Ethiopian Review

Addis Ababa, Ethiopia — The credit bubble that has grown over the last few years seems to have infected striving businesses with a cancerous vice, as disproportionate loans were acquired in sectors now also suffering from the power crisis.

Their creditors too are now facing difficult times, as defaults occur and the collateral obtained to secure the loans proves insufficient.

Taking the lead is the Bank of Abyssinia (BoA), which has put properties held as collateral worth nearly 130 million birr up for auction, this past week.

The amount of collateral being disposed of by BoA to compensate it for loan defaults is almost unprecedented in Ethiopian business history.

The properties belong to three firms: Simachew Demise Investment, Awda Plc., and Getaneh Plc and Getaneh Trading Plc, which are sister companies.

The three properties owned by Simachew Demise Investment are worth over 93.4 million birr, while the floor prices for the real estate of the other two companies are 23.2 million birr for Awda and 12.8 million birr for Getaneh.

Simachew, which is involved in coffee trading, has three different compounds in Bole Sub City. According to the auction notice of the bank, the properties include offices, warehouse and coffee cleaning machines, among other facilities.

For this huge auction, the bank has facilitated a special method of payment to make the properties affordable for bidders. It has said it will loan 70 per cent of the final price, with the winners making up the remaining 30 per cent.

Bidders are also to present a bank guarantee bond equal to 25 per cent of the property, which, going by the starting price of all properties would be worth 32.4 million birr.

The bank has said a two storey building of the Getaneh companies will be rented initially for 60,000 birr per month if it is not sold at auction.

Previously, BoA auctioned eight properties offered as collateral by Getaneh Trading Plc. They included five residential quarters and three buildings that were used for storage and other business purposes.
The properties that had a floor price of over 58.5 million birr were largely owned by Yohannes Getaneh, who committed suicide a few months ago leading to the auctioning of his real estate. His 12.8 million birr residence built on a 646 square metres of land was also part of the previous auction.
Although the bank recorded 16.6 million birr net profit last budget year, sick loans forced its profits decline by 75 per cent. Still, the bank’s total assets grew by 26.5 per cent to 4.5 billion birr; its loans portfolio increased by 22 per cent to 2.8 billion birr; and its reserves climbed by 28 per cent to 3.4 billion birr.

Also last year, 142.7 million birr worth of repayments was defaulted on borrowers, which BoA intends to collect during the new budget year.

Bank of Abyssinia Factfile

• The Bank of Abyssinia was established 13 years ago with 131 shareholders.
• Currently, the subscribed capital of the bank has reached 630 million birr; deposits are 420 million birr and the total wealth of the bank is 4.9 billion birr.
• Last tax year, it issued 2.8 billion birr in loans.

- By Muluken Yewondwossen | Capital Ethiopia