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DEVELOPING STORY: New Policy Requires Financial Institutions to Invest in DBE

August 31 , 2021

The central bank has introduced a new mandatory rule that demands commercial banks invest one percent of their annual loans to buy bonds from the Development Bank of Ethiopia (DBE).

Insurance companies are also mandated to allocate 15pc of their net annual income to do the same.

The measure is expected to strengthen the financial soundness of the policy bank.

Previously, banks were expected to invest 27pc of every loan disbursement in the DBE at a three percent interest rate with a five-year maturity period.

The requirement was, however, lifted in 2019 to increase the liquidity of commercial banks.

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