Development Bank of Ethiopia

The bank was established in 1909 as The Societe Nationale d'Ethiopie Pour le Development de l'agriculture et de Commerce.[2] In 1945, the Agricultural Bank was established but was replaced by the Development Bank in 1951. In 1970, the bank was temporarily renamed to the Agricultural and Industrial Development Bank but was renamed back to the Development Bank of Ethiopia in 1994.[3]

The geographical distribution of projects financed by the Development Bank also indicates the uneven regional development of the country. Nearly 57 percent of the industrial projects financed by the Bank which was located in or around Addis Ababa. The larger cities in the three provinces of Shewa (excluding Addis Ababa), Harrar and Eritrea accounted for nearly 36 percent of industrial loans in number and absorbed over 50 percent of the total value of industrial loans. As regards agriculture, the three provinces of Kaffa, Illubabor, and Sidamo received slightly over 49 percent of the total value of agricultural loans and accounted for over 47 percent of the total number. These three provinces are in the coffee producing regions of Ethiopia.

The Bank's policy of requiring collateral valued at 200 percent or more of the amount of the loan requested had adverse effects. The security requirement directed loans to the urban areas, where property values are high, and excluded loans to potentially productive areas where no title deeds exist or where communal ownership prevails. The Development Bank, as a tool for large-scale development, had not accomplished all of the objectives. One of the weaknesses of the Bank was a passive attitude. It would have been more desirable if it had sought promising avenues of investment rather than to wait to be approached by applicants. Some 85 percent of the number of loans made by the bank were overdue. These include 97 percent of small agricultural loans (up to Eth$2,000), about 80 percent of the industrial of the industrial loans, nearly 78 percent of the coffee loans, and over 65 percent of the agricultural development loans. However, the 85 percent of outstanding loans overdue represented less than 27 percent of the total amount outstanding. The multiplicity of forms of land tenure, the prevalence of tenant cultivation, the absence of legally defined landlord-tenant relationships, and the lack of cadastral surveys and clearly defined certificates of ownership have restricted the Bank's activities.

After the 1974 Ethiopian revolution the fate of the bank was uncertain as it was a part of the imperial government. On January 1, 1975 the Derg nationalized the Agricultural and Industrial Development Bank (along with all other private and state banks in the country) to fall under the control of the National Bank of Ethiopia.[5]

After the Derg was defeated, the Transitional Government of Ethiopia sought to reverse the Derg's communist policies. The EPRDF established the New Economic Policy which opened up the financial sector, thus giving the Development Bank independence from the National Bank.