A Motor Vehicle Loan is a term loan granted for the purchase of motor vehicles for borrowers in the transport sector as well as other business sectors.

The loan does not, however, include the cost of spare parts or luxury items.

The vehicle to be bought should be held as collateral and registered with the legally empowered organ.

Eligibility

The motor vehicles to be financed should meet the standard specification of the Ministry of Transport and Communication – Transport Authority. To this effect the suppliers list of the Transport Authority shall be used.

The motor vehicles to be bought shall only be new brand.

If the motor vehicle, is to be used in the transportation sector, it should have the following minimum loading capacity (manufacturing loading capacity):

1. For dry cargo transport: a truck with trailer with 300 quintals loading capacity.


2. For fuel cargo transport: a fuel tanker with trailer with 40,000 liters loading capacity.


3. For public transport: a bus with 25 seats.


4. For dump truck: with loading capacity 9m3.

The loan could also be extended to other business sectors as well—to buy other types of vehicle, including, large-, medium- and small-sized trucks, mini-buses, pickups and automobiles, that are needed to facilitate the borrower’s existing business or, simply, as a component of a project.

Bank financing, or any other type of borrowing, is not acceptable as a source of fund for the borrower’s equity contribution. This should be ascertained by evaluating the applicant’s financial statements, account performance and credit information.

The borrower should make an equity contribution amounting at least to 30% of the purchase value of the vehicle to be bought. The amount of the equity contribution shall, however, be determined based on the type of business, the borrower’s relevant experience and the additional collateral offered.

Grade 1 or 2 applicants should make an equity contribution of at least 30% of the purchase value of the vehicle, without having to offer additional collateral.

Grade 3 applicants should, nonetheless, make an equity contribution of at least 30% of the purchase value of the motor vehicle and offer additional collateral in the form of building whose estimated value is at least 30% of the amount of the loan sought.

If the loan request is for the purchase of fuel cargo trucks, both Grade 1, 2 or 3 applicants should make an equity contribution of at least 30% of the purchase value of the vehicle, without having to offer additional collateral.

Applicants for fuel cargo trucks should submit a tripartite agreement—that is, involving the borrower/association, the oil company and the CBE. Such an agreement has to explicitly stipulate that the oil company will transfer the payment directly to the borrower’s loan account until such time as the loan has been fully settled; the tripartite agreement also has to incorporate assurances from the oil company that the truck’s service will continue uninterrupted for a given number of years.

If the applicant makes an equity contribution of 60% of the purchase value ofthe vehicle, the loan will be extended with no requirement for additional collateral.

The building to be offered as additional collateral should be located in Addis Ababa or in one of the capital cities of the Regions. In exceptional cases, however, buildings that are found in other towns, too, might qualify for the purpose, provided that the pertinent credit-approving team believes that the real estate market of the concerned town is promising.