The Commercial Bank of Ethiopia extends various types of loans and advances to the following business sectors:

• Domestic trade
• Import and export trade
• Agriculture
• Hotel and tourism
• Manufacturing
• Construction
• Transport
• Services (education, health, etc), and
• Others.
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Acceptable collaterals to the bank are:

• Buildings/Houses
• The buildings/houses should be constructed within the city's limits; and
• They can be used for residential purposes, as warehouses or business organizations.
• Motor vehicles
• This includes trucks, tankers, trailers, combiners, public transport, buses and automobiles
• Bank guarantee
• Local bank guarantee
• Foreign bank guarantee.

Unconditional Life Insurance at surrender value

1. Deposits at Banks

• Saving deposits
• Demand deposits, and
• Time deposits.

2. Merchandise (for merchandise loan only).

• The merchandise should be:
• Easily marketable
• Durable and
• Non-perishable items.

3. Negotiable Instruments

• Treasury bills
• Government bonds
• Leased land
• Machinery and agricultural equipment
• Business mortgage.

Interest 

• At present, CBE collects a 7.5% interest rate per annum on credit facilities it extends.
• The CBE may vary the interest rate based on the Directive of the National Bank of Ethiopia.
• In addition, as per the new Credit Policy, the Bank’s customers may be charged various interest rates based on their:
  • Loan repayment history
  • Business strength
  • Collateral strength and
  • Other similar factors.

That is, customers who meet the Bank's performance parameters are charged less interest rate, whereas the Bank will impose an additional 3% penalty interest rate per annum on non-performing loans.

Documents required from customers during loan request

• A written application that clearly indicates, among others, the amount and the purpose of the loan requested.
• Licenses (as appropriate)
  • Trade and industry license specific to the line of activity and renewed for the current operational year.
  • Municipal license
  • Investment license
  • Registration certificate
  • Others as applicable.
• Financial statements (audited as deemed necessary)
  • Balance sheet
  • Income statement
  • Cash-flow statement
  • If the customer cannot prepare the financial statements and the requested loan amount is small, he/she has to fill out the Commercial Credit Report (CCR) form, which will be provided by the Bank, and
  • Others.
• A business plan
• A project feasibility study (for new projects)
• An ownership certificate (title deed/booklet, construction permit, etc.) for assets or merchandise offered as collateral
• Memorandum and Article of Association (for legally established companies)
• Negarit Gazetta (establishment proclamation)
• An official letter of consent from the Board of Management (where applicable)
• Authority to conclude loan contracts (for companies not specified in their Articles or Memorandum of Association).
• Power of attorney
• Management profile
• In addition, if the requested loan is approved, customers must meet the following conditions:
  • The borrower and the guarantor must sign loan and pledge contracts.
  • The collateral offered as security must be insured both in the names of the Bank and the borrower.
  • The borrower must be willing to register the collateral with the appropriate government body.
  • The borrower has to open a deposit account at the concerned branch, if he/she has not done so, as specified under each type of credit services.                Back to Top

Types of Credit Facilities

Currently, the Commercial Bank of Ethiopia (CBE) offers the following credit products:

• Term Loan
  • Short-term loan
  • Medium- and long-term loans (Project Loan)
• Overdraft
• Merchandise loan
• Agricultural loan.

Term Loan 

• A term loan is a loan granted to customers to be repaid with interest within a specific period of time.
• The loan can be repaid in periodic installments or in a lump sum on the due date of the loan, as the case may be.
• This loan is granted in three forms, i.e., short-term, medium-term and long-term loan.

• Short-term Loan
• Definition
• A short-term loan is a loan that has a maturity period of one year or twelve months from the date the loan contract is signed.
• Purpose of the loan
• The loan is extended to finance the working capital needs and/or to meet other short-term financial constraints of customers.
• Eligibility
• Applicants can be individuals and business entities engaged in any type of business that can meet the following conditions:

  The client must have been in the business for which the loan is requested or in a related business for at least one year with a permanent address.

• The applicant needs to have opened an account at the branch where the loan is requested.

  The applicant has to present the necessary documents required by the Bank.

  The applicant must not have any record of default and misuse of his checking account in the banking system.

Collateral

The security offered must be able to cover both the principal and the interest of the loan.

Repayment of the loan

The loan can be repaid monthly, quarterly, semi-annually or annually in a lump sum upon maturity, depending on the nature of the business and cash-flow statement.

The periodic repayment amount incorporates both principal and interest.

Medium- and Long-term Loan (project loan) 

Definition

A medium-term loan is a loan which has a maturity period exceeding one year but less than or equal to five years from the date the loan contract is signed.

A long-term loan is a loan that has a maturity period of five to fifteen years.

Purpose of the loan

The purpose of the loan is to finance new projects, support the expansion of existing projects, investments and meet working capital needs.

Eligibility

Applicants can be either new or existing customers. To be eligible for the loan, customers must present the following:

For new projects 

• A feasibility study
• Lease agreement and certificate, land holding-certificate and bill of quantity and specification (if the project involves construction)
• A business license from authorized government bodies
• Memorandum and Articles of Association
• Proforma invoice (not exceeding two months)
• Equity contribution by the customer
• Curriculum vitae of the management group.

For existing projects 

• A feasibility study
• Audited financial statements
• A list of fixed assets which include their book value and market value
• A list of the market value of fixed assets to be purchased
• Projected financial statements
  • Without project expansion
  • With project expansion

For enterprises to be purchased from the Privatization Agency 

• Bid documents
• Sales contract
• Bill of quantity and specification (if the project involves construction)
• The curriculum vitae of the management group.

Collateral

In addition to the acceptable securities, customers have to offer the entire asset of the project as additional collateral.

Repayment of the loan

Based on the nature of the project and projected cash-flow statement, the loan will be repaid quarterly, semi-annually and annually.

The Bank may provide a grace period for the commencement of repayments.            Back to Top

Overdraft

Definition

An overdraft (O/D) is a credit facility by which a customer can withdraw in excess of her/his/its current account balance up to the limit approved by the Bank.

Purpose of the loan

The loan is intended to finance the day-to-day operational needs of a viable business.

Utilization of the O/D facility

Applicants have to open a current account to utilize an overdraft facility.

The O/D account should have a proper turnover by way of withdrawals and deposits. However, an O/D account should not be overdrawn.

An O/D facility is approved only for a period of six months and, in some cases, for a year. Therefore, it has to be renewed every six months or year.

The request for renewal must be presented to the Bank two months before the expiry date of the facility.

Approval of request for renewal of overdraft is subject to fulfilling the Bank's requirements, such as:

• Sound financial conditions
• Good operational results evidenced by acceptable financial statements
• Satisfactory utilization of the O/D
• Stability of the collateral value
• In addition, during renewal request, the O/D account has to show the credit balance.

Eligibility

Overdrafts can be considered for manufacturing, trading and service-giving enterprises. To be eligible for the facility, customers should meet the following conditions:

• The business must be in operation for at least two years.
• Applicants should have a record of satisfactory utilization of current accounts for at least the year preceding their application for overdraft facility.
• Applicants must have settled at least one term loan with a good repayment record.
• O/D requests will not be considered for businesses with non-performing credit status and/or currently blacklisted by the CBE or any other bank.
• Customers' seasonal or temporary financial needs will not be entertained by an overdraft.
• Customers' O/D accounts may be cancelled or converted to a term loan (partially or fully) if they fail to properly utilize the facility.

Collateral

An O/D facility can be approved against any collateral acceptable by the Bank, except motor vehicles and machinery.

Loan Repayment

• In case of an O/D facility, interest is calculated on the amount used by the customers.
• Customers have to pay the accrued interest regularly so that the facility will not be overdrawn.
• By the time of the request for renewal, the O/S overdraft balances have to be fully settled.
• The Bank can claim the outstanding balance of the O/D facility at any time.

Merchandise Loan 

Definition

• Merchandise loan is a credit facility provided by the Bank against which the merchandise is held as collateral for the loan.

Purpose of the Loan

• The purpose of the loan is to overcome the cash-flow problem of customers when money is tied up in merchandise.
• The loan is approved for a period of three months (90 days) or it may be approved on a renewal basis.

Types of Merchandise Loan

• This is a merchandise loan which will be granted for a specified short period of time
• This type of merchandise loan has a limit that is renewable every six months.
• Customers have to forward their renewal request in writing two months before the expiry date.
• In this type of loan, customers' account is credited when he/she stores the merchandise.
• Merchandise is released upon the request of the borrower.

Loans Against Railway Receipts, Truck Waybills or Airway Bills                                   Back to Top

• Such loan is granted against acceptance of the evidence for merchandise that is in the course of shipment transit by rail, truck and air transport.
• The evidence should be supported by original railway receipts, truck way bills or airway bills.

Eligibility

• This type of loan is granted to prime customers or to customers who are considered by the Bank as being highly credit-worthy and should meet the following conditions:
• Submit financial statements, including projected cash-flow statement, for at least one year.
• Open an account at the branch where they request the loan.
• Submit plans that justify the purpose and utilization of the loan.
• Prepare interim financial statements on a regular basis or as requested by the Bank.
• Present an ownership title for the merchandise to be offered as collateral, i.e.,
  • Customs declaration for imported goods.
  • Valid invoices checked with respective suppliers for locally purchased merchandise.
  • Internal documents like production report for manufactured goods.

Types of Acceptable Merchandise for Pledge

• In order to be acceptable as security, merchandise must meet the following conditions:
  • The product should not be perishable
  • It must be easily marketable
  • Its price must be determinable and relatively stable
  • The product must be insurable
  • The Bank must be entitled to possessing the goods and must have an unconditional legal right to sell them in the event of default by the borrower.

• Some of the goods that are not acceptable as security for merchandise loan are:
  • Chemicals
  • Packed foods
  • Pharmaceuticals
  • Batteries
  • Butter
  • Oil, yeast and other similar products.

Security Arrangement for Merchandise Loan

Merchandise offered as collateral might be kept at the Bank or at the borrowers’ storeroom.

• If pledged merchandise is stored in a warehouse fully controlled by the Bank, it is considered to be under the sole control of the Bank.
• If merchandise is stored in a warehouse owned/rented by the borrower or a third party property, it is considered to be under the dual control of the Bank and the borrower. In this case, the condition of the storeroom should be acceptable to the Bank, and the Bank should have unconditional access to the storeroom.
• Any expenses related to the warehouse and the safety of the merchandise will be borne by the customer.

Repayment

• Repayments are made before the release of the pledged merchandise as per the term and conditions of the loan contract.
• Customers have to deposit the proportionate amount of the merchandise to be released.
• The tenure of the merchandise to be released should not exceed 90 days.

Agricultural Loan

Definition

Agricultural loan is a loan granted to customers who are engaged in a production business.

Purpose

Agricultural loan is intended to finance working capital needs and investments of customers involved in the sector.

Eligibility

Any individuals, enterprises and associations involved in the agricultural sector can apply for this loan.

• For investment-related agricultural loans, customers have to submit:
  • Land-holding certificate
  • Investment license
  • Project feasibility study
  • Equity contribution.

Loan Repayment

• The loan may be repaid monthly, quarterly, semi-annually or annually.
• The Bank provides a grace period for investment-related agricultural loans.

Collateral

This loan can be approved against acceptable collaterals.                                     Back to Top