The Development Bank of Ethiopia (DBE) has been one of the state-owned financial institutions providing short, medium, and long-term credits for the past 107 years.
The bank recently amended its lease financing policy, which was adopted in March 2016, in order to assist small and medium-sized businesses. The updated Lease Financing Policy No. LFP/002/202 contains articles to help small businesses obtain loans through lease financing.
SMEs account for roughly 90% of all businesses (99% in developing countries) and more than half of all jobs globally.
Although there is no universal definition of SMEs that applies to all situations, Small and Medium Enterprises (SMEs) in the context of DBE are defined as businesses in agriculture, agricultural mechanization services, agro-processing, manufacturing, mining and quarries, tourism, and construction industries which are managed in a personalized manner by owners with a total capital of between Birr 500,000 and Birr 10 million and employ more than 6 people.
Lease Financing is defined as a capital goods financing service provided by the bank to SMEs in the “hire-purchase” modality in the amended DBE’s Lease Financing Policy No. LFP/002/202.
‘Hire Purchase Modality refers to a type of leasing in which a lessor provides a lessee with the use of a specified capital good in exchange for payment of mutually agreed installments over a specified period, with each lease payment transferring an equal percentage of ownership to the lessee, and upon effecting the final payment, ownership of the capital goods is automatically transferred to the lessee.’
DBE’s Priority area projects for SMEs are:
- Production of horticultural products, vegetables, fruits, mushrooms, etc
- Improved seed multiplication
- Poultry farming
- Animal breeding
- Fishery (Fish farming)
- Dairy farming
- Food grain (wheat, maize, rice, pulses, etc.) farming
- Sesame farming
- Coffee plantation and development
- Cotton farming
- Fiber (sisal) crops production
- Silkworm farming
- Apiculture farming / Bee Keeping
- Bamboo plantation and development and
- Ostrich Farming
- Other agricultural projects which are not contained in the above list shall be determined by the Bank when requested by lessee.
- Dairy products processing: Pasteurized milk production; Cheese production; and Butter production.
- Animal feed processing;
- Poultry products processing;
- Spices, medicinal plants and essential oil production; extraction and processing;
- Fish products processing;
- Edible oil extraction and processing;
- Fruit and vegetable processing;
- Food processing; and
- Other processing shall be determined by the Bank when and as required.
- Areas targeted under manufacturing industries for SMEs lease financing are:
- Leather and leather products;
- Textile (spinning, weaving, dyeing, knitting, garment, in combination or separately);
- Metal and nonmetallic works;
- Soap and detergent;
- Paint; and
- Other manufacturing industries shall be determined by the Bank when and as required.
- Boat service;
- Car service; and
- Other Tour industries shall be determined by the Bank when and as required.
- Hallow block, pipe and bricks production;
- Concrete pole production;
- Bazola production;
- Terrazzo production;
- Ceramic Production;
- Gypsum production;
- Construction materials production; and
- Other Construction industries shall be determined by the Bank when and as required.
Mining and quarries
- Marble production;
- Gold and precious minerals Production;
- Gravel production; and
- Other mining and quarries shall be determined by the Bank when and as required.
SMEs who qualify for funding will receive loans ranging from half a million Birr to 7.5 million Br.
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