The Development Bank of Ethiopia (DBE) is to take out a loan primarily for the purposes of continuing to make letters of credit (L/Cs) available for Ethiopian traders.

The 1.4 billion birr (Br1.4 billion) loan from the Commercial Bank of Ethiopia (CBE) aims to support DBE's efforts to fulfil lending commitments already made of more than Br3 billion.

Over extended

The bank has already extended Br876 million of loans in the first six months of the 2009/10 fiscal year.

Now it needs to raise more finance if it is to stave off a cash shortfall it would encounter in the process of meeting its lending target.

Import L/Cs

Much of the latest tranche of loans obtained by the DBE will be used to finance import L/Cs for purchases by a handful of companies.

These are thought to include two Turkish companies as well as local enterprises including National Cement, Addis Pharmaceutical and Dashen Brewery.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.