall finance only viablefbankable development projects. In financing development projects, the Bank ensures that iti sustainable. To this end, it puts in place a sound credit policy as such policy isa comerstone for safe and healthy banking pr ‘Accordingly, the Bank issued this eredit policy to define its lending priorities and risk appetite; clarify the way it manages credit risk; and enhance transparency, accountability and responsibility in credit provision process. 2. Issuing Authority This Credit Policy is issued by the BOM of DBE in line with authorities vested in it by article 14 (4) of Public Enterprises Proclamation No. 25 of 1992 3. Short Title ‘This Policy may be cited as “Credit Poliey of Development Bank of Ethiopia No. CP 01/2017. 4, Definiti of Terms For the purpose ofthis Policy: 4.1 domestic investor means a natural person of Ethic jan citizen! Ethiopian origin or a company where Ethiopian citizens or foreign nationals of Ethiopian origin own at least 151% of its capital or maintain at least $1% of voting rights ip general meeting of the ‘company aL 42.interest incentives means interest rate advantages to be given to the borrowers of the Bank who meet pre-defined requirements set by the Bank or relevant govemment authority: 43. lease financing means capital goods lease/hire purchase financing modality for SMES ‘whose total capital is between Birr $00,000 (inclusive) and Birr 7.5 million (exclusive). 44. lending officer means the Bank’s performer involved in loan process: application receiving, document screening, negotiation, due diligence assessment, appraisal, recommendation, approval, disbursement, follow up and loan collection activites; 45. loan portfolio means total loans and advances extended to all borrowers categorized ino any sectors form of business ownership, geographical location or otherwise; 46. president means the President of the DBE; 47. project appraisal means analyzing, assessing and evaluating the viability of @ loan project submitted by a customer, 48. project financing means a loan arrangement for development project whose paid up ‘capital is Birr 75 million and above; in such financing modality, the loan repayment is ‘rived primarily from the projects eash flow on completion, and where the project's assets, rights, and interests are held as collateral; 49. project rebabil 10 improve the health of a sick project so asthe project can pay the Bank’s loans; or in jon and loan recovery means a process by which the Bank attempes ‘ase of failure to rehabilitate take legal ations to recover loans; 4.10, single borrower limit means the aggregate loan or extension of credit by the Bank to any one borrower, whether a natural person or business organization; 4.1. small and medium enterprise (SMEs) means an enterprise in the commercial agriculture, agro-processing, manufacturing, constriction, mining and quatties and tour industries that operates with above 6 employees and has paid up capital of Birr $00,000 at a minimum and less than Bist 7.S million ata maximum; 4.12 Total capita means paid up capital, legal reserves and retained earnings of the Bank ‘excluding provisional profit, but including provisional losses. 5. Scope of the Credit Policy This rd pole is applicable tall credit processing an aimnistein fant oti Bale 2 6. Authorities & Responsi ities Without prejudice to the specific responsibilities indicated elsewhere in this eredit policy or other lavs, the following are the authorities & responsibilities vested on different organs ofthe Bank in relation tit ereit fuetion 6.1, Board of Directors (BOM) ‘The BOM: 614. 612, 613, 614. 62, The Preside

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