The Development Bank of Ethiopia (DBE) plans to lend up to 19 billion birr under interest free services, a new scheme which is set to be launched by July 2022. The state bank is setting up new a department for interest free banking.
“Guidelines are currently being developed as interest-free services are based on Sharia law,” said Yohannes Ayalew (PhD) president of the bank adding, “The new interest-free window will fundraise itself, and also provides loans.”
The bank is also installing five different specialized banking departments, including for crop finance, livestock’s, horticulture, and SMEs. The departments will have specific directorates and technical teams, which will be assigned to advise clients.
According to Yohannes, a research and development cluster is being set up to study the agricultural and industrial market and development.
The bank plans to give 19 billion birr credit in the first year of operation and increase it by 50 percent in the second year. It plans to lend SMEs ranging from two million to 45 million birr and 100 million birr for large enterprises.
However, experts argue DBE should focus on other products, as full-fledged interest free banks are embarking on the scheme.
On the other hand, the bank has set aside two billion birr, in a bid to cover losses for the loans it extended for businesses in Tigray.
“The provision has reduced our profit for the current year,” added Yohannes.
