Chamber Appeals to Prime Minister Over Mounting Loan Crisis in Tigray Regional State

Mar 11 , 2026. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

In a fresh appeal, the Tigray Chamber of Commerce submitted a seven-point proposal that includes a “targeted debt jubilee” for businesses that lost all assets, a “recovery liquidity facility” offering concessional loans, and an “asset protection regime” shielding core productive assets from seizure. The Chamber also called for lifting the credit cap for banks operating in Tigray Regional State, creating a “Bad Bank” to absorb non-performing loans, issuing a “forbearance directive” to ease regulatory pressure on lenders, and activating public credit guarantees to support new lending.

Leaders of the Tigray Chamber of Commerce have taken their case to Prime Minister Abiy Ahmed (PhD), arguing that a war-induced debt crisis is now tipping businesses in the region toward collapse and threatening to spill over into the wider financial system.

The business leaders argue that routine technical fixes had failed and that only political intervention could prevent banks from seizing borrowers' collateral, which they say they have been unable to recover since the conflict. Whether a banking system already under strain should enforce loan contracts as written, even when war shattered the capacity of many businesses to operate, or whether further forbearance is needed to protect firms, preserve productive assets and avoid deeper financial distress, remains the issue these leaders are pressing.

In a letter they issued in May last year, they depicted the business community in the region as "a constituency caught between conflict and regulation." According to the Chamber, before the war erupted in 2020 and lasted for two years, businesses in the regional state operated across multiple sectors, created jobs, paid taxes, and met their debt obligations. That commercial base was broken by the outbreak of the war, which stopped after the warring parties signed a cessation of hostilities in Pretoria, South Africa, in November 2022.

The Chamber's leaders are disgruntled with a 2021 law requiring borrowers to pay interest on loans that had not been serviced for three years, adding pressure on 422 businesses that had already lost the ability to function normally.

According to the letter, the issue can no longer be treated as a matter of banking administration.

After the Pretoria Agreement, representatives of the business community appealed to federal authorities seeking relief. They held discussions with senior officials of the National Bank of Ethiopia (NBE), the Ministry of Finance and executives of commercial banks. In 2023, they also submitted a study and proposed solutions to the Prime Minister’s Office. The Macroeconomic Committee later extended repayment deadlines twice, with the final extension set for December 25, 2025. But the Chamber says those extensions bought time without producing a durable settlement.

Its latest appeal came as banks began auctioning properties belonging to businesses in the Regional State.

"These actions are being taken while the business community is still waiting for a response from the Prime Minister’s Office," said the Chamber.

A month before the final deadline, the Chamber also wrote to Governor Eyob Tekalegn (PhD), warning that unless immediate action was taken, the legacy of the conflict would cripple businesses, paralyse credit markets and trigger economic repercussions across the country. It set out a seven-point proposal intended to prevent what it sees as a broader financial breakdown.

Official of the NBE were not available for comment.

The proposal called for a "targeted debt jubilee" to cancel loans, interest and penalties for businesses that lost all assets during the war. It also seeks a "recovery liquidity facility" that would provide concessional loans at discounted rates for rehabilitation and new ventures. A third measure, dubbed "asset protection regime," would shield core productive assets from seizure until "a fair resolution framework" is in place. The Chamber also wants the credit cap for banks in Tigray Regional State lifted, a “Bad Bank” established to absorb non-performing loans, a "forbearance directive" issued to give lenders regulatory relief and public credit guarantees activated to reduce the risk of new lending.

“The systematic implementation of these measures is the only path to salvaging the borrower community, stabilising the banking sector, and reviving the national economy,” the Chamber declared.

Without such measures, the Chamber warns, toxic assets could spread across bank balance sheets, erode capital adequacy and freeze credit in the Regional State. Forced sales, the Chamber's leaders claim, are depressing property values while demand is already weak.

"Fiscal revenues could weaken, monetary policy could be distorted, and national supply chains could be disrupted," said the Chamber.

According to its Secretary General, Haftey Hagos, several banks had issued foreclosure notices, while others had sent letters as non-performing loans continued to mount on their balance sheets, with outstanding loans climbing to 80 billion Br.

The loans were disbursed through 616 bank branches across Tigray Regional State. Their principal value reached 60 billion Br. The initial annual interest on the loans was estimated at 5.1 billion Br, with 18 banks and two microfinance institutions advancing it.

"Several businesses remain inactive, leaving their owners unable to repay what they owe," Haftey told Fortune. "Banks have begun enforcement."

Four banks - Wegagen, Anbesa, the Commercial Bank of Ethiopia (CBE) and Oromia Bank - have issued notice or started foreclosure procedures. Dedebit Microfinance Institute has taken similar steps.

For some borrowers, like Wolde Mehari, once a rebar importer now struggling to support his 10 children, the crisis is no longer a balance-sheet problem but a household one. He has surrendered property to one of his lenders, Anbesa Bank. Three houses were put up as collateral for his loan, but only one belongs to him. The other two - a one-storey villa on a 200Sqm and a three-storey building on a 325Sqm in Mekelle and Agula, respectively, were pledged by friends and family members to support his loan application. Now the unpaid debt threatens the homes of three families.

Two of the families at risk had no direct role in taking the loan, but could still lose their homes. One of those households supports nine children; another supports five.

“The bank is there for foreclosure,” Wolde told Fortune.

Bank managers see the issue as more complicated than borrowers claim. According to Demessew Kassa, secretary general of the Ethiopian Bankers Association (EBA), repayment extensions were granted not only to borrowers in Tigray Regional State but also to borrowers in other war-affected regions.

"Banks provided relief for nearly two years in an effort to help businesses recover," he said.

Demessew acknowledged that economic conditions in Tigray Regional State had not returned to pre-war levels. But he saw some businesses had continued operating during the relief period and that banks had obligations to depositors whose funds financed the loans.

"Collateral in major cities had largely remained intact, with Axum the main exception because of the scale of destruction there," he said. "But the value of Birr had depreciated sharply since."

Businesses in Shire town, a northwestern town of Tigray Regional State, who took loans from Wegagen Bank had received rescheduling, penalty waivers and a 25pc waiver on one year of accrued interest. The remaining 75pc was restructured as zero-interest debt repayable over three years, with no additional charges.

According to Tesfay Gebrewahid, customer relationship manager at Wegagen Bank’s Shire Branch, the Bank has not initiated foreclosure unless borrowers themselves have initiated the process.

Worku Lemma, a banking expert, stated that the war created circumstances beyond the control of many businesses and argued that the rescheduling period should be extended again. He warned that foreclosure may prove a poor remedy in war-affected areas where weak demand could depress the value of seized properties and make recovery harder for banks.

PUBLISHED ON Mar 11,2026 [ VOL 26 , NO 1349]