Fortune News | Feb 23,2019
Development Bank of Ethiopia, the state policy bank, imported 36 vehicles at a cost of 42 million Br to lease to tour and travel operators. The Bank has already transferred 26 automobiles to 12 companies thus far.
The Bank procured the vehicles from Motor & Engineering Company of Ethiopia Limited S.C. (MOENCO), the sole importer of the Toyota brand in Ethiopia.
The process of importing the vehicles took over a year due to the ongoing foreign currency crunch, according to Teshome Alemayehu, vice president in charge of small & medium enterprises financing at the Bank, which approved 3.94 billion Br and disbursed 2.39 billion Br in project and lease financing during the first half of the current fiscal year. The Bank reported that it has collected 1.03 billion Br from loans.
The policy bank used the foreign currency secured from the European Investment Bank and the World Bank to import the cars. In early January of last year, the Bank secured 276 million dollars from the two international financial institutions for lease financing over the next five years.
The Bank started a lease financing scheme two years ago with the main aim of supporting businesses in the manufacturing sector, as well as other forex generating companies. The businesses are supposed to submit a detailed business proposal and raise 20pc of the project cost on their own to be eligible.
Though tourism is under the service sector, the Bank considered it as one of the industries that generate foreign currency. In the last fiscal year, the country generated 3.5 billion dollars from 934,000 tourists.
A total of 445 travel and 98 tour agencies are operating in the capital, with 1,129 commercial vehicles servicing the industry. These tour and travel agencies are organised under 19 associations.
In considering the tour operators for the scheme, the Bank shortlisted companies that have been in business for at least two years with a history of generating foreign currencies in their transactions.
The off-road vehicles were imported duty-free, and the processes of obtaining duty-free status from the Ministry of Revenues was contentious as there was fear that the privilege would be abused, according to Mamitu Yilma, an adviser to the Minister of Culture & Tourism.
“We had feared that the vehicles would not be used for the targeted purpose, but after holding discussions with the operators and Ministry of Revenues officials, we came to the realisation that the project can be implemented safely,” Mamitu said.
Based on the preference of the tour and travel agents, MOENCO, which operates eight branches across the country, including Hawassa, Bahir Dar, Adama, Dire Dawa and Addis Abeba, supplied the vehicles. The company has previously supplied agricultural machinery to the Bank under a lease financing scheme.
The 60-year-old MOENCO offers a 100,000Km, three-year warranty on the vehicles, according to Seifu Getahun, finance head at MOENCO.
The operators are expected to fully pay the cost of the cars plus nine percent interest over a five-year repayment period, at which time ownership titles will be transferred to them.
The remaining 10 vehicles are in route and are expected to arrive in a month, according to Teshome.
Last year, the Federal Small & Medium Manufacturing Industry Development Agency reported that only 20pc of the lease financing proposals submitted to the Bank have been approved. This is despite the fact that the Bank has received applications for lease financing for over 10 billion Br.
PUBLISHED ON Feb 09,2019 [ VOL 19 , NO 980]
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