The third largest exporter of pulses last year, Edao Abdi, has grown anxious over the past three months. His 500 million Br loan request from a couple of the top private commercial banks, remains up in the air.

International customers from Europe are expected to receive 8,000tns of a variety of crops by November. But, they will have to settle for an eighth of the amount as the exporter cannot access credit for the 20,000tns of inputs he needs.

"No one waits around if payment is not made," he told Fortune in disappointment.

Edao sources its pulses from the Ethiopian Commodities Exchange (ECX) and farmers from Oromia and Sidama regional states through contract farming arrangements. His 16-year-old company Edao Trading was founded with a million Birr capital.

The 14 million dollars in export revenues from last year has little to offer in the form of comfort this year, as the company thirsts for fresh credit.

Commercial banks have placed a tight clasp on new loans to customers, following a cap on credit growth of 14pc by the National Bank of Ethiopia (NBE). The policy shift rolled out in August is similar to the one imposed a decade ago, aimed at battling inflation.

A 27pc inflation rate has been maintained recently while regulators of the central bank laud their priorities to further tame the rate to 20pc by the end of the year. Governor Mamo Mihretu underscored that price stability would remain a top priority of monetary policy for at least the next three years "at the cost of some growth."

While the result remains to be seen, Vice Governor Fikadu Digafe suggests that it is still too early to determine the exact impact of the loan cap on overall price levels.

"I can't deny there has been some impact," he told Fortune.

Although the move may contribute to containing the inflation rate, several impacts are strained on the banking industry.

In the third quarter of 2022/2023, a few months before the credit cap was announced, the banking sector disbursed 123 billion Br in new loans, signifying a 13pc annual growth from the prior year. The total banking industry's loans and advances had grown by 35pc from the prior year to 1.4 trillion Br.

The benefits of reducing the inflation rate at the expense of revenues sit well for seasoned institutions such as Zemen Bank which netted 1.8 billion Br this year.

Dereje Zenebe, president of Zemen, indicates the importance of increasing the purchasing power of money to realise price stability.

"The policy interventions are rather late," he said, pointing to the ballooning prices of homes and vehicles over the past two years.

However, he noted that the decline in loans will limit business owners with prior credits, as they will be limited in working capital to run businesses at full capacity. The Bank looks into credit scores and prior relationships to approve credit lines, according to Dereje.

On the contrary, the loan cap has put a tighter clasp on new entrants, with some suspending loan requests for employees while others restrict their growth. Ethiopia's financial landscape has been on an accelerated growth trajectory, with new entrants looming in the banking industry while some upgrade from microfinance institutions.

Sinqee Bank grew into a full-fledged commercial bank last year from Oromia Credit & Saving Microfinance, which amassed 371.6 million Br in profits last year. The Bank has been feeling the impact of the new monetary policy prescriptions.

Its President Neway Megerssa has mixed feelings about introducing caps on credit growth. He reasons that the longstanding provision where half the amount of deposits is set aside for legal reserves and treasury bonds already put structural limits on credit.

"It'll reduce inflation," he underscored, "and our interest income."

To keep momentum, Sinqee has halted giving loans to its employees, one of the perks associated with a position at a Bank. Neway cautioned that the slowdown in business caused by the credit cap will fuel unemployment rates as employers face a growing inability to make salary payments.

"There will be no new employment if businesses can't expand," he said.

The Bank management opted to prioritise import-exports, domestic trade, hotel and tourism businesses. Neway acknowledged that liquidity has been a problem in the banking industry over the past year, revealing that rigorous credit history evaluations precede the approval of any new bank loans.

'We're making sure that prior loans are properly collected," he noted.

One of the budding financial institutions that penned a letter to the central bank pleading for reconsideration of the loan cap on new entrants is Sidama Bank. It joined the banking fold last year with 574 million Br paid up capital from 2,000 shareholders, after operating as Sidama Microfinance Institution for 26 years.