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 TABLE OF CONTENTS

Title Pages

PART I: GENERAL OVERVIEW ................................................................................................................. 6

I. INTRODUCTION .................................................................................................................................. 6
II. OVERVIEW OF AGGREGATE PERFORMANCE AND TARGETS ................................................. 8
III. ORGANIZATIONAL BACKGROUND ................................................................................................ 9
3.1 Mission, Vision, Values of the Bank .............................................................................................9
3.2 Organizational Set-up ..................................................................................................................10
PART II: PAST ENVIRONMENT ASSESSMENT ................................................................................... 13
IV. ORGANIZATIONAL ASSESSMENT ................................................................................................ 13
4.1 Government Development Policies and Strategies......................................................................13
4.2 Nature of Development Banking Institutions ..............................................................................14
4.3 Environment Analysis .................................................................................................................15
4.3.1 External Environment Assessment..........................................................................................15
4.3.2 Internal Situation Assessment .................................................................................................22
4.3.3 Summary of External and Internal Assessment /SWOT Matrix/ ............................................27
4.3.4 Customer and Stakeholder Evaluation ....................................................................................31
V. PAST FIVE YEARS PERFORMANCE OVERVIEW ........................................................................ 34
5.1 BSC Performance Assessment ....................................................................................................34
5.1.1 Thematic Areas and Results during the Past Strategic Periods ...............................................34
5.1.2 Perspectives .............................................................................................................................35
5.1.3 Strategic Initiatives Implementation Performance Evaluation ................................................36
5.2 Credit Operation Performance .....................................................................................................38
5.3 Financial Performance .................................................................................................................39
5.3.1 Income Accounts .....................................................................................................................39
5.3.2 Balance Sheet Account, Cash flow and others ........................................................................40
5.3.3 Financial Ratio Analysis .........................................................................................................42
5.4 Human Resources Assessment ....................................................................................................43
PART III STRATEGY FORMULATION ................................................................................................... 45
VI. CORPORATE STRATEGY ................................................................................................................. 45
6.1 Customer and Stakeholder Analysis ............................................................................................45
6.2 Strategy Formulation ...................................................................................................................49
6.3 Thematic Areas, Strategic Results ...............................................................................................50
6.4 Perspectives .................................................................................................................................52

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 6.5 Strategic objectives ......................................................................................................................53
6.6 Strategic map ...............................................................................................................................58
6.7 Measure, Targets, Thresholds and initiatives ..............................................................................60
6.7.1 Performance Measures ............................................................................................................60
6.8 Summary of perspectives, Objectives, Measures and their respective weight ............................67
6.9 Targets and Thresholds ................................................................................................................69
6.10 Strategic Initiatives..................................................................................................................71
6.10.1 Existing Initiatives ..............................................................................................................71
6.10.2 New Initiatives ....................................................................................................................71
PART IV: LENDING FOCUS AREAS AND TARGET SETTING .......................................................... 80
VII. DBE LENDING AREAS ...................................................................................................................... 80
7.1 Agricultural Sector ......................................................................................................................80
7.2 Industrial Sector...........................................................................................................................80
7.3 Small and Medium Enterprises (SMEs) ......................................................................................81
VIII. STRATEGIC TARGET SETTING ...................................................................................................... 82
8.1 Credit Targets ..............................................................................................................................82
8.1.1 Agricultural Sector ..................................................................................................................82
8.1.2 Industrial Sector ......................................................................................................................83
8.1.3 Small and Medium Enterprises (SMEs) ..................................................................................84
8.1.4 Others (Services, RUFIP, Consumer etc)................................................................................85
8.2 Financial and Other Targets ........................................................................................................86
8.2.1 Financial Projections ...............................................................................................................86
8.3 Import/Export Target ...................................................................................................................88
8.4 GERD Bonds Target....................................................................................................................89
8.5 Resource Mobilization Targets ....................................................................................................90
8.6 Capital Budget .............................................................................................................................91
8.7 Human Resources Targets ...........................................................................................................92
8.8 Summary of BSC Targets ............................................................................................................93
IX. GENERAL AND SPECIFIC ASSUMPTIONS.................................................................................... 95
9.1 General Assumptions...................................................................................................................95
9.2 Specific Assumptions ..................................................................................................................97
9.3 Other Issues to be addressed ......................................................................................................100
ANNEXES .................................................................................................................................................. 102

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 LIST OF TABLES

Table 1: Comparison of Past Performance and Targets Set for the Next Strategic Period
Table 2: The summary and SWOT Matrix
Table 3: List of Customers and Stakeholders
Table 4: Credit Service Delivery Performance Trend in the last strategic plan period (2010-2015)
Table 5: Summary of existing Thematic Areas of the past strategic plan period
Table 6: BSC Performance Result of the Bank (2010/11-2014/15)
Table 7: Status of Initiatives Selected during the past strategic period
Table 8: Summary of Planned and Actual Performance for the period covering 2010/11—2014/15
Table 9: Summary of Income Statement Accounts
Table 10: Performance of Balance Sheet Account, Cash flow and others
Table 11: Trends of Financial Ratios for the Strategic Period from 2010/11-2014/15
Table 12: Human resource assessment by category
Table 13: List of Customer and Stakeholder based on their interest, expectation and influence
Table 14: Rating Thematic Areas Candidates
Table 15: Rating Thematic Areas Candidates
Table 16: Strategic Objectives and Commentary
Table 17: Measures, Measure formula and Measure Clarification/Explanation
Table 18: Perspectives, Objectives Measures and Their Weight
Table 19: Corporate Level Performance Determination
Table 20: Stock of Initiatives Transferred to the next strategic period
Table 21: Description of new initiatives
Table 22: Ranked initiatives
Table 23: Initiatives Time and Budget
Table 24: Summary of credit operation targets for the period covering 2015/16-2019/20
Table 25: Financial Targets (2015/16-2019/20)
Table 26: Target of Cash flow activities
Table 27: Import, export and net foreign currency requirement targets
Table 28: Resource Mobilization Targets
Table 29: Capital Budget Summary for 2015/16 - 2019/20 Strategic Plan Period
Table 30: Summary of Human Resources Targets
Table 31: Summary of BSC Targets
Table 32: Vision description

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 ACRONYMS

AADFI's- Association of African Development Finance Institutions

ADB- African Development Bank

ADLI- Agricultural Development Led-Industrialization

BSC-Balanced Scorecard

CAGR -Compound Annual Growth rate

CBE- Commercial Bank of Ethiopia

COMESA- Common Market for Eastern and Southern Africa

CSA- Central Statistical Office

DBE- Development Bank of Ethiopia

ECG- Export Credit Guarantee

EIB- European Investment Bank

EIC- Ethiopian Investment Commission

F&D- Finance and Development

FDI- Foreign Direct Investment

GDP -Gross Domestic Product

GERD Bond- Great Ethiopian Renaissance Dum Bond

GTP- Growth and Transformation Plan

IGAD -Intergovernmental Authority on Development

IT- Information Technology

KYC- Know your Customer

MDG- Millennium Development Goal

MoFED- Ministry of Finance and Economic Development

MSEs- Micro and Small Enterprises

NBE- National Bank of Ethiopia

NEPAD- The New Partnership for African Development

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NPLs- Non-Performing Loans

PASDEP - Plan for Accelerated and Sustainable Development to End Poverty

PESTE- Political, Economic, Social, Technological Environment

PFEA- Public Financial Enterprises Agency

PHLS - Professional and High Level Supervisor

POESSA-Private Organizations Employees Social Security Agency

PSSSA-Public Servant Social Security Agency

PTA –Preferential Trade Arrangements

ROA - Return on Asset

RUFIP- Rural Financial intermediary Program

SACCOs- Saving and Credit Cooperatives

SDPRP- Sustained Development and Poverty Reduction Program

SMEs –Small and Medium Enterprises

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 PART I: GENERAL OVERVIEW

I. INTRODUCTION

Over the past two decades, the Ethiopian economy has gone through numerous changes. The
Government adopted market oriented economic policy, made agriculture its primary priority in
1991, and implemented Agricultural Development Led-Industrialization (ADLI) strategy. Since
then, the Ethiopian economy has gone through remarkable growth and a number of stimulating
actions have also been taken, including privatization of government owned enterprises.

Based on the lessons drawn from the ADLI, Sustained Development and Poverty Reduction
Program (SDPRP) and Plan for Accelerated and Sustainable Development to End Poverty
(PASDEP) policies and strategies, the economy has gone through remarkable growth which
became the foundation for the design of five years strategic plan (GTP-I) and execution
programs.

During GTP-I, one of the critical major objectives has been to sustain at least an average real
GDP growth rate of 11.2 percent per annum to attain MDGs Accordingly, the economy has
registered average real GDP growth rate of about 10.3 percent in the period under consideration.
Moreover, agriculture, industry and service sectors have grown, on average, by 7.2%, 18.1% and
10.96%, respectively, in GTP-I period, (MoFED, 2014).

The registered continuous and sustainable economic growth for the past five consecutive years
witnesses that the designed economic policy and strategy have been on the right path towards
joining the middle income countries.

To support the country‘s development agenda, the government gave due attention for involvement
of financial institutions, particularly public Banks. Development Bank of Ethiopia (DBE) is one
of the major state owned institutions established to support the economy through the provision of
project finance and technical support to viable projects that are selected as priority areas by the
government.

DBE, as a policy Bank, is entrusted to serve as a tool for the country‘s development through
availing medium and long-term credit to agriculture, industry, mining, energy, and SMEs.

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With these prime objectives, during the past five years‘ period, DBE has planned to approve Birr
44.1 Billion, disburse Birr 37.44 Billion and collect Birr 13.4 Billion. Actually, however, it has
managed to approve Birr 38.8 Billion, disburse Birr 26 Billion and collect Birr 12.82 Billion. The
performance is 88% for approval, 69% for disbursement and 96% for collection.

All in all, the last five years improvement strategy implemented by the Bank has registered
remarkable achievements, which can be a foundation for the design of the next five year strategic
plan.

Based on the past performance results and the strategic directions designed in the GTP- II to
continue supporting the development agenda of the country, DBE has designed a growth strategy
to play a pivotal role in financing, agriculture, industry, SMEs and other priority area projects of
the government. To this end, the Bank plan to approve Birr 112.28 Billion, disburse Birr 104.33
Billion and collect Birr 39.15 Billion, over the next five years.

This document is, therefore, the second five years Strategic Plan of the Bank prepared based on
the achievements of the first five years strategic plan (2010/11-2014/15) and the second Growth
and Transformation Plan (GTP-II) of the country, covering the period 2015/16-2019/20. The
document is organized in four parts.

The first part of the document represents general over view. Part II depicts the Past environment
assessment. Part III presents Strategy formulation while Part IV winds up by highlighting DBE‘s
strategic focus lending areas and Target setting s including general and specific assumptions and
annexes.

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 II. OVERVIEW OF AGGREGATE PERFORMANCE AND TARGETS

A close look at the past five-year‘s performance indicates that the Bank has registered
encouraging achievements in its overall credit operation. Based on these positive results, now, the
Bank has embarked on the design of the next five years strategic plan. As portrayed in the table
below, the Bank has prepared a stretched target which enable to arrive at the vision targets. The
following table shows comparison of the aggregate performance of the past five years and the
next strategic targets.

Table 1: Comparison of DBE Past Performance and Targets Set for the Next Strategic Period. (In Billions of Birr)
GTP-II Planned Target
GTP-I Plan vs. Actual (2010/11-2014/15) (2015/16-2019/20)
Performance
Description Plan Actual (%) Target Growth
Approval 44.10 38.80 88% 112.28 189%
Disbursement 37.44 26.00 69% 104.33 301%
Collection (P+I) 13.40 13.20 99% 39.15 197%
Loan Outstanding 29.61 27.36 92% 127.11 365%
Amount 1.71 3.43 50% 6.36 85%
NPLs Ratio (%) 7.04% 12.54% 56% 5% -60%
Import (Foreign currency sale) 13.73 62.60 356%
Export Proceed (Foreign Currency purchase) 10.70 16.70 56%
Net Foreign Currency requirement from NBE 3.03 45.90

Description 2014/15 2019/20 Growth

Asset 44.73 152.08 240%
Liability 39.47 142.94 262%
Capital 4.23 9.14 116%
Income 2.64 12.03 356%
Expense 1.37 10.11 638%
Net-Profit 0.68 1.92 182%
Capital to risk weighted Assets (%) 18.81 8.13 -57%
Return on Asset (%) 1.55 2.93 89%
Debt-Equity Ratio (%) 9.28 10.21 10%
Branch Network 35 152 334%
Human Resource 1341 4522 237%

In a nutshell, based on the achievements of the past five years and targets set by the government,
for GTP II, the Bank envisages stretched strategic targets. As compared to the previous plan
period, this stretched objectives, foresee tremendous change, among others, in its branch network
and geographical distribution, paid-up capital and human resource development in both quantity
and quality.

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III. ORGANIZATIONAL BACKGROUND
3.1 Mission, Vision, Values of the Bank

 Mission Statement

‘The Development Bank of Ethiopia is a specialized financial institution established to promote

the national development agenda through development finance and close technical support to
viable projects from the priority areas of the government by mobilizing fund from domestic and
foreign sources while ensuring its sustainability.

The Bank earnestly believes that these highly valued objectives can best be served through
continuous capacity building, customer focus and concern to the wider environment.’

 Vision

‘100% Success for All Financed Projects by 2020’

 Values

 Commitment to Mission
 Customer Focus
 Integrity
 Team Work
 High Value to Employees
 Learning Organization
 Concern to the Environment

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3.2 Organizational Set-up

The Bank‘s existing organizational structure is process-based, implying that all activities are
grouped together in order to create value for customers. The core credit service is the basis for
all work units of the Bank, while other processes are interfaced with the core business to
enhance the performance of the loan process.

DBE is a Public Financial Institution supervised by a Board of Management composed of nine

members appointed by the Government. Under the Board of Management is the President who
manages the overall activities of the Bank. The President is assisted by four Vice Presidents.

The existing organizational structure of the Bank comprises of 18 Processes, three Offices, five
Regional Offices and 35 branches and sub-branches, including one under establishment
located all over the country. The Bank‘s Management is structured in a way that decision taken
and their enforcement are done in a manner that follows rules and regulations. For effective
implementation of policies and procedures, the Bank has established Compliance and Risk
Management, Internal Audit and Ethics and Complaint Management system.

As a result of increased volume of operations, ever increasing customer demands and

expectations of stakeholders, the Bank has been continuously improving the existing
organizational structure. Yet, there are visible gaps on the existing structure to implement the
stretched targets of the next five years strategic plan. To this effect, reviewing of the Bank‘s
organizational structure is under progress.

The existing organizational structure of the Bank is presented hereunder.

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  The Newly Approved Organizational Structure Of DBE

Owing to limitations of the above existing organizational structure, as discussed in the internal assessment part of this document, the Bank
has prepared and approved the following new organizational structure as of October 2015. This new organizational structure is expected to
facilitate smooth execution of the next five years strategic targets.

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 PART II: PAST ENVIRONMENT ASSESSMENT

IV. ORGANIZATIONAL ASSESSMENT

4.1 Government Development Policies and Strategies
Over the past two decades, the Ethiopian economy has gone through numerous changes. The
Government adopted market oriented economic policy, made agriculture its primary priority
since 1991, and implemented Agricultural Development Led-Industrialization (ADLI) strategy.

Based on the lessons drawn from the ADLI strategy coupled with the need to achieve the
Millennium Development Goal (MDG) targets by 2015, the government has embarked on the
three years Sustained Development and Poverty Reduction Program (SDPRP) policies and
strategies, which covered the period 2002/03-2004/05. The achievements realized and lessons
drawn from this period have also become a foundation for the formulation and implementation of
the Plan for Accelerated and Sustainable Development to End Poverty (PASDEP), for the period
covering (2005/06-2009/10).

To carry forward the important strategic issues pursued in the PASDEP which are believed to be
the cornerstone to attain the long term vision of being middle income country by 2025 and to
sustain rapid, broad-based and equitable growth, the government has formulated a five year
Growth and Transformation Plan (GTP-I, 2010/11-2014/15) and has successfully implemented
it. During the plan period one of the critical major objectives has been to sustain at least an
average real GDP growth rate of 11.2 percent per annum to attain MDGs (GTP-I, 2010).
Accordingly, the economy has registered average real GDP growth rate of about 10.3 percent in
the period under consideration. Moreover, agriculture, industry and service sectors have grown,
on average, by 7.2%, 18.1% and 10.96%, respectively, in GTP-I period.

During the GTP-I period one of the critical major objectives among others, has been to sustain at
least an average real GDP Growth rate of 11.2 percent per annum to attain MDGs-2015 and to
join the middle income nations‘ status by 2025.

Recognizing the successive achievements and to carry forward the important strategic issues
pursued in the GTP I which are believed to be the cornerstones to attain the long term poverty

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eradication strategy the government has formulated GTP-II for implementation for the period
covering 2015/16-2019/20.

In line with the targets defined by the government and the achievements realized during the first
strategic plan period, DBE has also, as the strategic arm of the government, identified its areas of
involvement to support the stretched government goals.

4.2 Nature of Development Banking Institutions

Given the objectives of national economic development, one of the most pressing problems has
always been that capital is a scarce resource. This situation has resulted in market imperfection
that has given birth to the concept of market failure. Market failure has thus become one of the
main reasons for government intervention in developing economies in order to correct the
harmful impacts of market imperfection.

This reasoning is further reinforced by the rudimentary stage of development and risk-avert
nature of the private sector that forces the profit oriented private sector to focus on short-term
profit maximization goals. . The contention of development economists is, therefore, that the
strategic and long-term interests of national economy may be compromised because of this
situation, unless an appropriate solution is sought for such problems.

It is such shortcomings and dilemmas of developing economies, therefore that call for
government intervention so as to arrange for an alternative source of medium and long-term
credit for strategic projects of national interest through the establishment of specialized financial
institutions like development banks.

Development banks are mainly established for providing credit, technical support and advice to
strategic projects. Besides, given the complex nature of project design and implementation, the
emerging entrepreneurial class would find it difficult to fully design, implement and manage
projects on its own without support from specialized institutions like development banks.

The above stated two main factors are, therefore, the major justifications for the establishment
and continued operation of development banks, like the DBE, in developing countries.

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On the other hand, a common challenge, which is shared by the DBE as well, is the multiple
objectives of meeting the dual developmental objectives of promoting socio-economic
development through employment generation, export promotion etc, while at the same time
achieving sustainability.

4.3 Environment Analysis

This analysis is basically conducted to identify external opportunities and threats and assessing
the organization internal strengths and weaknesses. The external aspects of the assessment looks
opportunities and threats using the PESTE and industry analysis models, whiles the internal
situation assessment are conducted using McKinney‘s 7S model, which commonly used to
pinpoint the strengths and weaknesses of the organization.

In general, the analysis undertaken on both the external and internal environment is summarized
using a SWOT analysis matrix. The major sources of data used in the analysis are the following;

i. Government direction on GTP-II;

ii. A report of discussion with customers and stakeholders supported by questionnaire
distribution;
iii. Supervisory and regulatory findings;
iv. Brainstorming by the Strategic Management Team;
v. Discussions with Executive Management of the Bank;
vi. Internal environment assessment survey; and
vii. Previous strategic plan, performance reports and other relevant literature review.

4.3.1 External Environment Assessment

A. PESTE Analysis

The categories of assessment under External Environment Assessment include the following five
broad areas:

1. Political and legal factors;

2. Economic factors;
3. Social Factors;
4. Technological factors;
5. Environmental factors.
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1. Political and Legal Factors

Political and legal forces are outcomes of changes in structure of government, laws and
regulations, which significantly affect the overall operation of an organization. Political
processes shape a society‘s laws, which constrain the operations of organizations and thus create
both opportunities and threats.

The Federal Democratic Republic of Ethiopia is governed by a parliamentary system. It

comprises nine national Regional States and two City Administrations where they have been,
constitutionally granted autonomous political administration. The government has established
democracy and development friendly political system.

These political developments along with strong record in fighting terrorism and good
cooperation with the international community in peace and security areas has maintained peace
and stability of the country.

Besides, governments support and strengthening of the Federal Ethics and Anti-Corruption
Commission indicates its‘ determination to fight corruption and impropriety which are capable of
hindering the social, economic and political development of the country.

The strong legal protection of property right (including intellectual property right) is also
expected to contribute to the inflow of FDI considered as good opportunities for credit operation
of DBE.

Clear Foreign Affairs and reliable National Security Policies to pursue an economic
development-centered strategy is one of the many important milestones taken by the government
of Ethiopia in its political sphere. Moreover, sustained economic growth and the recent
encouraging international credit rating of the country, has significant role in improving image of
the country. Hence, all external relations are focused on promoting business and investment
opportunities that help in creating an enabling environment for smooth operation of the banking
sector in general and that of the DBE in particular.

NEPAD, IGAD, COMMESA, PTA and others have particularly served as the government‘s
major inter-African forums and areas of political participation to promote the nation‘s interests.

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In this regard, strengthened regional integration in the area of trade relations are expected to
create a good international market opportunity for the DBE financed projects.

However, the political instability, threat of terrorism and its expansion due to fundamentalist
movements in the Horn, West and North Africa and the Middle East can be considered as a threat for
the strategic plan period under consideration.

On the legal side, the fact that land lease proclamation which prohibit the registration of loan
agreement before any construction work undertaken, is apparently contradicts with the DBE‘s
existing procedure of registering loan agreements can also be seen as a threat for DBE in the
coming strategic plan period.

2. Economic Factors

Ethiopia, with a diverse agro-ecology and unexploited natural resources, is currently one of the
fastest growing economies in Africa. The Ethiopian government introduced free market
economic policy with targeted government intervention, as deemed necessary, to correct market
failures. Fiscal and Monetary Policies are fairly managed to maintain macroeconomic stability in
the country.

The focus given to economic diplomacy by our embassies and consulates abroad to attract FDI,
trade and regional integration which is seen as a rational response to the difficulties faced by the
continent with many small national markets and landlocked countries is being promoted in
Africa such as COMESA and many other regional integration arrangements, are some of the
push factors for the fast economic growth.

To enhance the FDI flow and attract local investment the government provides various incentive
packages such as low land lease cost, tax holidays, preferential interest, and duty free import of
machinery for priority sectors and the ongoing construction of industrial parks.

Such favorable economic policy environment promoted by the government along with massive
expansion of infrastructures (power, railways, dray-port, telecom, etc) has led to unprecedented
economic growth during the GTP-I.

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Supported by the above stated favorable political and economic factors, during the GTP-I
(2010/11 – 2014/15) the economy has registered average real GDP growth rate of about 10.3
percent. Moreover, agriculture, industry and service sectors have grown, on average, by 7.2%,
18.1% and 10.96%, respectively, in GTP-I period.

Domestic saving rate significantly improved in the GTP-I period from a mere 5.5 percent in
2010/11 to about 22.5 percent of the GDP in 2013/14. As a result, the rapidly growing saving
due to improved saving culture expected to be a good opportunity to the financial industry at
large and DBE in particular.

With regard to macro-economic situation measured by inflation rate, it is notable that the GTP I
period is accompanied by double digit inflation rates in its first three years which declined to
single digit in the year 2013/14, with an average general inflation rate of 8.1 percent. It is
estimated to further decline to about 6 percent in 2014/15 and this single digit will be maintained
during the GTP II period.

All in all, while the above conducive economic factors are expected to be a good opportunity for
DBE, in the coming five years, the growing shortage of foreign exchange, expanding negative
balance of trade in general, and the formal and informal flow of low priced goods from Asian
countries may challenge the Bank‘s credit operation during the same period.

3. Social Factors

Based on the most recent CSA projections, the population of Ethiopia is estimated to reach 90
million by the end of 2015. About 82% of the total population in the country is found in rural
areas while the remaining 18% live in urban area. The population is forecasted to grow on an
average by about 2.3%.

The government has drawn population policy to maintain the population growth rate to match
with economic resources and realize rapid economic growth. Accordingly, there has been similar
progress on poverty reduction, human resource development. Poverty in both urban and rural
areas has been reduced from 29.2 percent in 2011/12, to less than 24 percent in 2014/2015.

Ethiopia is on the track to achieve MDGs in terms of gender parity in primary education, child
mortality, HIV/AIDS, and malaria. Good progress has been made in increasing access to primary

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education. In the past five years education expenditures were equal to 2.2 percent of GDP.
Accordingly, the sector‘s expenditure as percentage share of the GDP is projected to be 1.9% in
next five years.

Investment in education not only improves literacy, but it also promotes knowledge and
technical skill in addition to facilitating communication among young and diverse group of
the nation‘s population. It also means an increasing supply of a literate labor force and also
professional and middle-level skilled manpower to modernize businesses in general and
DBE human resource requirements in particular.

Similarly, the growth in health infrastructure due to the increased investment in the sector will
boost productivity as it can be safely assumed that the incidence level of endemic diseases like
malaria, HIV/AIDs and tuberculosis will significantly reduce. This general health improvement
is also a good opportunity to recruit and maintain healthy and productive human resource to the
nation at large and specifically to DBE.

On the other hand, there are challenging issues that still require the nation‘s attention to ensure
the sustainability of the prevailing impressive economic performance. Some of the obstacles
include lack of good governance especially at lower administration level, limited
entrepreneurship, and the relatively low labor productivity, increasing migration of young and
trained labor force, low technological knowledge and undeveloped work culture. Moreover, bias
against local products, low credit discipline etc are factors that could negatively affect the nation
in general and DBE in particular.

4. Technological Factors

The importance of science and technology as a crucial input for economic

development is well-recognized by the government by establishing science and technology
ministry and council. Special attention accorded to technology is widely observed in practice
in the agricultural, industrial, education, the telecommunications as well as the civil service
sectors (e.g. the national transformation program for the adoption of new working systems)
throughout the country. Innovative thinking and innovation and science and technology in
general are also increasingly being given due respect, recognition, prizes and popularization,
although a great deal still needs to be done in the future.

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Additionally, the liberalization of the economy and the growing competitive
nature of business have also created a situation whereby the purchase and
acquisition of technology has become easier for those with awareness and capacity to own
and adopt new systems. Appropriate technology and technology in general along with its
application are, therefore, no longer being seen as a source of competitive edge but a
necessary condition and prerequisite for survival in today‘s business environment.

Moreover, the education policy that promotes technical education and the training of university
students in 70:30 proportions for science and other disciplines is an indication of the accord
given to science and technology. Creation of link between universities and research centers with
industries and rewarding of innovations and inventions, the envisaged establishment of National
Payment System, integrated core banking system within the banking industry, among others, are
significant developments in the area of science and technology. Hence, DBE is expected to
significantly benefit from these telecom infrastructure developments.

All in all, the above conducive technological factors will be good opportunities for DBE in the
coming five years.

On the other hand, inefficiency in telecom services witnessed by frequent interruption of telecom
networks were expected to be one of the major challenges in the branch expansion and operation
of the Bank.

5. Environmental Factors

Environmental conservation plays a vital role in sustainable development. Building a green

economy and ongoing implementation of environmental laws are among the key strategic
direction pursued during the GTP-I period. As a result of massive environmental protection and
rehabilitation efforts the country‘s forest coverage has dramatically increased from 3% to around
14% within the last decade.

The Ministry of Environment and Forestry, as a regulatory body, has its own rules and
regulations by which all new project establishments in the country should abide. The policy
drawn tries to safeguard the environment against all kinds of pollution of which, soil degradation
and deforestation are the main environmental hazards. The need that all development ventures

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have to be initially assessed against their impact on the environment, which consists of both
living and non-living things, has therefore been well established now. With the exception of a
few small-scale projects environmental impact assessments certification are under the
responsibility of the Ministry of Environment and Forestry.

During the past strategic period DBE has developed and implemented Environmental
Assessment Policy and Procedure to minimize or mitigate adverse environmental and social
impacts that may result from financed projects.

For the next strategic period also, DBE‘s major responsibilities, in addition to the current
practice, will be the creation of awareness among its employees on safe environments and
environmental protection in general. It is, therefore, the interest and obligation of the DBE to
adopt an environmentally sensitive stance and practice.

B. Industry Analysis

The financial sector in Ethiopia is composed of the banking industry, insurance companies,
microfinance institutions, saving and credit cooperatives and the informal financial sector. The
banking industry accounts for about 95% of the total financial sector assets, implying that the
financial sector is undeveloped, and activities that banks could perform are legally limited, which
in turn contribute to lesser contestability.

Currently, the Ethiopian financial sector consists of 3 public banks including the Development
Bank of Ethiopia (DBE), 16 private banks, 16 private insurance companies, 1 public insurance
company, 35 microfinance institutions, five capital goods leasing companies and over 8200
Saving and Credit Cooperatives (SACCOs) in both rural and urban areas.(BIRRITU
February,2015),

Growth in deposits has been robust, as commercial banks have been expanding out in to
previously unreached areas. The share of savings and time deposits in total deposits has
increased significantly. In 2013/14 some 80 percent of bank financing was channeled to
infrastructure investments, industry, international trade, and housing and construction. In recent
years, industry, housing and construction, in particular, have increased their share in total credit.
According to NBE 2014 report, the banking industry has mobilized Birr 111.4 billion (including
deposits, borrowing and collection) and disbursed Birr 60 billion in 2013/14.
| P a g e 21
The expanding savings, deposits and lending of the banking sector in general and the private
commercial banks in particular will ensure sustained source of loanable fund for the DBE
through 27% bill purchase.

The total bank branches in the country are 2,208, out of which 45% is public Banks network
while the remaining 55% is private Bank‘s branch. As the capital structure shift from public to
private sector through time the role of the private banks also expands. Recently, the banking
industry has implemented the core banking system and the National Payment System which are
crucial instruments for improved service delivery.

The credit market domain of the DBE is medium and long-term and is the only development
banking institution in the country. When viewed from this perspective, therefore, it appears that
the Bank has no business competitor locally. This, however, does not mean that the Bank has no
competitor when looked from a wider perspective.

On the other hand, access to finance is one of the most significant concerns for SMEs in
Ethiopia. The share of SME loans to overall lending portfolio in Ethiopia is only 7 percent which
is very low compared to other developing countries (16 percent). Banks and MFIs mainly rely on
credit history of SMEs with their own financial institutions, financial assessment of the SME
business and behavior of SME owner for loan decision making. Access to finance for SMEs is
further hampered by the financial institutions‘ strong reliance on collateral. Banks and MFIs
require collateral for SMEs with a minimum value from 100 percent to 120 percent for
immovable assets. For movable assets, that are accepted only by a few financial institutions, the
collateral is 140 percent. This is an acute problem for SMEs which have not built up a capital
and asset base.

Thus, the DBE, as a strategic development financing institution, has finalized its preparation to
adequately address the financial needs of SMEs in divers sectors.

4.3.2 Internal Situation Assessment

Internal environment scanning is one of the major inputs for strategy formulation. It clearly
portrays the Strengths and weaknesses of the organization and helps to summarize in SWOT
analysis.

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Internal assessments can be conducted in various forms. For this specific purpose however, the
model used is the 7S-Makinsey‘s Model. It looks at the Bank‘s overall internal environment
through Strategy, Structure, Style, Staff, Skills, Systems and Shared values.

The analysis stated here under is based on survey result, past Bank‘s performance reports, audit
reports and brainstorming with the team assigned to work with the strategic plan of the Bank for
the period 2015/16-2019/20.

1. Strategy

The strategy adopted by DBE in the past strategic years was improvement strategy which
capitalizes opportunities and work on weaknesses. This strategy encompasses the Bank‘s vision,
mission and focus area of operation to provide project financing along with technical support to
borrowers investing in the priority areas set out by the Government.

The Bank has cascaded its strategic plan for the period 2010/11-2014/15 from the government
GTP-I. The strategic plan was prepared based on the Balanced Scorecard framework so that it
encompasses strong monitoring and evaluation strategy. In line with this, there was an on-going
change management program to enhance the required attitude and behavior which support the
effective implementation of the strategy. Accordingly, the Bank has shown significant
improvement during the past strategy implementation.

However, the implementation of the strategy was characterized by insufficient paid-up capital,
which has limited the loan sanctioning capacity of the Bank, the potential relationship with
stakeholders, collaborators, partners and others has not been fully exploited.

In spite of tremendous effort in improving the Bank‘s Human Resource Management, it still
lacks comprehensive Human Capital Strategy which enhances the Bank‘s Human Resource
Management efficiency and effectiveness. Besides, although the Bank has implemented different
change management tools like BPR, BSC and others that have contributed to the existing
satisfactory level performance, still there is a gap in terms of behavioral issues and meeting its
service delivery and stakeholders interest objectives, among others. In addition, though the Bank
has successfully implemented the core Banking and related systems there is still inadequate
automation and IT business continuity strategy which mitigate unprecedented technological risks
that affects the continuity of the Bank‘s operation.
| P a g e 23
 2. Structure

The Bank‘s organizational structure is process and team based which means, the vertical and
horizontal organizational structural elements are clearly depicted taking in to account the
business nature of the Bank, which are intended to improve the service efficiency, effectiveness
and create value for customers and stakeholders. The established operating units of the Bank are
categorized in to Core and Support Units. The Core Units are the basis for end-to-end credit
services of the Bank and Support Units are interfaced with Core units to achieve the objective of
the Bank. Moreover, in addition to clear definition of jurisdiction, processes are also interfaced
with each other and have clear lines of reporting, delegation and accountability.

Currently, the Bank has 4 Vice Presidents, 18 processes, 1 Customer Accounts Services, 4
Offices, 5 Regional Offices, 15 Branches and 20 Sub-Branches which are located at different
parts of the country.

During the strategic period the Bank has allocated sufficient physical and human capital for the
smooth implementations of its strategic objectives. The existing salary and employees benefit
scheme of the Bank enables to attract and retain the necessary human resource thereby to achieve
its strategy.

Over the five years period, the Bank has been making the necessary organizational
improvements. Yet, the organizational structure is still insufficient to effectively implement the
strategy to address the ever changing demands of customers, stakeholders and the increasing
trend of the work volume of the Bank. Moreover, there is inadequate empowerment and
delegation of power due to absence of comprehensive procedure for delegation of authority at
various levels. This hampers the timely execution of the strategy. With regard to work unit‘s
relationship, there is still inadequate synergy between core and support units as manifested by
not working for common goals. IT strategy, policy & procedure and security are not well
developed to ensure IT security and governance.

3. Style of Leadership

The Bank has set its mission, vision, focuses areas and also stipulated its values/principles
required to be shared by all staffs for accomplishing its target. Thus, its leadership style follows
directions enabling to reach and meet the expected goals of the Bank.

| P a g e 24
In this regard, the predominant leadership style of the Bank is participatory and cooperative.
Moreover, there is smooth management and labor relation that enable the Bank to enhance
positive work environment and industrial peace. In addition to this, the availability of forums for
open discussion with customers and employees help the Bank to improve effectiveness and
efficiency.

However, at higher level of management, there is a tendency of involving in routine and

operational tasks, which requires attention during the next strategic period. In addition, In spite
of efforts made to train leaders at all levels regarding coaching, mentoring and counseling, there
is a gap between expectation and the actual performance, requiring attention of the Bank.

4. Staff

The Bank has educationally qualified, multidisciplinary, young human resource which helped to
achieve its business objectives. The total number of staff of the Bank as at June 30, 2015 was
1,341 of which 1039 (77%) are professionals and semi-professionals (diploma and above). This
has enabled the Bank to play a great role in the achievement of its mission and vision. Unlike the
previous years, the self-development effort of employees has improved tremendously.

However, based on practical observations and survey results, there is low level of employees‘
engagement; lack of commitment and behavioral changes of the staffs which requires further
consideration for the next strategic period.

5. Skill

During the strategic period, the Bank has established a Bank wide Competency Framework in
order to modernize the Human Resource Management though its implementation is not at the
required level. Furthermore, there was tremendous effort to improve the human resource capacity
which is reflected by increased number of foreign and local trainings, exposure visits, knowledge
sharing & peer-teaching programs as well as educational assistance. This effort has enabled the
Bank to improve its human resource profile by having diversified skill & experience.

However, there is still a skill gap to handle complex investment projects, to undertake due
diligence assessment (KYC), quality project appraisal & follow-up and providing technical
advice, in research activities and other support processes.

| P a g e 25
In addition, despite the successful implementation of Core Banking and other related systems,
there are still inadequate IT knowledge & skill to develop and manage the overall Bank‘s
Information & Communication Technology, which require special attention during the coming
strategic period.

6. System

The Bank has gradually built and improved its working systems. It has developed policies,
procedures and guidelines for accomplishing the intended objectives and installing
accountability. , Different systems are in place to mention some, Balanced Scorecard (BSC)
which is cascaded to different tiers of the Bank, and Core Banking System to support the Bank‘s
core business. In addition, during the strategic period the succession planning framework was
introduced for the first time which will help to select and develop potential successors for
leadership position.

However, the Bank‘s compliance to rules and regulations requires further improvement. The
credit service delivery cycle time as compared to the standard is not achieved. Moreover, it was
also noted that there is prolonged loan rehabilitation process and delay in updating and reviewing
of policy and guidelines documents along with the changing situation of customer requirements.

Despite the establishment of various tools to enhance Bank wide good governance like risk
management, ethics education, code of conduct, change programs, etc.., the overall
implementation of good governance in the bank is not up to the required level.

The Bank‘s procurement, allocation, utilization & management of resources are characterized by
inefficiency which compromises the quality of resources and budget utilization as well as delay
in securing the required resources timely. Besides, other non-core business activities are not
automated so that the support functions are unable to discharge their duties efficiently and
effectively. Moreover, the data center and disaster recovery system is not yet materialized.

7. Shared Values

The values of DBE are properly stated in areas that are relevant to its nature of business, reflect
the Bank‘s mission and vision help to address all areas that need to be owned by all management

| P a g e 26
and staffs and also enable to achieve the strategic goals of the Bank. In addition, it has
contributed for improved focus to customer need.

However, values were not adequately shared by the entire staffs of the Bank. Furthermore,
though the survey result on team development revealed high side performance, since this result is
based on opinion, the practical level of team work and team development throughout the Bank is
not up to the desired level.

As per the above mentioned internal environment assessment the bank needs to continue with its
strengths and more effort is required to be exerted in changing the weaknesses in to strengths so
as to accomplish its strategy in the coming five years.

4.3.3 Summary of External and Internal Assessment /SWOT Matrix/

The SWOT analysis provides highly valuable information that is helpful in matching the
company‘s resources and capabilities to the competitive environment in which it operates.
Hence, it is instrumental in strategy formulation and selection.

Internal environmental factors can be classified as Strengths (S) or Weaknesses (W) and those
external can be classified as Opportunities (O) or Threats (T). Such analysis of the strategic
environment is known as a SWOT Analysis. Summary and SWOT Matrix is shown below:

| P a g e 27
 Table 2: The summary and SWOT Matrix
Strength
i. Strategy
 Clarity in the Bank‘s Vision, Mission & focus
areas of operation
 Strategic plan cascaded from the government GTP
 Existence of on-going transformation works
 Established Monitoring and Evaluation strategy
ii. Structure
 Improved Process and team based structure
 Continuous Process design & improvement at
finance
 Availability of sufficient physical assets & human
capital
 Improved salary and employee benefit scheme
iii. Style of Leadership
 Relatively Participatory and cooperative
leadership
 Smooth management and labor relation
 Availability of forums for open discussion with
customers & employees
 Presence of educationally qualified, and
multidisciplinary human resource
Weakness
 Incomprehensive Human Capital Strategy
 Inadequate focus on strategy implementation
 Implementation of change management issues is not at the
expected level;
 Low paid-up capital
 Limited relationship with stakeholders, collaborators, partners,
research institutes, universities, etc.
 Insufficient execution of NPLs reduction strategy
 Inadequate IT business continuity strategy
 Inadequate empowerment & delegation
 Inadequate synergy between core & support units and among
operating units
 The existing structure is insufficient to effectively implement
the strategy
 IT governance structure & framework is not properly in place
 Engagement in routine and operational tasks rather than
focusing on strategic issues
 Inadequate practice of coaching, mentoring & counseling
 Insufficient supervisory role of line managers.
iv. Staff
 Low level of employee engagement
 Attitude & behavioral changes have not developed to the
| P a g e 28
 Improved self-development effort of employees
v. Skill and Competency
 Established competency mapping framework
 Existence of Multidisciplinary & experience
 Special fund management & administration
capacity
 Long experience in project financing
vi. System
 Availability of different policies and
procedures
 BSC implementation and cascading to
different tiers of the Bank
 Implementation of the Core Banking system
 Establishment of succession planning
framework
 Improved financial soundness
vii. Shared Values
 Clearly stipulated Bank's core values
 Improved focus to customer need
required level
 Competency mapping has not implemented at the expected
level
 Inadequate technical competency to handle complex investment
projects
 Insufficient skill to undertake due diligence assessment(KYC),
quality project appraisal & follow-up and providing technical
advice
 Inadequate IT expertise
 Compliance to rules & regulations is not to the expected
level
 Delay in policy review
 Extended credit service delivery cycle time
 Implementation of good governance is not up to the
required level
 Efficiency problem in procurement, allocation, utilization
& management of resource
 Time taking of loan rehabilitation process
 Non-core business activities are not automated/supported
with IT
 The data center and disaster recovery system is not yet
materialized.
 Practical Team work is not up to the desired level
 Inadequate value enhancement & communication
| P a g e 29
 Opportunity Threat

i. Political and Legal factors

 Peace and Stability in the Country;
 Political commitment of the government and increased
awareness of the general public in fighting corruption;
 Strong protection of property right (including intellectual
property right);
 Instability and the threat of terrorism due to
fundamentalist movements in the Horn, West and
North Africa and the Middle East;
 Difficulty in registering loan agreements due to land
lease proclamation.

 The one stop-shopping-services being provided by the EIC is

increasing local and foreign direct investment flow;
 Clear Foreign Affairs and reliable National Security Policies
focused towards economic diplomacy;
 Strengthened regional as well as continental economic blocks;
 Improving image of the country as result of sustained
economic growth and encouraging credit rating.
ii. Economic Factors
 Sustained, broad-based and inclusive Economic Growth;  Shortage of raw material for some critical sectors;
 Stable macro-economic situation;  International market volatility due to economic crisis
 Massive expansion of infrastructures (power, railways, dray- in Euro-zone and Russia and persistent instability in
port, telecom, etc); the Middle East;
 Rapidly growing domestic saving rate and culture;  Shortage of Foreign Currency;
 Sustained source of loanable fund for the DBE through 27%  High logistics cost due to landlockedness;
bill purchase;  Competition from the low priced products;
 High potential for investment flow;  Frequent power interruption.
 Various incentive package for investors including low interest
rate and availing medium and long-term loan for prioritized
projects through DBE and industrial parks construction;
 The MSEs strategy of developing disciplined SMEs is serving
as a reliable base for industrialization and thereby ensuring
consistent supply of creditworthy customers for DBE;
 Growing Trade Relations with other countries;
 Relative proximity to European, Middle East and Asian
markets;
 Regional integration by infrastructure (power, road, railway
and telecom networks, etc) and trade.

iii. Social and Environmental Factors

 Abundant labor supply;  Low Labor Productivity;
 Growing size of middle class;  Limited entrepreneurial Capacity;
 Large Local Market;  Low Credit Discipline;
 Growing health and education ;  Underdeveloped Work Culture;

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 Growing anti-corruption awareness;  Traditional Business Management;
 Biases against locally manufactured goods;
 Lack of good governance especially at lower level of
administration.

iv. Technological Factors

 Expansion in infrastructure & communication technology;  Inefficiency telecom services witnessed by frequent
 Expansion in agricultural research; interruption of telecom networks;
 Government focus on science and technology.  Limitation of data and information;
 Low adoption to new technology.

Given the results of the external environment analysis (opportunity and threats identification)
and the internal situation analysis (strength and weakness or pains and enablers identification)
and other issues discussed earlier, the past five years performance of the bank has registered
considerable improvement in utilizing the created opportunities and minimizing the prevailed
weaknesses.

4.3.4 Customer and Stakeholder Evaluation

The Bank has made considerable institutional transformation efforts to improve credit service
delivery, efficiency and effectiveness within the last strategic plan period. Among them,
implementation of BPR and BSC are the notable efforts made by the bank to satisfy both
dynamic needs and interests of its customers and stakeholders.

DBE‘s major customers and stakeholders identified during last strategic plan period base on their
level of influence, interest and expectation were those listed below.
Table 3: List of Customers and Stakeholders

Customers Classification Customers/ Stakeholders Influential Stage on DBE

Borrowers 1
Public Bond Buyers 2
Primary
CBE as Public bonds primary 2
Customers selling Agent
Commercial Banks 3
Others
Suppliers & Contractors 4
Federal Government 1
PFEA 1
Stakeholders
MOFED 3
General Public 2

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  Summary of Customer and Stakeholder Assessment

The past strategic plan had targeted to raise the customer satisfaction level from 70% to 90% by
gradually pushing down the average credit service delivery cycle time from 48 to 32 working
days at the end of the strategic plan period.

As can be seen from the trend in the table below, the customer satisfaction score had increased to
82% even though the average credit service delivery cycle time has increased to 46 days at the
end of March 31, 2015. In addition, similar survey was administered by the Public Financial
Enterprises Agency (PFEA) in 2014 and its findings also didn‘t significantly deviate from the
Bank‘s results. Summary of DBE and PFEA survey results are as presented below:

Table 4: Credit Service Delivery Performance Trend in the last strategic plan period (June 2010-2015)
2014
Credit Service Delivery Performance 2010
2011 2012 2013 DBE PFEA 2015
Indicators Baseline
External customer Plan 70 75 80 85 NA 88
65
satisfaction Actual 71 77 79 81 75 77
Internal customer Plan 70 75 80 85 NA 80
-
satisfaction Actual 70 75 70 74 72 73
Average credit service Plan 48 40 38 34 32
58 NA
delivery cycle time Actual 40 41 38 43 40
NA = Not Available
Source: DBE Annual Plans and Performance Reports and PEFA intuitional change implementation assessment
report.

Generally, from the customer and stakeholder questionnaire assessment and survey result the
following major findings can be inferred for the preparation of the second five years plan:

 The survey administered by the Bank within the past strategic plan period under
evaluation, the Bank has managed to raise its external customers‘ satisfaction level from
65% baseline in 2010 to estimated 82% in June 2015;
 Reports and several discussion forums made with the customers, stakeholders,
employees and management of the Bank show the prevalence of noticeable gaps mainly
relate to lengthy and inefficient credit and poor Banking services due to some internal
weaknesses and external challenges.

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  Due to inadequate internal coordination, alignment and accountability, the internal
customer satisfaction score stands barely at the estimated 72% in 2015;
 The Bank‘s stakeholders have evaluated the past five years‘ performance in
accomplishing its mission and vision as not more than satisfactory; which is almost
similar with DBE past five years BSC performance report.

Hence, it is possible to conclude that setting strategic targets and initiatives to address the already
observed gaps and to be aligned with the growing and dynamic interests and expectations of
customers in the coming strategic plan period is imperative.

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 V. PAST FIVE YEARS PERFORMANCE OVERVIEW

5.1 BSC Performance Assessment

5.1.1 Thematic Areas and Results during the Past Strategic Periods

Over the past five strategic periods, DBE has identified four thematic areas which were
considered as very imperative for execution of the strategy plan prepared in accordance with the
Balanced Score Cared (BSC) principles. The thematic areas and there results are considered as a
tool in supporting the Bank to realize its vision of ‗‘100% success for financed projects by
2020‘‘. The Identified thematic areas and their strategic results are those indicated below:

Table 5: Summary of existing Thematic Areas of the past strategic plan period

Sr. Summary of existing Thematic Areas

Thematic Areas Strategic Results
No.
Capacity Building (excellence in
1 Improved organizational readiness.
Human Capital in particular )
2 Service Excellence Increased effectiveness and efficiency
3 Excellence in Asset Quality Good quality Assets and Financial Sustainability.
Increased number of development projects and
4 Business Expansion & Intensification
additional value from existing assets or business lines.

The Bank has made rigorous efforts toward the implementation of the set target. In terms of
human development the Bank has conducted competency mapping and identified the
competency level of existing employee. In addition, extensive training has been offered to fill the
competency gap and also significant numbers of new entrants were recruited to make the labor
force multidisciplinary. Furthermore, continuous foreign and local training and exposure visits
were conducted.

The service excellence of the Bank is actually measured by cycle time and Customer
Satisfaction. During the past five years, although it does not reached the intended level of 32
days, the cycle time has been within the range of 32 days to 46days, implying effort on further
improvement. Similarly, the Bank target for customer satisfaction was 90% while the actual

| P a g e 34
achievement registered has been 82% , implying the necessity to still take service excellence as a
thematic area for the next strategic plan period.
The quality of the Bank‘s asset measured by NPLs rate and sustainability has exhibited
significant improvement over the past five years. Although it has not reached the target of 5%,
the NPLs ratio has decreased to 12.54% at the end of strategic period, while profitability has
tripled during the same period.

Moreover, the strategic period performance has registered significant growth in both volume and
value of business operations of the Bank. The value of loan approval has doubled from 5.6
Billion at the beginning of the plan period (2010/11) to 9.69 Billion at the end of the strategic
period (2014/15).

All in all, the above stated thematic areas have significantly facilitated the fulfillment of
customer and stakeholder‘s expectation thereby improving the capacity of the Bank in strategy
execution. However, the Bank has to pursue growth strategy based on the first three thematic
areas for the next plan period.

5.1.2 Perspectives

The Bank has implemented the BSC framework as a strategic planning and management,
communication tool over the last five strategic periods. As a performance measurement tool the
Bank has evaluated its performance using perspectives, objectives and measures. The Bank‘s
BSC objectives and measures and weights attached to perspectives objectives and measures have
been refined from year to year as it is a learning process to better implement strategy by focusing
on major strategic issues. Accordingly, the Bank‘s strategic objectives reduced from 17 at the
beginning of the strategic period to 11 objectives at the end of 2014/15. Similarly, the measures
have also been condensed from 48 to 33 within the same period. The change in objectives and
measures has also altered the weights attached to both. The past five years‘ perspective
performance is summarized hereunder.

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Table 6: BSC Performance Result of the Bank (2010/11-2014/15)

Perspectives 2010/11 2011/12 2012/13 2013/14 2014/15

F&D 35 26.05 25.5 22.6 22.2

Customer 20 20 19 19.5 18.4

IBP 16.01 26.49 26.3 27.0 29.2

L&G 19.26 18.79 18.4 19.12 19.1

TOTAL 90.27 91.33 89.20 88.0 89.0

As depicted in the above table, the overall average performance of the Bank during the review
period was about 89.0% and found to be ‗satisfactory’ level. This demonstrates the fact that the
accomplishments are clearly in accordance with expectations/performance score ranges. Hence,
the Bank is expected to register ‗above satisfactory’ or ‗outstanding’ level in the coming GTP-II
periods.

On the other hand, due to the continuous refinement of objectives and measures during the
strategic period which created inconsistency in the weights attached to each objective and
measure, it becomes very difficult to evaluate the actual performance over the past five years, for
both. Yet, the past two years average performance for objective and measure was about 90%,
indicating that the performance has been satisfactory.

5.1.3 Strategic Initiatives Implementation Performance Evaluation

Strategic initiatives are specific actions (mostly Investment) undertaken in areas where there are
significant performances gap to attain the desired target and are projects believed to be crucial
for the execution of the strategy. Hence, they are investments made in order to fill identified
performance gaps and to meet targets set under strategic objectives. Accordingly, during the past
strategic period, the Bank has selected 23 initiatives for implementation; out of which 15 (65%)
has been fully implemented, 6 (26%) are ongoing and 2 (9%) were not yet started. Details are as
presented hereunder.

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Table 7: Status of Initiatives Selected during the past strategic period
Sr. Status
No. Initiatives Under Implementation Not Yet Started Implemented
1 Data Centre Construction X
2 Core Banking System implementation X
3 Building maintenance and renovation X
4 Training X
5 Recruitment X
6 Redeployment X
7 Network Connectivity X
8 Disaster Recovery X
9 Process automation X
Process Redesign for Finance &
10 X
Banking
11 Core Process Certification X
12 Rewards Scheme development X
13 Office Facility and Standardization X
14 Records & Archive Management X
15 Branch Rationalization* X
16 Balance Sheet Restructuring X
17 Field Vehicles Purchase X
18 Public Bond Issuing X
19 BSC implementation X
20 Developing partnership modality X
Customer information desk
21 X
establishment
22 Customer orientation cum training X
23 Baseline data development X

 The initiative on Branch Rationalization Study is completed and its implementation is under-progress.

As indicated in the above table, the ongoing six initiatives will continue as an initiative
inventory. The Reward Scheme initiative which was not yet started is included in the new
initiatives, while the rest core process certification initiative was dropped due to its insignificant
strategic relevance.

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 5.2 Credit Operation Performance
This section of the document reviews the Bank‘s credit performance for the past five years
(2010/11–2014/15). It is based on the past four years and nine months actual performance and
three months estimate. Accordingly, actual performance related to credit activity like Approval,
disbursement, collection, outstanding and NPL‘s are summarized in the following table in
comparison with the set plan targets.

Table 8: Summary of Planned and Actual Performance for the period covering 2010/11—2014/15 (‘In Million Birr)

TOTAL
2009* 2010/11 2011/12 2012/13 2013/14 2014/15 ( 2010/11-2014/15)
Sr.
No Descriptions A P A P A P A P A P A P A Perf.
1 Loan Approval 2033 5,110 5,534 7,822 7,973 7,925 8,152 8,722 7,424 14,563 9,685 44,142 38,768 88%
2 Loan Disbursement 2750 3,512 3,793 7,073 4,541 6,374 5,336 8,460 5,472 12,024 6,842 37,443 25,984 69%
Loan Collection
3 (P+I) 750 1,310 1,387 2,647 2,155 2,574 2,540 2,961 3,054 3,900 4,087 13,393 13,223 99%
Loan Outstanding
4 (P+I) 9426 12,023 11,980 17,663 14,881 20,433 18,887 26,590 22,523 32,152 27,362 29,613 27,362 92%
Non-Performing
5 Loan 2144 1,170 1,398 1,400 1,123 1,147 1,627 1,497 1,853 1,714 3,431 1,714 3,431 50%
Non-Performing
6 Loan Ratio 22.75% 9.73% 11.67% 8.36% 7.54% 5.62% 8.62% 5.27% 8.23% 5.63% 12.54% 5.27% 12.54% 56%

 Base year, CAGR- Compounded Annual Growth Rate P- Plan A- Actual

As depicted above the bank approval, disbursement and collection showed a CAGR of 38%,
23% and 38%, respectively.

Sector distribution of the loan approval indicates that the lion‘s share of 66% is accounted by
industry followed by agriculture for 23% while the remaining balance of 11% has been shared
among financial services (RUFIP & ECG), service sector and consumer loans (staff loan).

Similarly in terms of disbursement industry constitutes the lion shares accounting 65% followed
by agriculture (21%) and the remaining 14% has been shared among financial services (RUFIP
& ECG), service sector and consumer loans. Like that of approval and disbursement, major share
of the collection (68%) was accounted by industrial projects, while the share of agricultural loan
has been 19%. The rest 13% was collection from other products financed and managed by the
Bank.

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5.3 Financial Performance

5.3.1 Income Accounts

The last five years financial performance indicates that the total income of the Bank has grown
from Birr 920 million (2010/11) to Birr 2.65 Billion and registered an annual compounded
average growth rate of 30%. Over the same period, the total expense of the Bank has increased
from about Birr 481 million in 2009/10 to the tune of Birr 1.37 Billion at the end of the strategic
year, showing compounded average growth rate of 17%. The following table summarizes income
statement account.

Table 9: Summary of Income Statement Accounts (In million Br)

Sr.
Particulars 2010/11 2011/12 2012/13 2013/14 2014/15 Total CAGR % share
No.
1
Income 920 1646 1882 2042 2645 9,135 30% 100%
1.1
Interest income 459 1413 1616 1696 2305 7,489 50% 87%
1.2
Non-Interest income 461 233 266 346 340 1,646 -7.0% 13%
2
Expense 722 1063 1146 1515 1,368 5,814 17% 100%
2.1
Interest Expense 332 511 716 872 1,070 3,501 34% 78%
2.2
Non-Interest Expense 390 552 430 643 298 2,313 -7% 22%
3
Net Profit after Tax 198 583 735 527 775 2,818 41%

From the total income, interest income and non-interest income has shown a compounded
average annual growth rate of 50% and -7%, respectively. Furthermore, the interest income
accounts for the lion share of 87% while the non-interest income constitutes the rest 13% of the
total income.

Likewise, from the total expanses, the interest expense has registered an average compounded
annual growth rate of 34% while the non-interest expenses which include employees‘ salaries &
allowances, employee benefits, depreciation, general expense, provision expense and income tax
have declined by 7%. Moreover, in the period under review, the total interest expense accounts
for 78% of total expense while the rest non-interest expense constitute 22%.

The net income after tax has increased from Birr 131 million (2009/10) and has reached Birr 775
million at the end of the strategic period (2014/15) registering a CAGR of 41%.

To sum up, as depicted in the above table, the total expense showed compounded annual average
growth rate of 17% whereas that of the total income was 30% during the past five years
| P a g e 39
indicating more or less a positive correlation. Hence, the Bank for the coming periods should
maintain this correlation and implement efficient and effective cost mechanisms to control the
annual growth rate of expense comparable with that of income. Moreover, the Bank should raise
marginal interest rate to compensate any possible macro, micro and Bank level shocks so as to
maintain its sustainability.

5.3.2 Balance Sheet Account, Cash flow and others

During the review period, total assets at the baseline year (2009/10) was Birr 9.3 billion and has
reached to Birr 43.70 billion (2014/15) and has shown CAGR of 36%. Moreover, loans &
advances registered 30% CAGR and the non-loan and advances asset accounts grew by 48% per
annum. Loans and advances made up the lion‘s share of the Bank‘s total assets (about 61%)
followed by non-loan and advances assets accounting for the remaining 39%. Non-loan and
advances assets includes assets such as investments (treasury bill), deposits with other banks,
other assets, fixed and related assets, and cash on hand and cash equivalent.

Similarly, the total liability of the Bank has increased from Birr 7.2 billion (2009/10) the) to Birr
39.5 billion at the end of the strategic year (2014/15) and has shown CAGR of 39%.

From the total liability, borrowings constitute the lion‘s share of 88%, while non-borrowings
account for the remaining 12%. Non borrowings consist of deposits, other credit balance, and
provisions. In terms of average growth rate, total borrowings registered 40%, whereas total non -
borrowings showed 10%.

In terms of total capital and reserve, the Bank registered Birr 2.03 billion in 2009/10 and is
expected to reach Birr 4.3 billion at the end of the strategic year (2014/15), exhibiting CAGR of
16%.

From the total capital, the paid up capital comprises 41% where as retained earnings, legal
reserve and others in total constitute 59% of the total capital. Retained earnings, legal reserve
and others in total showed CAGR of 61% while the paid up capital remains intact for the last five
years. Hence, the Bank should consider increasing its paid up capital so as to meet the ever
increasing developmental needs at national level.

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Cash flow is one of the financial statements that reveal the financial soundness of an institution
or a firm. In line with this the cash flow is prepared taking into account three components namely
operating, financing and investing activities. Accordingly, the net increase in cash & cash
equivalent was Birr 87.1 million as of 30 June 2010/11 and has increased to negative balance of
Birr 236.2 million in 2014/15. Hence, in order to improve and accommodate future increasing
loanable fund requirement, the Bank needs to mobilize additional funds from local and abroad
sources and further enhance loan collection.

On the other hand, the Bank‘s total foreign currency payment for import (sale of foreign
currency) was equivalent to Birr 2.09 billion (2010/11) and has reached to Birr 3.24 Billion
(2014/15) depicting CAGR of 12%. With regard to export proceeds, the Bank purchased foreign
currency equivalent to Birr 2.15 billion (2010/11) and has declined to Birr 1.87 billion (2014/15)
registering a CAGR decline of 3.4%.

In a nutshell, the Bank should devise a pragmatic strategy to broaden the import/Export
performance through providing specialized and competitive services and products, using
experienced and competent consultant, etc.

During the last four years DBE has sold a total bond of Birr 6.1 billion including CBE, and
Micro Finance Institutions. Accordingly, a total bond sale of Birr 2.62 Billion was sold in the
fiscal year of 2011/12 and has reached to Birr 1.3 billion by the end of 2014/15 showing a
CAGR decline of 16%.

Over the past five year strategic period the Bank has allocated and expended Birr 293 million
for different capital expenditure items such as building construction and renovation, transport
equipment & vehicles, computerization program, computers and accessories and furniture and
fixture. As can be seen from the table below, the trend of capital expenditure items of the Bank
shows CAGR of 18% within the strategic period. Table -5 below depicts the past performance
of balance sheet accounts, cash flow and others.

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Table 10: Performance of Balance Sheet Account, Cash flow and others
(In million Br)
Sr. Base line
Particulars 2010/11 2011/12 2012/13 2013/14 2014/15 CAGR
No. (2009/10)

1 Asset 9,263 15,227 25,025 31,185 37,317 43,728 30%

Loans and
1.1 Advances 6,949 11,209 14,042 17,929 21,438 25,678 23%
Non-loans and
1.2 advances 2,314 4,018 10,983 13,256 15,879 18,050 45%

2 Liability 7,226 13,028 22,476 28,034 33,749 39,472 32%

2.1 Borrowings 4,685 9,579 17,981 24,493 29,249 34,203 37%

2.2 Others 2,542 3,443 4,487 3,530 4,487 5,269 11%

3 Capital 2,036 2,198 2,548 3,150 3,567 4,256 18%

3.1 Paid-up Capital 1,800 1,800 1,800 1,800 1,800 1,800 0%

3.2 Others 236 577 748 1,350 1,767 2,456 44%

Net increase in
Cash & cash
4 equivalent 87 (7) 721 839 (236) 0%
5 Import/ Export 0%
Foreign
5.1 Currency sales NA 2,090 2,850 2,550 3,000 3,239 12%

5.2 Export Proceeds NA 2,150 2,140 2,200 2,340 1,869 -3%

6 GERD Bond NA NA 2,620 1,370 1,070 1,300 -21%

Capital
7 Expenditure 51 41 45 56 100 18%

5.3.3 Financial Ratio Analysis

Financial ratios are useful indicators of a company‘s performance and financial situation. In view
of this, the analysis of financial ratios of the Bank is conducted using three major categories as
presented hereunder.

Table 11: Trends of Financial Ratios for the Strategic Period from 2010/11-2014/15

AADFI's Years
Prudential
Types of Financial Ratio Standard 2010/11 2011/12 2012/13 2013/14 2014/15
Capital Adequacy:
Capital to risk weighted Assets > 15% 20.55% 15.10% 14.22% 14.20% 18.81%
Debt to Equity Ratio < 4:1 5.93 10.45 11.21 11.27 9.28
Asset Quality:
NPLs to total Loans < 15% 11.67% 7.54% 8.62% 8.23% 12.54%
Efficiency:
Return on Asset (ROA) >1% 1.30% 2.33% 2.36% 1.41% 1.55%

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a. Capital to risk weighted Assets: As it is noted from the above the ratio of capital to risk
weighted assets seems to be good as long as it is not below the AADFI‘s prudential standard.
However, in the near future, the capital of the Bank is not sufficient to absorb any shock in
any loss of loan portfolio in consideration of the high risk nature of credit and long gestation
period of projections in which DBE is currently operating.

b. Debt to Equity ratio: The ratio was 5.93:1 (2010/11) and has reached to 9.28:1 at (2014/15).
This implies that the capital of the Bank is highly leveraged or indebted. In addition, this
ratio is also beyond the standard (4:1) throughout strategic period. Therefore, it is high time
for the Bank to raise its capital to an acceptable international standard. By doing so, the
Bank can improve its capital risk absorption capacity and raise its single borrower limit to
address the ever-increasing credit demands from private entrepreneurs.

c. Non-Performing (NPL) Ratio: The NPL ratio of the Bank was 22.75% (2009/10) and has
declined to 12.54% (2014/15). As it can be noted from the above table, the NPL ratio has
been declining from time to time with CAGR of 11.23%, and is below the AADFI‘s standard
(15%). But, this ratio is higher than the NBE target of 5%. Therefore, the Bank should design
pragmatic and effective NPL reduction strategies.

d. Return on Asset (ROA): it is the ratio of net income to total assets. It is an indicator of how
profitable the Bank is relative to its total assets. As depicted from the above table, the ROA
of the Bank has grown from 1.30% (2010/11) to 1.55% at the end of 2014/15. The increasing
trend of ROA of the Bank is a reflection of the improvement in profitability.

5.4 Human Resources Assessment

Human resource development is one of the strategic focus areas to be addressed during the last
five years strategic period. Accordingly the Bank was involved in different types of recruitments
from both internal and external sources to fill the job position required. Moreover capacity
development is also another strategic focus area of the Bank which has planned to be performed
during the strategic period.

To this end, the total man power balance of Bank at the beginning of the strategic period was
1,064 and expected to reach at 1,341 at the end of the strategic period with CAGR of 5.96%.

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 The Bank human resource by occupational category can be classified further into 820 (61%)
professional and high level supervisor, 219 ( 16%) semi professional, administrative and clerical,
86 (6%) technical and skilled while the remaining 216 (16%) are manual and custodian.

In terms of job category I.e. Professional and High Level Supervisor, Semi-Professional,
Administrative and Clerical, Technical and Skilled, Manual and Custodian increased by 14.9%,
6.9%, 3.1% and 0.83% respectively during the past five years. This indicates that the Bank focus
for professionals and high level supervisor compared with other job categories. Refer the
following table for details.

Table 12: Human resource assessment by category

Sr. 2010/11 2011/12 2012/13 2013/14 2014/15 CAGR

HR Category
No. No. % No. % No. % No. % No. %

1 Professional and High

Level Supervisor 470 44% 594 55% 656 57% 713 59% 820 61% 14.9%
Semi-Professional,
2
Administrative and Clerical 168 16% 191 18% 199 17% 210 17% 219 16% 6.9%
3 Technical and Skilled 76 7% 70 6% 75 7% 78 6% 86 6% 3.1%
4 Manual and Custodian 209 20% 225 21% 217 19% 209 17% 216 16% 0.83%

Grand Total 1064 100% 1080 100% 1147 100% 1210 100% 1341 100% 5.96%

| P a g e 44
 PART III STRATEGY FORMULATION

VI. CORPORATE STRATEGY

6.1 Customer and Stakeholder Analysis

Strategy is basically concerned with the fulfillment of customer‘s and stakeholder‘s

requirements. The initial task in this regard will therefore be identification of Customers and
Stakeholders and clearly defining of customer value proposition, which are the foundation of
strategic formulation.

A. Identifying Customer and Stakeholders

Stakeholder: A stakeholder is basically defined as anyone who has an interest in the outcome
of the organization. Stakeholders of the DBE could be listed as the Federal Government, which
is the owner, the National Bank of Ethiopia (NBE) which is the regulatory body, the Ministry of
Finance and Economic Development (MOFED), i.e. a primary lender, the Public Financial
Enterprises Agency (PFEA), etc , which represents the owner and the general public.

Customer: A customer is a direct beneficiary of the organization‘s products or services. In

other words, customers are stakeholders who directly benefit from the credit facility and other
related products offered by the Bank. They can be Borrowers, Public Bond buyers, commercial
banks etc.

B. Defining customer and Stakeholder value proposition

Customer value proposition essentially shows the customer‘s needs and expects from the DBE. Similarly,
stake holder analysis indicates their requirements in relation to mission and vision achievement and the
fulfillment of standards and regulatory requirements.

To this end, the Bank and Public Financial Enterprise Agency (PFEA) has conducted survey to
evaluate the past five year‘s performance of the Bank in terms of meeting customers and
stakeholder‘s requirements. Critical Issues rose by stakeholders and customers during the survey
are summarized below:

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  Avoid prolonged Loan Delivery Time
 Minimize the Banks Loan Requirement
 Improve employee skill particularly those who are directly engaged in loan processing
 Modernize and improve International Banking Services
 Diversify loan products to include SMEs
 Establish close relationship with supervisors and Regulators.
 Expand Branch Network

For the next strategic period, therefore, DBE‘s major customers and stakeholders are redefined
and their value proposition is prepared taking in to account the issues raised above, their level of
influence, interest and expectation as depicted in the following table.

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Table 13:List of Customer and Stakeholder based on their interest, expectation and influence
Behavioral Requirement
Customers/ from
Stakeholders Classification Customers/Stakeholders
 Creditworthiness
 Openness (readiness to
disclose financial position
or relationship)
Borrowers  Commitment to project
plan and contract;
Primary
 Awareness on the objective
and nature of the bond
Customers
Interest and/or Service
Expectations
 Efficient Credit and Financial
Guarantee Service;
 Efficient Banking services;
 Technical support.
 Keeping promise.
Degree of
Resistance issues Influence on
from Customers/Stakeholders DBE
 Non-fulfillment of terms
and conditions;
 Non-provision of sufficient
project information;
 Not consulting the Bank 1
before changing project
design;
 Over invoicing and loan or
project income diversion.
 They assume it could be
risky and unwilling to buy

 To operate as per the rules the bonds due to lack of

Public Bond Buyers and regulation awareness 1
 New potential buyers may
not be ready to buy due to
lack of acceptance
 To operate as per  Guarantee for export credit;  Conflict of interest
memorandum of  Commission payment for  Inappropriate guarantee
Commercial Banks and understanding claim
Bond sales; 2
MFIs  Adhere to NBE regulation
 Efficient settlement system.  Submitting unfulfilled
Secondary document
 Honesty  Timely Payment  Over invoicing
Suppliers & Contractors  Adherence to the contract  Dishonesty
2
 Responsiveness to the  Modernization and Efficient  Delay in decision making;
needs of the Bank project financing services;
PFEA  Understanding  Policy proposals; 1
Stakeholders

 Positivism;  Feedback on existing policies;

Primary  Performance report.
(key)  Close understanding of the  Efficient Credit Reference  Possible delay in decision
environment in which the System; making and providing
NBE DBE operates;  Timely settlement of debt; feedback;
 Timely allocation of  Policy proposals; 1
loanable fund as per the  Feedback on existing policies;

| P a g e 47
 needs of the Bank.  Performance and audit report;
 Adherence to Regulations;
 Justifications on External
Auditors‘ Findings.
 Responsiveness  Debt settlement  Delay in decision making
 Understanding  Dividend payment
 Fund management
MoFED 1
 Bond sales and
Administration
Federal Gov’t  Responsiveness to the  Efficient and effective  Delayed decision making
 Ministry of Industry needs of the Bank financing of prioritized  Inadequate support and
(Including Textile and  Understanding industrial, agricultural, agro collaboration in project
Leather Institutes);  Positivism; processing and export implementation and loan
 Ministry of agriculture oriented development recovery
(Including Horticulture projects; 2
Agency);  Graduating SME financing;
 Ministry of Mines;  Feedback on existing policies;
 Federal SME Dev‘t
Agency;

Secondary  Responsiveness to the  Assisting development effort  Delayed decision due to

Regional and City
needs of the Bank; of the respective regional inefficient service delivery; 2
Governments
 Understanding governments  Inadequate cooperation
Funding Agencies &  Understanding the nature  Management and  Too many conditions
Organizations: and operational Administration of fund  Limited insurance products
Local: - Insurances, Third environment of DBE (resource)  Delay in decision making
2
party insurance fund,  Debt service
Pension Agency;
International: - WB, EIB,
ADB;
 Understanding our mission  Project establishment & Job  Insufficient collaboration in
General Public  Moral support to our opportunity creation project implementation due 2
development endeavors to inadequate awareness

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6.2 Strategy Formulation

Strategy is a planned direction and scope of an organization over the long-term. It‘s clear
definition and establishment is advantageous in that it helps the organization in configuring
resources within a challenging environment, so as to meet the needs of customers and to fulfill
stakeholder expectations outlined above.

Strategy formulation refers to the process of choosing the most appropriate course of action for
the realization of organizational goals and objectives and thereby achieving the organizational
vision. The process of strategy formulation basically involves at least six main steps:

 Setting Long Term objectives -------Vision

 Evaluating the Environment ------ --External & Internal Assessment
 Performance Analysis -----------------Past Performance Evaluated
 Align with Individual Unit ------------Loaning Units Participated
 Setting Quantitative Targets ----------Credit Target Set
 Choice of Strategy -----------------------Growth Strategy

Once the objectives are set, the results of the external environment analysis (opportunity and
threats identification), the internal situation analysis (strength and weakness or pains and
enablers identification), past five years achievements which are rated as Satisfactory, and the
stretched targets are set, the next step will be selecting the appropriate strategy for the Bank.

As observed in the environment scanning, the Bank‘s internal strength out ways the weaknesses
and there are untapped opportunities created by the favorable economic growth, political and
social sector development in the country. The past five years performance of the Bank has also
registered remarkable achievements in both credit operation and BSC implementation.

Recognizing the above stated achievements and to carry forward the strategic issues clearly
indicated in the GTP-II document, the best options to pursue for the next five years shall be
Growth Strategy, which combines the existing internal Strength with external opportunities.

S+O = Growth Strategy: (Maxi-maxi strategy)

Page | 49
This combination is an optimistic scenario arguing for the expansion of business. The
combination of factors like sufficient organizational strength, human resource development and
information capital developed over the past five years coupled with ample opportunities created
by government are the basis for choosing this strategy.

6.3 Thematic Areas, Strategic Results

Once the strategy is selected the next major task will be the identification of thematic areas and
their strategic results which are pillars of strategy execution and fulfillment of customer‘s
expectations. One of the methodologies usually utilized for selecting and analyzing these themes
is assessment of external and internal environment (SOWT) analysis, customer and stakeholder
needs assessment. To overcome weaknesses and achieve the set targets clarity in the thematic
areas and their outcomes is considered to be very important as they are instrumental in
achievement the vision of the organization. This is in fact why thematic areas identification is
considered to be the foundation of an organization‘s strategy.

Given the analysis made earlier and in line with the norm and premises described above, a
limited but significant core or pillar issues were identified as listed so as to serve as candidate
thematic areas, which are ultimately instrumental in helping the Bank realize its vision of
―100% success for financed projects by 2020‖.

The candidate thematic areas forwarded include the following major organizational issues;

 Risk management
 Asset quality improvement
 Business expansion
 Service delivery
 Capacity building
 Liquidity Management
 Corporate d governance
 Resource mobilization

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The need to ensure that the thematic areas selected are the most appropriate and relevant to the
Bank, i.e. given its needs and vision statement, calls for the establishment of a set of criteria to
screen candidate thematic areas.

The standard or criteria established for thematic areas selection requires that it be made on the
basis of the following key or major points;

 be broad enough to help set objectives in several areas;

 be different from a single or simple activity and
 not be a functional description of a day-to-day activity, but issue that requires the Bank‘s
attention;
 Not be limited to one process or function.

The following table shows the basis used for rating of the candidate thematic areas together with
the result obtained by so doing;

Table 14: Rating Thematic Areas Candidates

Candidate Thematic Selection criteria

Area No. of objective Not a simple Not a-day-to- Cross process Point scored
Risk management 
encompassed 
or single x
day activity 
nature 3
Asset quality activity
    4
improvement
Business expansion     4
Service delivery     4
Capacity building     4
Liquidity
   X 3
Management
Corporate governance x    3
Resource mobilization x   x 2

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Table 15: Rating Thematic Areas Candidates
Sr.
No Thematic Areas Strategic Results
Capacity Building (Human Capital, Information
Capital, Organizational Capital): Concept- To
enable the institution achieve its vision and mission
1 Improved organizational readiness.
by filling identified gaps (i.e. overcoming
weaknesses) in employee‘s competency by improving
skill, organizational capital and IT infrastructure;.
Service Excellence: Concept: customer focuses and
improved services with the objective of customer Increased effectiveness and
2
satisfaction and meeting stakeholder needs and efficiency.
requirements.
Excellence in Asset Quality: Concept- The primary
factor affecting the overall asset quality of a bank is
Good quality Assets and Financial
3 the quality of loan portfolio and credit administration
Sustainability.
program. Asset quality and loan quality are two terms
with basically the same meaning in banking industry.
Business Expansion: Concept: enable the Bank Increased and diversified number of
make adequate use of its resources and reach all development projects and additional
4 priority area sectors and exploit opportunities through value from existing assets.
business expansion and value addition.

6.4 Perspectives

Perspectives are the tools for describing and understanding how value to shareholders is created.
This is achieved by clearly establishing and showing the various cause and effect relationships
that exist between the perspectives chosen. Additionally, perspectives also help balance the short
(financial result) and long term interests (sustainability) of an organization.

Based on such logic and the past years performance the perspectives revalidated for strategy
mapping and the Balanced Scorecard System of the DBE are four.

The perspectives revalidated for the next five years strategic period are the following;

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  Finance and Development Perspective;
 Customer Perspective;
 Internal Business Process(IBP) Perspective and
 Learning and Growth Perspective

6.5 Strategic objectives

Strategic objectives basically are instruments to achieve the mission and vision statements. It tends to be
more specific and action oriented that lead to strategic results. Above all they have continuous
improvement potential. Or, in short, they are building blocks of strategy. Each strategic objective has its
own measurable strategic results.

Strategic Objective developed for a particular thematic area is defined to create common
platform for all areas of concern with clear explanation or description as regards what it
represents in terms of its scope and expected outcome.

Accordingly, the objective commentary has been prepared so as to clearly indicate the
scope of the strategic objective, describe the intended outcomes of the strategic
objective and identify key components of the objectives. Based on this concept, the following
objectives and objective commentary is prepared for the coming five years.

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 Table 16: Strategic Objectives and Commentary

Sr.
No. Perspectives Objectives Objectives Commentary Outcome
Successfully Operating
 Stakeholders refer to owner, lenders and regulatory organs. Projects.
 The requirements of the owner are primarily met by increasing the
number of viable successfully commissioned and successfully operating

Enhance Stakeholder Interest

development projects and improved fund mobilization from Hidase Bond
sale.
Successfully commissioned projects refer to projects which are
implemented within the time frame set as in the appraisal report for
physical implementation.
Development and Finance

Healthy Relationship with

Similarly, successfully operating projects refer to those that are fully Regulators and Creditors.
commissioned and operating as per the capacity utilization set in the
appraisal report, create employment opportunity for at least 80% of the
1 labor force target set in the appraisal and fulfill other critical criteria set
in the vision description.
 Lenders and regulators interest is fulfilled by adhering to or by
meeting established prudential standards for project financing and
meeting debt obligations.
 The financial soundness of an organization – mostly depicted by the
Improve Financial

income statement, balance sheet and cash flow - usually shows the
overall financial health of an organization and most importantly it can
Soundness

gauge an entity‘s ability to continue as a going concern. Financial Sustainability

 Accordingly, the purpose of the objective here is to continuously
improve the financial performance of the DBE particularly by increasing
asset quality, broadening of income bases, reduction of default and other Reliable & Acceptable
related costs, timely debt settlement, efficient utilization of resources and Financial Result and
etc. to ensure its sustainability; Position

Page | 54
 Improve Customer Customer refers to end user of services of the Bank, which are mainly
Satisfaction borrowers. Customer satisfaction is a direct result of efficient and
effective project finance service that is availed together with the critical
input of professionally based technical support and advice to Profitable & Satisfied
beneficiaries. Customer
Customer

2 DBE as a Bank has existed for more than a century. However, due to
various internal and external reasons the public at large could not clearly
Improve Public demarcate its role and objective from traditional banking activities. Its
Awareness role as a development finance institution through providing low priced
loan and preferential treatment to those who are engaged in investment
has not been fully recognized by the public. Hence, the Bank has to work
towards improving its image to the general public. Reputable Bank

 Service delivery is directly related to the various types of all- round

support provided by the Bank to customers in general. Customers
require full information on the Bank‘s products, requirements, loan
delivery time, conditions of loans and other related services. This
services can be those directly provided by core process at forefront and
Internal Business Process

Improve Service
Delivery indirectly availed by the support units of the Bank. Efficiency

This will be achieved through instituting good governance and

3 increase in productivity and improvements in the areas of quality of
service and time taken to deliver service as well as the cost of the service
itself. Effectiveness
Asset Management
Improve Credit/

Credit/Asset management is generally relates to the proper and

systematic handling and optimal utilization of loans assets of the Bank. It
includes:
· Basically credit administration refers to monitoring of project Increased Asset Quality
implementation, project commissioning, operational projects follow-up ,
technical advice, loan collection as per the schedule, rehabilitation of sick
projects and , etc.;

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  Besides, it includes insuring of project assets, timely registering and
revaluation of collateral asset, and delivering credit information regularly
to the borrower.

Improve Customer This means identifying, selecting and recruiting potential customers for
Sourcing project financing with the objective of better customer screening to Potentially Creditworthy
promote loan quality. Applicants

Improve Relationship and Communication Partnership is the act of creating business relationships with reputable
institutions in order to mutually benefit from the interaction.

It is targeted at establishing and strengthening relationship with local and Improved Service
external Learning Organizations, Research Centers, Financial Institutions Efficiency and Quality
/preferably Development Banks/, Specialized Institutes like the textile,
Horticulture and leather producers associations etc. for knowledge,
know-how and skill transfer as well as to obtain critical technical support
services where the bank is deficient.

Increasing internal and external communication to improve awareness as

regards the Bank‘s mission, vision, policies, strategies and performances Increased Business
so as to create informed employee, customers and collaborators to Opportunity
enhance service delivery, to mobilize resource, strength relationship with
lenders and stakeholders as well as image building. Image Building
& Growth
Learning

Enhance Employee Employee competency refers to the acquiring and aligning of employees
4 and Leadership with the necessary behavioral attributes, skill and knowledge, which are Employee Readiness
Competency required for achievement of the strategy particularly in areas of
development projects financing.

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  Leadership competency refers to the realization of leadership with
Strategy and
the necessary behavioral traits and technical skills so as to inspire and Transparency focused
influence the workforce towards achieving business mission and vision Leadership
and strategy of the Bank. It helps leaders to work proactively and become
strategy focused instead of involving on routing tasks.
Improve Information
Organization and
Management This refers to the improvement of DBE‘s capacity to properly capture, Reliable and Readily
store and process various types of data and information by upgrading the Available Information
information technology and networking system of the Bank, database,
record keeping including documentation of knowledge etc.

Mission & Vision

This refers to attitudinal change and alignment of values of employees to Oriented
Improve meet vision and mission by creating the environment for strategic Employees/organization
Organizational Culture thinking, team work, customer centric and productive work culture.
and Alignment
The alignment of skill, budget, performance, incentive and reward system Strategy Focused and
with the strategy of the Bank is very imperative for alignment of Transparent Organization
employee with the Bank's Vision and Values. It is the major factor for
creating shared value among the Bank‘s community.

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6.6 Strategic map

The Strategy Map is a summarized pictorial representation of the strategy of the Bank through
linked strategic objectives under each of the four perspectives depicting the relationships
between the various objectives already defined and explained in the preceding part of this
document.

The strategic objectives are linked together in patterns of cause and effect relationship beginning
from the drivers in the learning and growth perspective through the value creating process of
internal business process up to the outcomes shown under the finance (development) and
customer perspectives. Please refer to the map overleaf for details.

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 VISION: “100% Success for Financed Projects by 2020”

I. MEASUREMENT

DEVELOPMENT &
Performance measures are developed and definedEnhance for each of the identified
FINANCE Stakeholder’s
strategic objectives. Further, lagging measures are identified, expected targets
Interest

and thresholds are also established. A strategic measurement naturally relies or

depends heavily on the focused strategic objectives, which articulate exactly
what the Bank sets to accomplish. Improve
Financial
Soundness

Finally, strategic performance measures monitor the implementation and

CUSTOMER Improve Public
effectiveness of Awareness
the Bank’s strategies;Improve
help determine the gap between the
Customers’
actual and targeted performances andSatisfaction
the Bank’s effectiveness and operational
efficiency.

INTERNAL

BUSINESS Improve
Service Delivery Improve
PROCESS Credit/Asset
Management

Improve Relationship
and Communication
Improve
Customer
Sourcing

Enhance
LEARNING & Employees and
Leadership
GROWTH Competence (HC)

Improve Improve
Organizational Information
Culture and Organization & Mgt
Alignment (OC) (IC)
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6.7 Measure, Targets, Thresholds and initiatives
6.7.1 Performance Measures
Performance measures are metrics used to provide an analytical basis for decision making and to
focus attention on what matters most. They answer the question, ―How is the organization doing
at the job of meeting its strategic objectives?‖ Lagging indicators are those that show how
successful the organization was in achieving desired outcomes in the past. Leading indicators on
the other hand are precursors of future success or performance drivers.

Specifically, performance measures are needed to:

 Monitor the implementation and effectiveness of an organization‘s strategies;

 Determine the gap between actual and targeted performance;
 Determine organization effectiveness and operational efficiency.

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Table 17: Measures, Measure formula and Measure Clarification/Explanation

Source of
Unit of Reporting Responsible
Measure Formula Clarification/Explanation in
Measure Frequency Unit
Formation
Successful Projects are Projects that:
1. Under Performing Status
2. Generate and /or save foreign exchange to the country
No. of successfully * For projects established for export, at least 75% of the planned
Percentage of Operating Projects production has to be exported Loaning
Quarter/An Loaning Units,
Successfully ________________ * For import substitution, 100% of the planned production has to be % Units
nual SPDEP
Operating Projects Total No. of Operational sold in the domestic market Reports
Projects 3. Create employment opportunity for at least 80% of the planned
target in the appraisal report
4. Generate 100% required business income Tax for the
Government (Does not include tax exempted projects).
Basically, Successfully commissioned Project refers to a project
Actual Successfully which meets time schedule set in the appraisal report, implemented
Percentage of
Commissioned Projects within the allocated budget and produce marketable Product.
Successfully Quarter/An Loaning Units
____________________ However, due to various reasons the following allowances are % Loan Units
Commissioned nual and SPDEP
Total Projects Planned to given:
Projects
be commissioned 1. 20% allowance for not meeting time schedule
2. 20% Contingency for cost variations
As a principle, the Bank must generate sufficient foreign exchange
Actual amount of export IBS and
Export from financed projects to cover its own requirements and purchase
proceeds earned Loaning Monthly/Q Loaning Units
proceeds/foreign the balance from other sources. To this end, therefore, the Bank has %
__________________ units uarterly IBS and SPDEP.
currency purchased to continuously monitor and measure its internally generated
Total planned Proceeds Report.
foreign exchange from time to time

Actual amount of Bond In line with government decision DBE has been entrusted to GERD and
Amount of Fund GERD, Regional
Sold mobilize the GERD fund, and has been making every possible Regional Monthly/Q
Mobilized from % Officer and
______________ effort to discharge the duty. Hence, the Bank has to measure from Of Offices uarterly
GERD Bond Sale SPDEP
total Planned Bond Sale time to time its actual Performance against the plan for both Reports
fulfilling its duty.
CRMP, Internal
Compliance with Examinatio Quarter/An
composite Rate Defines the fulfillment of NBE standards such as CAMELS Rate Audit, Loaning
Regulation n Reports nual
approach which should be fulfilled by the Bank units and SPDEP
NPLs Loaning Quarter/An Loaning Units,
NPL Ration %
Total Loan Portfolio Defines the proportion of NPLs to total Loan Portfolio Un Its nual CRMP and

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 Reports SPDEP
Source of
Unit of Reporting Responsible
Measure Formula Clarification/Explanation in
Measure Frequency Unit
Formation
It shows Percent of collected loan against the total demand. It
Loaning
Loan Recovery Actual Loan Collection generally and clearly measures the Bank's effort in reducing default Quarter/An Loaning Units
% Un its
Performance Total Demand risk. It covers collection from both performing and non-performing nual and SPDEP
reports
loans.
Clean Long Amount of cleaned long
outstanding outstanding receivables
and payables Financial Quarter/An FAMP and
receivables and It shows the amount of long outstanding payables and receivables %
Reports nual SPDEP
payables (more Total long outstanding against the total outstanding to maintain financial soundness of the
than 90 days) receivables and payables Bank.
Net Profit
________ Financial Quarter/An FAMP and
Return on Asset %
It measures how much profit the Bank generates for each Birr of its Reports nual SPDEP
Total Assets Assets.
Customer
Positive Responses It measures the level of satisfaction of customers regarding service Survey Quarter/An CMO and
Satisfaction Score %
Total Responses delivery by comparing positive or "Yes" responses out of the total Results nual SPDEP
(External)
responses given by customers to enquire.

Total No. Of Positive

Level of Public Survey BPCP and
Response % Annual
awareness It measures the level of positive or "Yes" responses regarding Results SPDEP
Total No. of responses
Public outlook to towards the bank against total responses given by
sampled population to enquiries made to measure public trust.
Loaning
Amount of Loans Amount Un Its/T- Quarter/An Loaning Units
Loan Disbursement
Disbursed It measures amount of loans disbursed by the Bank for project in Birr insight nual and SPDEP
financing. Reports
It measures whether project are being implemented within the
stipulated schedule in the project appraisal document.
Projects being
NB:- The measure excludes external factors beyond the Bank's
Percentage of Implemented as per
control like natural disasters, financial crises, etc. Loaning Units,
Projects that Meet schedule Loaning Quarter/An
% CMO and
Implementation ___________________ Un its nual
APDEP
Schedule Total Projects Under
Implementation

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 Source of
Unit of Reporting Responsible
Measure Formula Clarification/Explanation in
Measure Frequency Unit
Formation

It measures how long it takes for loaning units to deliver credit Loaning Units
Average Cycle Average No. of working services to their customers from application receiving to first Loaning un Quarter/An
Days ,CMO and
Time days to process a loan disbursement excluding waiting times at each step /efficiency/ its nual
SPDEP

Loaning
Loaning Units,
Amount of Loans Amount Un Its/T- Quarter/An
Loan Approval CMO and
Approved It measures amount of loans approved by the Bank for project in Birr insight nual
SPDEP
financing. Reports
No. of Reworks Monthly/Q
Loaning Loaning Units
Rework Rate ________________ At Organizational Level Rework refers to the back and forth % uarterly/An
Un its and SPDEP
Total Outputs movement of works among processes due to major drawbacks. nual

It measures frequency of follow up against the standards set on a II

Actual No. of Follow up Projects/except foreclosed or acquired/ regarding their Loaning Units,
Project Follow-Up ________________ implementation progress or operation including debt servicing Loaning Quarter/An
% CMO and
coverage ratio Total Expected Follow performance. Apart from the inspection and other types of follow- Un its nual
APDEP
up ups, the expected follow up for operational project is at least twice
per annum for a project including grading of borrowers. Similarly
under implementation Projects will be followed up every quarter.
Loaning
Amount of Loan Amount Un Its/T- Quarter/An Loaning Units
Loan Collection
Collected It Mainly Measures amount of loan collected from Projects through in Birr insight nual and SPDEP
various ways. Reports
Loaning
No. Of New Entrants to Loaning Units,
Rate of Fresh Un Its/T- Quarter/An
NPLS Total % CMO and
Entrants to NPLs It compares the number of performing loans which are entering to insight nual
No. of performing Loans SPDEP
NPLs. Reports
Customer Sourcing or recruitment refers to clients selected by the
Bank through direct and purposeful approach or initiation. While
No. Of Recruited
Percentage of total applicants are those prospective clients who have lodged CMO/BPC
Customers Quarter/An Loaning Units
Recruited formal applications and signed disclaimer agreement. % process/Re
_______________ nual and SPDEP
Customers gions
Total Applicants

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 Source of
Unit of Reporting Responsible
Measure Formula Clarification/Explanation in
Measure Frequency Unit
Formation

Actual Forums It measures workshops, forums, events organized, Publications and

CMO/BPC
No of Forums Organized electronic media utilized and etc. to reach and provide information Quarter/An CMO and
% process/Re
Organized _______________ to the public on the Bank's mission & performances. It measures nual SPDEP
gions
Planned Forums the Problem solving interaction and joint meetings conducted with
customers and stakeholders at both corporate and Regional Levels.
No. of actual
No. of Successful
Partnerships BPCP Quarter/An BPCP and
partners Created No
________________ It measures increase in number of partnerships created and Reports nual SPDEP
and Managed
Planned Partnership managed.
This refers to the internal assessment (competency Profile )
Conducted to measure the strategic readiness of employees in terms
No. of Employees of the necessary behavioral attributes, level of skills, talent and
Employee fulfilling the Required knowledge, which are requirements for performing and then HRMP Quarter/An HRMP and
Competence Competency achieving the Bank's strategic Objectives. This measure has %
Reports nual SPDEP
Coverage Ratio __________________To paramount importance to fill the identified strategic competency
tal No. of Staff gap at every level. It is a key component of ensuring human
resource readiness.

As a role model, leaders face special challenges that require

No. of leader fulfilling additional critical skills like as a champion of change management,
the required competency identify and timely respond to risks and fostering communication
team works.

Leadership
HRMP Quarterly/A HRMP and
Competency %
Hence, in addition to those critical competency started under Reports nnual SPDEP
Coverage Ratio
employee‘s competency measurements, the assessment for
Total No. of leaders
leadership competency measures should include these extra
attributes s/he must demonstrate as a leader.

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 Source of
Unit of Reporting Responsible
Measure Formula Clarification/Explanation in
Measure Frequency Unit
Formation
Through training, DBE can fill the existing competency gap and
No. Staff who got get better skilled employees who are more versatile, while for
Required Training employees, it creates opportunities to acquire new skills which
positively affect their performance. The problem, however is,
Percentage of staff managers usually tend to count the number of staff got training or
HRMP Quarterly/A HRMP and
who get required number of training offered, instead of evaluation the effect of the %
Total No. of staff who Reports nnual SPDEP
training training. One of the main reasons stated for such shortcoming is the
need the required complexity and subjectivity of trying to measure training results
Training which are qualitative by their very nature. For this reason,
percentage of staff that get the required training, still services as a
measurement tool for improving strategic skill.
No. of system automated Measures the actual number of system automated against the total
Automated system __________________ number of system identified for automation ITSP Quarterly/A HRMP and
%
coverage Ratio Total number of system Reports nnual SPDEP
to be automated
It infrastructure or the hardware and communication networks must
support the critical data storage and information flow a DBE.
Network Coverage Available Network Unless all operating units interlinked by IT technology, all efforts ITSP Quarterly/A
% SPDEP/property
Ratio Required Network toward strategy execution becomes in vain. Therefore, IT network Reports nnual
coverage or level of connectivity against need has to be
continuously measured, to fill the gap on time.

Availability of the IT infrastructure alone could not facilitate

execution of strategy. It has to serve for data storage, managerial
Information Positive Response decision making, smooth information flow and analysis and sharing Quarterly/A
of knowledge. Employees should store information in their data % ITS SPDEP/ property
Accessibility Ratio Total Response nnual
base, retrieve the right information and make it accessible for
strategic performance and management decision purpose. Thus,
measuring availability and accessibility of information has
paramount importance for strategy executions.
No. of IT security system
established
________________
IT security Quarterly
Total number of required It measures the actual IT security system established vs. the % ITS SPDEP
Coverage Ratio /Annual
IT security system as per standard IT security requirement
standard

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 Source of
Unit of Reporting Responsible
Measure Formula Clarification/Explanation in
Measure Frequency Unit
Formation
Percentage of The refers to the alignment of employee to the Banks objective, the
Positive Response Survey Quarterly/ HRM and
Employees perception of employees on their job, incentive and reward %
Total Response Results Annual SPDEP
engaged systems, which create motivated and prepared employees
Employee satisfaction level fives a clue on the extent to which
employees are happy with their jobs, incentives and working
environment. Satisfied employees are more often than not,
Employees Positive Response committed to their organization and enthusiastic about their job. Survey Quarterly HRM and
%
Satisfaction total Response Employee satisfaction is typically measured using an employee‘s Results /Annual SPDEP
satisfaction survey. These surveys address topics such as benefits,
rewards, workload, perceptions of management, flexibility,
teamwork resources, etc

Level of awareness on By-and –large the concept of cultural readiness refers to attitudinal
Organizational change of employees which directly impact the Vision, Mission ,
the Mission, Vision Survey Quarterly/ HRMP and
Culture change Values and most importantly Strategy of the Bank by creating the %
values and Strategy of Results Annual SPDEP
index environment for strategic thinking
the bank against standard

By its very nature, effective teamwork leads to greater performance

and goal achievement. A team, who communicates well,
coordinated, supports each other and work hard, and said to be the
cornerstone of strategy execution
Team Development stage
Team development This is also some of the measurable qualities of individuals, teams Survey Quarterly/ HRMP and
Against the required %
Index and leadership which contribute to successful team work. Results Annual SPDEP
standard
A tool known as team development index is an instrument designed
to measure the level of team development stage, horizontal and
vertical team work and alignment of the team goals to the strategic
objective of the organization.

Some level of turnover is healthy for DBE. Employees who are not
a good fit for the organization leave, making way for fresh new
Professional Attrition of professional potential entrants. By contrast, unwanted turnover happens when HRMP Quarterly/ HRMP and
staff DBE loses talented employees that it wants to keep. %
attrition rate Reports Annual SPDEP
Hence, to minimize professional turnover the Bank should
Total No of professional continuously measure the attrition rate which has significant impact
staff on it strategic accomplishment and created a good working climate.

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6.8 Summary of perspectives, Objectives, Measures and their respective weight
Perspective, objectives and measures are discussed in respective section above. Now again
weight is attached to each perspective, objective and measure depending on their impact on the
strategy as follows.

Table 18: Perspectives, Objectives Measures and Their Weight

Perspectives Perspective Objective Measure

SN. (4) Weight Objectives (11) Weight Measures (35) Weight
Percentage of Successfully
50%
Operating Projects
Percentage of successfully
20%
commissioned projects
Development and Finance (2)

Enhance Export proceed/Foreign

Stakeholder 60% currency purchase (in million 10%
Interest (5) Birr)
1 40% Amount of Fund Mobilized
from Hidase bond (in billion 10%
birr)
Compliance with Regulation 10%
NPL Ratio 50%
Improve Financial Loan Recovery Rate 30%
40%
Soundness (4) Return on Asset 10%
Cleaning Long Outstanding 10%
Improve Customer
Customer

80% Customer Satisfaction 100%

Satisfaction (2)
2 15%
Improve Public
20% Level of public awareness 100%
Awareness (1)
Loan Disbursement (in Billion
30%
birr)
Percentage of Projects that 30%
Improve Service Meet Implementation Schedule
40%
Delivery (5)
Internal Business Process (4)

Average Cycle Time 20%

Loan Approval (in Billion birr) 15%
Rework Rate 5%

3 30% Project Follow-Up Coverage 40%

Improve Credit/
Asset Management 35% Loan Collection (In Billion 40%
(3) Birr)
Rate of Fresh Entrants to NPLs 20%
Improve Customer Percentage of Recruited
15% 100%
Sourcing (1) Customer
Improve Number of Forums Organized 60%
Relationship and 10% Number of successful Partners 40%
Communication (2) Created and Managed
Objective Measure
Perspectives Perspective Objectives (11) Weight Measures (35) Weight
SN. (4) Weight

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 Employee Competence
40%
Coverage Ratio
Enhance
Employee and Leadership Competency
50% 40%
Leadership Coverage Ratio
Competence (3) Percentage of staff who get
required training in identified 20%
Learning and Growth (3) gaps
Automated System Coverage
40%
Improve Ratio
4 15% Information Network Coverage Ratio 30%
20%
Organization and Information and management
Management (4) 15%
Accessibility Ratio
Enhance IT Security 15%
Employee Engagement 30%
Improve Employees Satisfaction 25%
Organizational
30% Organizational Culture Change 20%
Culture and
Alignment (5) Team Development Index 20%
Professional Attrition Rate 5%

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6.9 Targets and Thresholds

A target is essentially a quantitative representation of the performance measure at some point in

the future, i.e. a desired future level of performance. Targets development can be based on any
one of a number of alternatives, as one can choose to evaluate performance against a goal either
from short-term perspective, medium or long-term perspectives, which naturally require
additional effort and performance.

A number of basic issues have been closely reviewed and assessed in order to establish strategic
targets for the DBE. The primary task included baseline determination, which is involved with
the specification of current level of performance based on exact results or proxies. Baseline
determination also involved the undertaking of surveys (e.g. customer satisfaction level) and
assessment of the Bank‘s performance in various areas in the previous strategic period. The
exercise of target definition, however, requires further consideration of a number of other factors
once the baseline data or result is correctly defined.

These include, among others, such important factors like close and in-depth consideration of
both customers‘ and stakeholders‘ interest or requirements in each specific and relevant area for
target setting and researching for acceptable standards or benchmarks before determining the
target for each objective. Please refer Part-IV, section 2.4 for summary of strategic targets set.

Thresholds – Performance Standards

Targets set can theoretically have a number of ―fates‖; which are (a) total failure (less that 50%
performance or achievement), (b) failure to achieve a target (mild failure),(c) target achievement and (d)
exceeding targets set for achievement.

Thresholds are, therefore, performance ranges, which serve as a basis for determining or for judging
performance in the future, i.e. as regards target achievement. Alternatively, thresholds can be standards
laid upfront to determine or take position in the future as regards the level of performance for each and
every objective defined.

Despite the above stated theoretical framework, however, thresholds are as a rule defined as follows;

 Blue (outstanding), which represents outstanding performance

 Green (Above Satisfactory): which represents acceptable performance range

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  Yellow (Satisfactory) : which shows marginal performance and therefore caution and
 Red (Unsatisfactory): which depicts below target performance

In the case of the DBE, however, the thresholds set for each objective under each target area have been
taken one step further as actual bands have been determined for each target area in order to simplify and
ease future performance evaluation as regards the achievement of a target set for a specific objective.

Corporate Level Performance Standards (Thresholds)

A performance standard is expression of the performance threshold, requirement, or expectation that must
be met at a particular level of performance. Accordingly, the bank corporate level performance standard
should have the following four levels.

Table 19: Corporate Level Performance Determination

Sr.
No Performance standard level
1 Outstanding (exceeding
expected performance level)
Score range Definition(description of level)
> 100% - Superior performance or accomplishment
expressed by>100% target achievement;
- Consistently exceeds expectations

2 Above satisfactory (meets - Demonstrated all expected results

expectations) 90≥X≤100% - Accomplishments are clearly in accordance
with expectations/performance score ranges;

3 Satisfactory (meet most - Demonstrated most of the expected results;

expectations) 75%≥ X <90% - Achievement that is at least within the
targeted score range

4 Unsatisfactory - Achievement that is less than 75% of target;

(unacceptable level of - Performance improvement review required;
<75% - Failure to demonstrate any of the expected
performance) results

Where ‘X’ refers to the performance results

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6.10 Strategic Initiatives
6.10.1 Existing Initiatives

The identification of initiatives first and foremost requires the listing of ongoing initiatives
within the organization which were selected during the past strategic periods. This initiatives can
be categorized in to either ongoing or those for which implementation was not started due to
various reasons. Since these initiatives are very important for the achievement targets set in the
strategy they will be fully implemented over the next five years period. The stocks of existing
initiatives are those shown below:

Table 20: Stock of Initiatives Transferred to the next strategic period

Status

Sr. Under Not Yet

No. Initiatives Implementation Started
1 Data Centre Construction X
2
Building maintenance and renovation X
Redeployment
3
X
Disaster Recovery
4
X
5 Office Facility and Standards
X
6 Customer information desk establishment X

6.10.2 New Initiatives

New initiatives are as a rule selected, rated and prioritized mainly on the basis of their strategic
impacts, objective coverage and on the basis of their time and resource (finance) requirement.
Accordingly, thirteen new initiatives selected for implementation based on the stated criteria is as
described below:

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Table 21: Description of new initiatives
Ser.
No. Initiative Description
 It refers to the overall IT
strategy required by the
Bank. This basically
includes the hardware,
Software, human resource
and IT governance structure
necessary for smooth
Comprehensiv operation of the Bank, by
1 storing data, accessing
e IT Strategy
information and fulfilling
regulators and supervisor‘s
requirement at both national
and international level.
Strategic Impact
 Improve service delivery of the bank
 Maintaining historical and up-to-date
information
 Improve information communication
 Avoid unforeseen risks
 Ensure the business continuity and
sustainability
 Improving management (decision
support) system and credit information
system (including providing online
statements, balance confirmation and
text messages).
Areas of Action Objectives Covered
 Identify the level of IT requirement 1. Increase customer satisfaction
of the Bank. 2. Improve service delivery
 Assess the IT resource available at 3. Improve information
the Bank and determine the gap organization and management
 Assess the resource (financial 4. Improve relationship and
human) need to fill the gap. communication
 Prepare IT policy, procedure and user 5. Improve organization culture
guideline for the smooth flow of and alignment
information. 6. Improve employee and
 Design plan for upgrading and Leadership competency
maintenance of the infrastructure.
 Design training program to expand
the IT skill bases.

 The manual is expected to  Improve transparency &  Identify critical areas where 1. Increase customer satisfaction
clearly indicates the accountability delegation and empowerment is 2. Improve service delivery
delegation f an authority  Improve the management practice required. 3. Improve credit/asset
To perform a certain task.  Increase the number of successors management
 It will also show the  Improve service efficiency and  Clearly stipulate the level of 4. Improve organization Culture
empowerment at each level effectiveness decisions to be made by the delegated and Alignment.
of the ladder which create  Improve Employee motivation person. 5. Improve Employee and
Empowerment Leadership Competency.
conducive atmosphere for
and delegation
2 the delegated to take  And then delegate at each level.
manual
initiative and make
decisions to solve problems
& improve service and
performance. The
empowerment shall also
enhance the performance
capacity and motivation of
employee.
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Ser.
No. Initiative Description
 The intention here is to
review the existing
competency mapping of the
bank.
 Reviewing, among others,
Review includes determining the
3 Competency baseline for employee and
Mapping leaders competency.
 Reviewing the credit policy
based on the practically
obtained feedbacks and
newly added credit services
Credit policy
4 review
 First, it is very necessary to
review the existing loan
process taking in to account
challenges faced over the
Work Process past strategic period and the
5
Design recent restructuring of some
Review loaning units.
 Then redesign the work
process of the support units
to align them to the revised
loan process.
Strategic Impact
 It serves as a base for various human
resource management and
development planning..
 Improve the employees and leaders
Knowledge, skill and behavior.
 Improve the efficiency and
effectiveness of the staff.
 Enhance the credit delivery and asset
quality of the Bank
 Establish clearly defined Rules,
Regulations and accountability.
 Minimize Risk
 Create Better communication with
stakeholders and customers.
 It will facilitate both loan delivery
and loan recovery.
 Create smooth alignment and
interfacing among loaning units and
support processes, which was one of
the complaint over the past strategic
period.
Areas of Action Objectives Covered
 Review the guideline/ road map of 1. Enhance Stakeholders
competency mapping. Interest
 Involve all operating units to 2. Increase Customer
undertake the competency gap Satisfaction
analysis. 3. Improve service delivery
 Identify the bank level existing 4. Improve credit/asset
competency level and gap. management
 Train or recruit to fill the identified 5. Improve Employees and
gap. Leadership Competency
6. Improve information
organization and management
 Identify the existing constraints in 1. Enhance stakeholders interest
the existing policy 2. Increase customer satisfaction
 Assess the external and internal 3. Improve service delivery
environment and recent 4. Improve credit/asset
developments which require the management
attention of the policy. 5. Improve customer sourcing
 Then review and update the credit 6. Increase relationship and
policy to fit to the new formulated communication
strategy.
 Evaluate both the existing loan 1. Enhance stakeholders Interest.
processes and support practice. 2. Improve Financial soundness
 Update the loan process based on 3. Improve customer satisfaction
the findings of the evaluation and 4. Improve service delivery
recent newly developments. 5. Improve Credit / Asset
 Review the support process management
workflow based on the new loan
process redesign.
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Ser.
No. Initiative Description Strategic Impact Areas of Action Objectives Covered
 This refers preparing a  Information will be properly stored,  Prepare clear guideline for
policy that clearly determine retrieving, and become accessible for information storage, retrieve and 1. Enhance Stakeholders
how the Bank‘s critical those eligible efficiently. accessibility. Interest
information and data is  It will reduce miss- utilization of the  Identify the types of 2. Increase Customer
recorded in soft and hard Bank‘s critical information information/critical documents that Satisfaction
copies, retrieved and wrongfully. needs to be disclosed and also the 3. Improve service delivery
Information disseminated to those  Improve Transparency. purpose for which it is used. 4. Improve Credit/ Asset
disclosure eligible to get it.  Assign a unit which delivers the Management.
6
policy  It also clearly show who is information with clear responsibility 5. Increase relationship and
responsible to disclose these and accountability. communication
information for internal and  Determine the level of accessibility 6. Improve Information
external users. depending on the nature of the Organization & Management
 The information should also inquiring organization, financial
fulfill the supervisors and institution, stakeholder, customer,
regulators requirements. researcher, internal staffs and the
like.
Develop the employee reward  Motivates the employees of the bank  Prepare clearly defined incentive 1. Improve customer
and recognition systems  Create competition for innovation and recognition and reward System satisfaction
new ideas  Align the reward system with the 2. Improve service delivery
Employee  Creates satisfied employees individual score card, measures and 3. Improve Credit/ Asset
7
reward  Enables the bank to retain competent targets. Management.
framework employees  Prepare Implementation Guideline. 4. Improve organizational
culture and alignment
5. Improve relationship and
communication

8 Branch  Undertake detail  Enhances the credit services out  Prepare Branch Expansion 1. Enhance stakeholders
Expansion assessment on the reaches. Guideline and set criteria for interest
requirement of new  Enable to achieve the strategic plan selection. 2. Increase customer
branches, selecting target.  Identify Potential areas for Branch satisfaction
appropriate location and  Enable the bank to be accessible by opening based on the set 3. Improve service delivery
prepare the overall customers requirements 4. Improve credit/asset
proposal for opening of  Improve the Bank‘s recognition at  Prepare the necessary external and management
new Branches while grassroots level. internal preconditions. 5. Improve customer sourcing
ensuring their sustainability  Assign manpower

| P a g e 74
Ser.
No. Initiative Description Strategic Impact Areas of Action Objectives Covered
 Interconnecting the newly  The newly and existing branches will  Allocate the necessary budget 1. Enhance stakeholders
opened branches with the get connected with network  Deploy/ Install infrastructure. interest
Regions and head office  The information flow and  Connect to the core banking 2. Increase customer
through network for communication will be facilitated satisfaction
Branch
uninterrupted and smooth  It creates efficient and effective Bank 3. Improve service delivery
flow of information. services. 4. Improve credit/asset
9 Networking management
5. Increase relationship and
communication
6. Improve information
organization and
management
10 Core Banking  Enhancing/upgrading the  Create efficient financial information  Prepare upgrading action plan. 1. Improve financial soundness
System current core banking flows.  Purchase the latest version of the 2. Increase customer
Upgrading system from R-10 to R-15  Enables the bank to conduct core banking system satisfaction
version transaction t with external and  Assign personnel/consultants to 3. Improve service delivery
internal financial institutions. make the upgrading 4. Improve credit/asset
 Enable the Bank to fulfill supervisors  Train technical personnel on the management
and regulators requirements. new version. 5. Increase relationship and
communication
6. Improve information

Enterprise Resource Planning  It creates efficient and effective credit  Assess the areas where the bank 1. Enhance Stakeholders
modules implementation service delivery and recovery to the needs enterprise resource planning Interest
includes Bond Automation, Banks customers.  Prioritize based on their importance 2. Improve financial soundness
BSC Automation, Anti-money  Meet the expectation of stakeholders and sense of urgency 3. Increase customer
laundering, and others. and regulators.  Implement the modules purchase satisfaction
ERP modules  Improve the data management and and installation, accordingly. 4. Improve service delivery
11 implementatio information flow within and outside 5. Improve credit/asset
n the Bank. management
 Prevent the bank from operational 6. Increase relationship and
and other related risks. communication
7. Improve information
organization and
7. management
8.
9. organization and
| P a g e 75
management
Ser.
No. Initiative Description
One of the critical areas where
the Banks has capacity
limitation is Core Banking.
Due to the changing nature of
the technology and its
Core Banking
complexity the area requires
Specialist
specialized people who are
12 Development capable to adapt to the
situation. At present there are
Program
only a few technical people
who are capable to run. Hence,
the Bank requires a continuous
specialist development
program for this specific area.
The intention of having
customer award scheme is on
the one hand to create public
awareness on DBE. And also
create a mutual understanding
Customer
and working environment by
13 Award
Scheme motivating customers for their
outstanding performance and
for collaborators to recognize
for their smooth relationship
support to the Banks effort.
Strategic Impact Areas of Action Objectives Covered
 Improve the financial management of  Prepare guideline for the program. 1. Improve financial soundness
the bank.  Identify the existing gap. 2. Increase customer
 Improve the credit data management  Conduct continuous practical satisfaction
 Timely provide credit information to foreign / local training for all 3. Improve service delivery
customers. employee engaged core banking 4. Increase relationship and
 Help to improve technical skill of area. communication
5. Improve information
employee.  Undertake bank level workshops for
organization and
 Create a conducive ground for experience sharing on practical
management
efficient and effective financial experiences on core banking system.
6. Improve employee and
information flow.  Continuously evaluate the
Leaders Competency.
achievements and drawbacks.

 Improve the Banks image.  Prepare guideline for the Scheme.
1. Enhance Stakeholders
 Strengthen the relationship between  Based on the Guideline select Interest
DBE, Customers and Collaborators. outperforming customers and 2. Increase customer
collaborators for reward. satisfaction
3. Improve service delivery
 Organize Customers Award 4. Improve credit/asset
ceremony. management
5. Increase relationship and
communication
| P a g e 76
 A. Description for the Initiative Criteria

1. Strategic Impact: Highest impact =4, High impact= 3, Moderate impact =2, Low
impact =1
2. Cost: Low cost (less than 5 million) =4, Moderate cost (>5-10 million) = 3, High cost (>
10-20 million) =2, Very high cost (>20 million) =1
3. Time: Short period (< one year) =4, Moderate period (>1-2 years) = 3, Long period (>2-
3 years) =2, Very long period (> 3years) =1
4. Number of Objectives Covered: Highest number coverage (5 or more objectives
covered) = 4, High no. coverage (4 objectives) = 3, Average no. coverage (3 objectives)
=2, Minimum no. coverage (2 objectives) =1

B. Ranking of Initiatives
As a principle the selected initiatives has to be ranked based on the time required to
accomplish, budget needed, its impact on the early start of the strategy execution and its
capacity to enhance other activities. Accordingly, the identified initiatives are ranked as
shown below.

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Table 22: Ranked initiatives
Strategic Impact Time Required Cost Required No. of Objectives
(45%) (10%) (10%) Covered (35%)
Sr. Average
No Initiatives Rank Wt Result Rank Wt Result Rank Wt Result Rank Wt Result Point Rank
1 Credit Policy Review 4 45% 1.8 4 10% 0.4 4 10% 0.4 4 35% 1.4 4.0 1
Empowerment and
2 delegation manual 4 45% 1.8 4 10% 0.4 4 10% 0.4 4 35% 1.4 4.0 1

3 Comprehensive IT Strategy 4 45% 1.8 4 10% 0.4 4 10% 0.4 4 35% 1.4 4.0 1
4 Branch Expansion 4 45% 1.8 1 10% 0.1 4 10% 0.4 4 35% 1.4 3.7 2
Work Process Design
5 Review 3 45% 1.4 4 10% 0.4 4 10% 0.4 4 35% 1.4 3.6 3
Core Banking System
6 Upgrading 4 45% 1.8 3 10% 0.3 1 10% 0.1 4 35% 1.4 3.6 3
Competency Mapping
7 Review 3 45% 1.4 4 10% 0.4 4 10% 0.4 4 35% 1.4 3.6 3
Employee reward
8 framework 3 45% 1.4 4 10% 0.4 4 10% 0.4 4 35% 1.4 3.6 3
ERP modules
9 implementation 4 45% 1.8 1 10% 0.1 1 10% 0.1 4 35% 1.4 3.4 4
Core Banking Specialist
10 Development Program 3 45% 1.4 1 10% 0.1 4 10% 0.4 4 35% 1.4 3.3 5
11 Branch Networking 3 45% 1.4 1 10% 0.1 3 10% 0.3 4 35% 1.4 3.2 6
12 Customer Award Scheme 2 45% 0.9 4 10% 0.4 4 10% 0.4 4 35% 1.4 3.1 7
Information disclosure
13 policy 2 45% 0.9 4 10% 0.4 4 10% 0.4 4 35% 1.4 3.1 7

| P a g e 78
Table 23: Initiatives Time and Budget

Sr. Time to complete Budget (In

No Initiatives the initiative Deadline Million Birr) Responsible Organ*
1 Credit Policy Review 6 months Before Dec. 31, 2015 0.05 President,
Empowerment and 6 months
2 Before Dec. 31, 2015 0.05 Executive Management
delegation manual
Comprehensive IT 1 year
3 Before June 30, 2016 0.05 VP-Support(ITS)
Strategy
Every year as per the VP-BOC, VP-Corporate and VP-Support, IT
4 Branch Expansion Continues 0.20
target Steering Committee
Work Process Design 6 months
5 Before Dec. 31, 2015 0.05 Executive Management
Review
Core Banking System 1 year
6 Before June 30, 2016 4.00 VP-Support, IT Steering Committee
Upgrading
Competency Mapping 6 months
7 Before Dec. 31, 2015 0.05 VP-Corporate
Review
Employee reward 1 year
8 Before June 30, 2016 0.05 VP-Corporate
framework
ERP modules Continues Every year as per the
9 TBD VP-Support, IT Steering Committee
implementation target
Core Banking Specialist Continues
10 Continues 0.05 VP-Support and VP-Corporate
Development Program
6 months Every year as per the
11 Branch Networking 8.00 VP-Support and VP-BOC
target
6 months
12 Customer Award Scheme Before Dec. 31, 2015 0.05 Executive Management
Information disclosure 6 months
13 Before Dec. 31, 2015 0.05 VP-Corporate
policy
*V/Ps will assign responsible Units or establish committee which runs the initiative projects.

| P a g e 79
 PART IV: LENDING FOCUS AREAS AND TARGET SETTING

VII. DBE LENDING AREAS

To realize GTP II, DBE will play a pivotal role in the country‘s economic development through
the provision of medium and long term financial support to different sector of the economy.
Accordingly, the focuses areas of the Bank shall be the following priority sectors of the
government.

7.1 Agricultural Sector

During the GTP-II period, agriculture will grow by 8% to ensure the food security challenge of
the country and also curb inflationary pressure as well as broadening the export base of the
country. The sector also serves as a spring board to bring about structural transformation in the
long run through contribution to industrial growth.

As stated in the draft GTP II document, the sector will continue its leading role of our country‘s
transformation endeavor with ultimate goal of poverty eradication and industrialization of our
country.

7.2 Industrial Sector

The government policy with regard to industrial development is towards speedy development
that can make it the basis for the country‘s future development, foreign exchange earnings, a
strong supporter of the agricultural sector and source of employment opportunity. Accordingly,
to realize rapid structural transformation of the economy, the nation target to increase the
industrial sector share in GDP from the estimated 14% at the end of GTP-I to 22% in GTP-II.

The industrial targets for the coming five years include; manufacturing sub-sector, mining sub-
sector, electricity sub-sector and construction sub-sector.

During GTP-II, the manufacturing sub-sector has got special emphasis giving due attention for
the production of textile and garment, leather and shoe products, sugar and its allied, cement,

Page | 80
chemical, pulp and paper, pharmaceuticals, food industries, oil seed processing, liquor and
beverage, agro processing and metal industries.

Moreover, it is planned to give more emphasis towards increasing production, improve

productivity and competitiveness and attract foreign direct investment at all levels of
manufacturing industries and enterprises. Besides, the Government set a plan to strengthen and
enhance SMEs, attracting new FDIs through development of industrial zones and parks etc.

7.3 Small and Medium Enterprises (SMEs)

Although, the government continues to shore-up its support for the sectors and is persisting to
address their rapidly increasing needs in various areas, financial service is becoming critical
challenge to such enterprises. Moreover, most of the enterprises are gradually being graduated
with capital accumulation and their financial need becomes beyond the capacity of micro finance
institutions.

So as to curb the acute financial problem of this sector, the government has designed various
mechanisms including Proclamation no. 807/2013 on Capital Goods Leasing Business.

Accordingly, DBE is taking the leading responsibility in the area of Small and Medium
Enterprise (SMEs) in the form of Lease Financing as new products in the next five years‘ plan.
In this regard, the Bank planned to open 117 new branches all over the country so as to avail
credit facility to SMEs in the form of Lease Financing as partial cost of fixed investment.

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 VIII. STRATEGIC TARGET SETTING
8.1 Credit Targets
The coming five years (2015/16-2010/20) are the GTP II implementation period at country level
and DBE‘s Second five year strategic plan. Based on the macroeconomic condition assessment,
investment opportunities, and past trend analysis, DBE prepared credit operational plan for
approval, disbursement and collection for GTP II period

The next five year plan is designed with special emphasis on export oriented, import substitution,
domestic raw material based and those which create employment including micro, small and
medium scale enterprises. This will enable the achievement of the country‘s vision to become a
middle income country by 2025.

In this regard, real GDP is expected to grow on average by 11 percent for the coming GTP II
plan period. Accordingly, all sector growth projections were made consistent with the overall
economic growth rate.

Hence, to support the country‘s development strategy, DBE is required to assess the volume of
credit to be injected into the economy based on the strategic direction and its execution capacity,
as well as availability of loan-able fund. To this end, the determination and projection of credit
demand by target sector of the economy are based on the past five year credit performance of the
Bank and sector growth rate projection of the Government as stated in the draft GTP II
projection document.

8.1.1 Agricultural Sector

As per the GTP II draft document, agricultural sector is expected to grow by 8%, on average, for
the coming five years assuming prevailing weather condition will continue and scaling up of best
practices and other policy and strategies will be effectively implemented in the subsequent years.

The Bank‘s agriculture loan approval performance for the past five years depicts an annual
compounded growth rate of 27.93% for the sector. This is due to the fact that the during the last
two years the Bank has been involved in financing rain-fed commercial farms and the application
flow of these projects is tremendous over the recent years. However, if we consider the first three

Page | 82
years strategic period (2010/11-2012/13) prior to the financing of rain fed commercial farms, the
compounded annual growth rate is about 3.59% which is on the lower side.

Hence, it is better to use the government GTP-II target of 8% growth rate for the projection of
loan approval for agricultural sector as the fate of newly approved rain-fed commercial farms
and their continuity is dubious as majority of them faced initial stage of implementation problem
and considering the riskiness of the investment due to their dependence on rain.

In line with this, the magnitude of agricultural loan approval will go up from Birr 3.27 billion at
the base year (2014/15) to Birr 4.47 billion by the end of 2019/20. The average annual approval
to the sector will be about Birr 3.85 billion.

The average implementation period of agricultural project is assumed to take three years with
disbursement proportion of 30%, 40% and 30% in the first, second and third years of project
implementation in respective order. Accordingly, loan disbursement will go up from Birr 1.89
billion at the base year (2014/15) to Birr 4.14 billion by the end of 2019/20. The average annual
loan disbursement to the sector will be about Birr 3.63 billion.

Collection is assumed to be from old and current demand. From old demand, the outstanding
arrears are assumed to be prorated and cleared over three years period. After a grace period of
three years, collection from new disbursed loan will commence. Accordingly, loan collection
will go up from Birr 544 million at the base year (2014/15) to Birr 938.6 million by the end of
2019/20. The average annual loan collection from the sector will be about Birr 925.6 million.

8.1.2 Industrial Sector

As per the GTP II draft document, industrial sector which includes, manufacturing, electricity,
construction and mining is expected to grow by 19.8%, on average for the coming five years.

On the other hand, the industrial sector for DBE includes only manufacturing, agro-processing
and mining and energy sectors. The loan approval performance of the Bank during the past five
years for this sector indicates a compounded annual growth rate of 8.39%. Even though there is a
significant difference between the GTP-II growth targets and DBE past five years performance
results, we have opted for the growth target set in the GTP-II document which is 19.8%.
Page | 83
Accordingly, the magnitude of approval will be Birr 5.81 billion at the base year (2014/15) and
will reach to Birr 13.98 billion by the end of 2019/20. The average annual approval will be to the
tune of Birr 10.06 billion.

The average implementation period of industrial project is assumed to take three years with
disbursement proportion of 30%, 40% and 30% in the first, second and third years of project
implementation in respective order. Accordingly, loan disbursement will go up from Birr 4.11
billion at the base year (2014/15) to Birr 11.78 billion by the end of 2019/20. The average annual
loan disbursement to the sector will be about Birr 8.51 billion.

Similar to the agricultural sector, collection is assumed to be from old and current demand. From
old demand, the outstanding arrears are assumed to be prorated and cleared over three years
period. After a grace period of three years, collection from new disbursed loan will commence.
Accordingly, loan collection will rise from Birr 2.86 billion at the base year (2014/15) to Birr
3.39 billion by the end of 2019/20. The average annual loan collection from the sector will be
about Birr 3.75 billion.

8.1.3 Small and Medium Enterprises (SMEs)

Following DBE‘s intended aggressive branch expansion and enhanced financing scheme for
SMEs, at the end of GTP-II period the lease financing program is expected to be one of the
major loan products of the Bank. Accordingly, at the end of year 2016/17, the Bank will allocate
20% of its projected outstanding portfolio, which is estimated to the tune of Birr 11.5 Billion.
Moreover, the loan approval to the sector will grow by the industry sector GTP-II growth rate of
19.8% in then after.

Hence, the magnitude of SMEs loan approval for the year 2015/16 will be Birr 4.6 billion and
will reach Birr 11.86 billion by the end of 2019/20 and the average annual approval to the sector
will be about Birr 8.31 billion.

The average implementation period of SMEs is assumed to take one year with disbursement of
100% in the first year. Accordingly, loan disbursement will go up from Birr 4.6 billion at the

Page | 84
initial year of the strategic period to Birr 11.86 billion by the end of 2019/20. The average annual
loan disbursement to the sector will be about Birr 8.31 billion.

Principal collection from the sector is assumed to commence after grace period of six months but
interest will be collected from the very begging. In addition, the lease period, which is assumed
to be the loan repayment period, is eight years. Accordingly, the total loan collection will go up
from Birr 437 million (interest payment) at the initial year to Birr 6.32 billion by the end of
2019/20. The average annual loan collection from the sector will be about Birr 2.72 billion.

8.1.4 Others (Services, RUFIP, Consumer etc)

The Bank also has managed fund and other credit service to RUFIP, ECG, Service Sector and
staff consumer loans. From this category, the Bank has a plan to approve new loans to ECG and
consumers where as disbursement of the existing balance in commitment and loan collection will
be for all categories.

Over the plan period, the total approval, disbursement and collection to/from the this sector will
be Birr 1.17 billion, Birr 1.72 billion and Birr 1.4 billion, respectively over the coming five year
of strategic period. Summary of credit operation targets of the Bank for the next five years is
depicted hereunder.

Page | 85
 Development Bank of Ethiopia
2015/16-2019/20 Credit Demand Projection
Targets for Loan Approval, Disbursement and Collection
In Millions of Birr
Projection Year
Sr.
No. Description 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total
1 Approval
Agriculture 3,271 3,286 3,549 3,832 4,139 4,470 19,276
Industry 5,813 6,787 8,131 9,740 11,669 13,979 50,306
SMEs - 4,600 6,900 8,266 9,903 11,864 41,533
Others 601 145 200 234 271 319 1,169
Sub Total 9,685 14,818 18,780 22,072 25,982 30,632 112,284
2 Disbursement
Agriculture 1,890 2,931 3,676 3,555 3,839 4,146 18,147
Industry 4,107 5,361 7,371 8,210 9,836 11,784 42,562
SMEs - 4,600 6,900 8,266 9,903 11,864 41,533
Others 847 648 621 234 271 319 2,093
Sub Total 6,843 13,540 18,567 20,265 23,850 28,112 104,335
3 Collection (P+I)
Agriculture 544 901 927 908 953 939 4,628
Industry 2,866 3,930 4,061 3,941 3,445 3,391 18,767
SMEs - 437 1,231 2,223 3,412 6,319 13,621
Others 678 521 489 442 366 319 2,136
Sub Total 4,087 5,788 6,707 7,513 8,175 10,967 39,151

NB. Industry includes Manufacturing and Mining and Energy.

8.2 Financial and Other Targets

8.2.1 Financial Projections

In line with the credit operation target, the Bank has also prepared financial operational targets
for income, expenses and capital expenditure for the coming five years. The major assumptions
contained while preparing the five year financial targets are presented in the annex section of this
document.

Summary of the Bank‘s plan for key items of income statement, balance sheet and cash flow
statement for the coming GTP II period are summarized here under:

Page | 86
Table 25: Financial Targets (2015/16-2019/20) In Billions of Birr
Projection Years
Sr. Base year
Description Average
No. (2014/15) 2015/16 2016/17 2017/18 2018/19 2019/20 Total
Growth

1 Income 2.64 4.17 5.88 7.68 9.75 12.03 39.51 36%

Interest
1.1 Income 2.04 3.58 5.24 6.97 8.95 11.13 35.87 42%
Non- Int.
1.2 income 0.6 0.59 0.64 0.71 0.8 0.9 3.64 9%
2 Expenses 1.97 3.57 5.07 6.22 7.99 10.11 32.96 40%
Interest
2.1 expense 1.07 1.96 2.77 3.34 4.82 6.58 19.47 45%
Non- interest
2.2 exp. 0.9 1.61 2.3 2.88 3.17 3.53 13.49 34%

3 Net Profit 0.68 0.60 0.82 1.46 1.76 1.92 6.55 27%
4 Asset 43.68 58.06 74.53 97.26 123.27 152.08 152.08 28%
5 Liability 39.43 50.41 66.68 89.04 114.61 142.93 142.93 29%
6 Capital 4.25 7.65 7.85 8.22 8.66 9.15 9.15 20%

As depicted in the above table, the total income of the Bank during the next five strategic years
will be to the tune of Birr 39.51 billion. The income of the Bank will rise from Birr 4.17 billion
at the beginning of the strategic period (2015/16) to Birr 12.03 billion at the end of the strategic
period (2019/20), registering an average annual growth rate of 36%. From the total income of the
Bank the major share (91%) will be accounted by interest income and the remaining 9% will be
from non interest income.

Viewed from the expense side, the total expense of the Bank during the next five years will be to
the tune of Birr 32.96 billion. The expense of the Bank will increase from about Birr 3.57 billion
at the beginning of the strategic period to Birr 10.11 billion at the end of the strategic period
exhibiting an average annual growth rate of 40%. From the total expense of the Bank, the major
share (59%) will be from interest expense while the remaining (41%) will be accounted by non-
interest expense, including loan and non-loan provisions and tax.

During the review period, the total net profit after tax of the Bank will be to the tune of Birr 6.55
billion. The net profit of the Bank will climb from birr 0.60 billion at the beginning of the
strategic period to Birr 1.92 billion at the end of the strategic period, thus mirroring an average
annual growth rate of 27%.
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A look at the balance sheet structure of the Bank attests that the total assets of the Bank will go
up from Birr 58.06 billion as at 2015/16 to Birr 152.08 billion at 2019/20, reflecting an average
annual growth rate of 28%. Similarly, the total liability will jump from Birr 50.41 billion at the
beginning of the strategic period to Birr 142.93 billion at the end of the strategic period, thereby
showing an average annual growth rate of 29%. Moreover the Bank‘s capital will grow from Birr
7.65 billion in 2015/16 to the tune of Birr 9.15 billion at the end of 2019/20, portraying an
average annual growth rate of 20%. The increase in capital account will be principally attributed
to additional injection of paid-up capital and legal reserve.

The cash flow is prepared taking into account three components namely operating, financing and
investing activities, which is derived from the projections of balance sheet and income statement.
The cash flow from operations at the beginning of the strategic year shows a shortfall of Birr
13.59 billion and the shortage will increase to about Birr 26.53 billion at the end of the strategic
year. This implies that, unless additional fund is mobilized, the cash inflow from operation
cannot cover the required cash out flow. The projection of the net cash in/out flow from
financing and investing activities show a balance of Birr 11.46 billion and 3.09 billion at the
beginning of the strategic year and will become Birr 24.31 billion & 0.28 billion at the end of the
strategic year, respectively. Finally, the net cash in/out flow is Birr 0.96 billion at the beginning
of the strategic period and it will become Birr -1.95 billion at the period end.

Table 26: Target of Cash flow activities In millions of Birr

Projection
Cash Flow Activities 2015/16 2016/17 2017/18 2018/19 2019/20
Cash flow from operation (13,593) (12,041) (13,705) (16,316) (26,532)
Cash flow from investing 3,090 127 219 233 275
Cash flow from financing 11,456 11,791 14,157 16,986 24,308
Net cash in/out flow 954 (123) 671 902 (1,949)

8.3 Import/Export Target

Considering 60% of each year total disbursement, the total foreign currency payment for import
will range from Birr 8.12 billion at the beginning of the strategic period (2015/16) and will go up
to the tune of Birr 16.87 billion at 2019/20.

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On the other hand, export is targeted to expand by 29% within GTP-II periods. However, in
forecasting the export proceeds for the next five years, a growth rate of 20% is assumed based on
the base year (2014/15) total export proceed of Birr 1.87 billion. This was due to the new credit
policy directions that commercial banks will participate in providing short-term working capital
loans for DBE-financed projects and may share 50% of the expected export proceeds
accordingly.

Hence, the projected export proceeds for the coming five years in total will be about Birr 16.70
billion and will be anticipated to climb from 2.24 billion in 2015/16 to Birr 4.65 billion in
2019/20.

Table 27: Import, export and net foreign currency requirement targets In Billion Birr
Year of Projection
Base Year
Description (2014/15) 2015/16 2016/17 2017/18 2018/19 2019/20 Total
Import (Foreign currency
sale) 3.24 8.12 11.14 12.16 14.31 16.87 62.60

Export Proceed 1.87 2.24 2.69 3.23 3.88 4.65 16.70

Net Foreign currency
requirement from NBE 1.37 5.88 8.45 8.93 10.43 12.21 45.90

The gap between the forecasted foreign exchange requirement and internally generated export
proceeds; clearly shows that shortfalls will occur throughout the entire strategic period.
Accordingly, the above net foreign currency deficit is expected to be covered by the National
Bank of Ethiopia, excluding beginning foreign bank balance which is tagged for the existing L/C
commitment balances.

8.4 GERD Bonds Target

On the assumptions that the project will phase out in the coming three years, DBE will be
expected to sell a total of Birr 1.8 billion including CBE and Micro Finance Institutions. On a
year-on-year basis, the total bond sales will reach Birr 785.8 million in the third year from Birr
453.9 million at the beginning of the strategic period.

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 With regard to bond redemption, it is assumed that all matured bonds will be fully settled in the
coming five-year strategic period. Accordingly, the total bond redemption during the strategic
period will be Birr 7.12 billion whereas the average annual redemption will stand at Birr 1.42
billion.

8.5 Resource Mobilization Target

According to the NBE‘s new financing strategy for DBE, the main sources of fund needed to
achieve the above credit and financial targets will be DBE bond sales to different institutions and
loan collection mainly from operational projects. Projection of Resource mobilized through DBE
Bond Sales to Commercial Banks, Insurance companies, PSSSA and PORSSA and New fund
Mobilized from loan collection is briefly summarized in the following table.

Table 28: Resource mobilization targets (in millions of Birr)

Sr.
No. Particulars 2015/16 2016/17 2017/18 2018/19 2019/20 Total

1 Commercial Banks A 3,172.3 4,908.4 7,696.0 16,501.4 14,468.8 46,746.9

2 Insurance Companies B 0.0 3,605.0 750.2 919.8 1,131.1 6,406.1

3 PSSSA C 3,683.3 3,241.3 4,278.5 5,647.6 7,454.9 24,305.6

4 POESSA D 2,821.0 2,821.0 4,231.6 6,347.3 9,521.0 25,741.9

5 Total DBE Bond Purchase E=A+B+C+D 9,677.0 14,576.0 16,956 .0 29,416.0 32,576.0 103,200.5

6 Maturing NBE Bill F 6,751.1 6,046.4 5,894.8 7,346.4 6,515.3 32,554.0

7 Rollover NBE Bill G 4,725.7 3,023.2 1,768.4 0.0 - 9,517.3

8 Redemption of T-bill H 3,000.0 0.0 0.0 0.0 0.0 3,000.0

9 Collection I 5,788.0 6,707.0 7,513.0 8,175.0 10,967.0 39,150.0

Net Resources Mobilized J=E-F+G+H+I 16,439.2 18,259.5 20,342.9 30,244.7 37,027.5 122,313.8

From the above Birr 122.3 billion net resources to be mobilized within the next five years, Birr
104.33 will be disbursed mainly for project and SMEs lease financing, while the remaining
amount will be used for various interest and non-interest operational expenses, capital budget
and for the settlement of various debt obligations.

Page | 90
8.6 Capital Budget

Apart from operational /income and expense/ budget, the bank will allocate capital budget for the
coming five year strategic period. This part of the budget normally includes recurrent and non
recurrent capital budget for items like building construction and maintenance, transport vehicle,
office furniture and equipment, computerization program and computers and accessories.
Summary of five years capital budget is as indicated below.

Table 29: Capital Budget Summary for 2015/16 - 2019/20 Strategic Plan Period
In millions
Sr. Budget Year
Total
No. Item 2015/16 2016/17 2017/18 2018/19 2019/20 Cost % Share
Building Construction and
1 Maintenance 35.78 33.99 7.44 0.35 - 77.56 11%
IT Infrastructure
Development/
2 Computerization Program 86.06 82.93 40.93 43.65 18.77 272.34 39%
Computers and its
3 Accessories 15.59 12.19 9.86 9.45 10.43 57.53 8%

4 Office Furniture 17.37 9.07 6.31 8.09 9.85 50.69 7%

Transport Equipment &
5 Vehicles 68.76 51.82 39.54 38.46 33.19 231.77 34%
Total 223.56 190.00 104.09 100.01 72.24 689.89 100%

Accordingly, the total capital budget for the year 2015/16-2019/20 comprises the rolled over
capital expenditure transferred from 2014/15 for different reasons and the new capital
expenditure required for the five year strategic plan period. Overall, a total of Birr 689.89 million
is planned for capital expenditure during the years under consideration. The breakdown of the
expenditure is given here under.

As can be seen from the table below, the major portion (39%) of the capital expenditure will be
allocated for IT infrastructure which will significantly improve the information capital and the
competitive position of the Bank in the industry.

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8.7 Human Resources Targets

The Bank‘s human resources target is projected based on work units demand, and expected
termination due to pension and other causes. Accordingly, the following assumptions were
employed to determine the human resources target for the coming five years strategic period.

 Small and Medium enterprise financing will be operational;

 New structure will be implemented and human resources requirement will be revised
accordingly;
 Replacement of staff who are pensioned during the coming five years will be considered;
 117 additional branches will be operational for the coming five years;
 Opening of seven regional office will be effected;
 New branch classification implementation; and
 In addition, 6% compounded annual growth rate is assumed for projection.

In line with the above assumptions, the HR compounded annual average growth rate for
Professional and High Level Supervisor (PHLS), Semi-Professional, Administrative and
Clerical, Technical and Skilled, Manual and Custodian will be by 25.97%, 16.4%, 26.45% and
40.32%, respectively. The 25.97% growth rate of PHLS shows attention of the Bank in the
strategic years for this job category. On the other hand, the 40.32% increase in the manual and
custodian job category is attributed to the opening of 117 new branches in different parts of the
country.

All in all, in terms of professional category the human resource plan of professional and high
level supervision is 2,601 (58%), semi-professional is 468 (10%) technical and skilled is 278
(6%) and manual & custodian is 1176 (26%). The total human resources balance is planned to
reach 4,522 at the end of the 2019/20 F.Y registering 237% growth from the baseline of 1,341
employees in 2014/15.

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 Table 30: Summary of Human Resources Targets

2014/15 2015/16 2016/17 2017/18 2018/19 20119/20

Sr. % % % % % %
No. HR Category No. Share No. Share No. Share No. Share No. Share No. Share
Professional
and High Level 820 61% 1783 60% 2184 58% 2315 58% 2454 58% 2601 58%
1 Supervisor
Semi-
Professional,
219 16% 331 11% 393 10% 417 10% 442 10% 468 10%
Administrative
2 and Clerical
Technical and
86 6% 180 6% 233 6% 247 6% 262 6% 278 6%
3 Skilled
Manual and
216 16% 693 23% 987 26% 1046 26% 1108 26% 1175 26%
4 Custodian
Total 1341 100% 2987 100% 3797 100% 4025 100% 4266 100% 4522 100%

8.8 Summary of BSC Targets

Targets refer to a quantitative representation of the performance measure at some point in the
future, i.e. a desired future level of performance. Accordingly, the following table depicts credit
and non credit targets for the coming strategic period under consideration.

Table 31: Summary of BSC Targets

Targets
Sr. Base Year- Year- Year- Year-
No. Strategic Objectives Strategic Measures Line Year-I II III IV V
Percentage of Successfully Operating
Projects 61% 73% 79% 86% 93% 100%
Percentage of successfully
commissioned projects TBD
Enhance Stakeholders
1 Interest Export proceed/Foreign currency
purchase (in billion Birr) 1.87 3.35 4.33 5.58 7.20 9.29
Amount of Fund Mobilized from
GERD (in million birr) 1,300 453.90 619.60 785.80 0 0
Compliance with Regulation 3 3 3 2 2 1
NPL Ratio 12.54% 10% 8% 7% 6% 5%
Loan Recovery Performance 47% 48% 51% 58% 66% 75%
Improve Financial
2 Soundness
Clean Long outstanding receivables
and payables (more than 90 days) TBD
Return on Asset 1.55 2.14% 2.32% 2.34% 2.24% 2.23%
Improve Customer
3 Customer Satisfaction Score (External)
Satisfaction 77% 83% 83% 84% 84% 85%
Improve Public
4 Level of public awareness
Awareness TBD
5 Improve Service Loan Disbursement (in Billion birr) 6.84 13.54 18.56 20.26 23.85 28.11
Page | 93
 Delivery Percentage of Projects that Meet
Implementation Schedule 88% 90% 92% 94% 96% 100%
Average Cycle Time (in Working
Days) 46 41 38 36 34 32
Loan Approval (in Billion birr) 9.69 14.82 18.78 22.07 25.98 30.63
Rework Rate 7% 5% 5% 5% 5% 5%
Improve Project Follow-Up Coverage Ratio 99% 100% 100% 100% 100% 100%
6 Credit/Asset Loan Collection (In Billion Birr) 4.09 5.79 6.71 7.52 8.18 10.97
Management Rate of Fresh Entrants to NPLs 2% 1% 1% 1% 1% 1%
Improve Customer
7
Sourcing Percentage of Recruited Customer 0 10% 15% 25% 35% 50%
Improve Number of Forums Organized 0 12 13 14 15 16
8 Relationship and Number of successful Partners Created
Communication and Managed 0 2 4 6 8 10
Employee Competence Coverage Ratio
TBD
Enhance Employee
Leadership Competency Coverage
9 and Leadership Ratio TBD
Competency
Percentage of staff who get required
training TBD
Automated System Coverage Ratio 30% 55% 70% 82% 92% 100%
Improve Information Network Coverage Ratio 80% 94% 96% 98% 100% 100%
10 Organization and Information Management and
Management Accessibility Ratio 75% 79% 83% 89% 96% 100%
Enhance IT Security 40% 59% 68% 86% 92% 100 %
Percentage of Employees Engaged TBD
Improve Employees Satisfaction level 72% 73% 74% 76% 78% 80%
Organizational Organizational Culture Change Index 72% 74% 76% 78% 80% 80%
11
Culture and Team development Index 79% 82% 84% 86% 88% 90%
Alignment Professional Attrition Rate 4% 4% 4% 4% 3% 3%
Remark: TBD = To Be Determined

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 IX. GENERAL AND SPECIFIC ASSUMPTIONS
9.1 General Assumptions

The projected amount of total loan approval, disbursement and Collection is estimated depending
on the following general assumptions. It has to be noted that all the numerical values exhibited in
each case is configured within the framework of these general assumptions.

A. Macro Level

The steady macroeconomic stability of the country will attract both domestic and
foreign investors to different sectors;
Political stability and security: Though Ethiopia is located in a region almost
synonymous with conflict and instability, the country is one of the most stable in
Africa and a hub of peace and stability. This can significantly contribute in
attracting foreign investment;
Infrastructural developments (railway, road, electric power generation and others)
that are currently underway in different parts of the country are believed to be
completed and will play a pivotal role for the attraction of both domestic and
foreign investors;
The credit rating classifies the country in a better position is believed to positively
build the country‘s image and will add to the inflow of foreign direct investment;
Better facilitation in licensing, registration, customs and taxation, as well as
delivery of land (industrial zone development) particularly for selected investments
such as manufacturing and agriculture will be put in place;
The country‘s inflation rate is remained at the steady level;
Industry will lead the country‘s economy keeping agriculture the major source of
raw materials for the industry;
Improved teamwork among government offices, ministries, Regional Offices,
financial institutions, etc;
The country‘s economic policies will be updated taking in to account the
development, dynamic environment and customer needs; and
Improved communication is expected to be made with all concerned stakeholders
on the newly developed policies and procedures and the updated ones.
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B. Bank Level

The Bank will revise the existing organizational structure to make it fit for the
proposed strategy implementation;
The Bank will regularly evaluate both transformation and operational activities and
take prompt action on any gap arising in the implementation process to enhance
credit service deliver;
Since regional loan sanction limit was revised upwards, the amount on loan
approval and disbursement of regional offices is believed to increase during the
forthcoming strategic period;
More attention will be given to customer sourcing;
The credit policy, procedures and other guidelines of the Bank shall be continuously
updated taking into account the ever changing customer demand and dynamic
environment;
The paid-up capital of the Bank will increase to Birr 7.5 billion. Accordingly single
borrower limit assumed to be uplifted;
It is expected that there will be an improvement in the overall physical asset
management of the Bank;
It is expected that there will be an improvement in updating research studies and
databases;
The networking within the Bank‘s operating units will be continuously improved
along with the information technology infrastructure;
There is improvement in the implementation of good organizational culture and
ethical standards every time;
The necessary human resource is in place. In line with this core areas of the Bank
will be filled by staff with the required competency;
The total number of branches and regions will increase from 35 and 5 to 152 and 12
respectively within the coming two years by assuming the opening of 117 and 7
new branch and regional offices;
The Bank will redeploy and assign the human resources by giving due attention for
its core credit operation; and

Page | 96
 Organizational restructuring and human resource redeployment will consider the
following critical issues;

o Independent follow-up and loan collection work unit shall be established

to strengthen monitoring and evaluation;
o Qualified and experienced leaders and professionals shall be assigned in
the Core Process.
o Strong and dedicated project implementation work unit will be organized;
o Special attention will be given to mega projects with monitoring and
special preferential treatment;
o Special window to provide special treatment to exporters will be opened;
o The Bank will expand and improve export banking services; and
o In order to maintain the financial performance for the coming strategic
periods, the Bank should design an effective strategy to reduce the NPL
rate to an acceptable level (presumably below 5%).

9.2 Specific Assumptions

A. Description of the Bank’s Vision

 Bank’s Vision:
“100% success for all financed projects by 2020”
 Description of the Bank’s Vision
To achieve the bank‘s vision all operational projects must fulfill 4 criteria; - debt Settlement, saving
and/or generating foreign exchange, and creation of employment and payment of tax revenue to the
government. All operational projects are believed to operate above breakeven point. The Bank’s vision
descriptions have been reviewed as shown below:

Page | 97
Table 32: Vision Measurement Criteria
Sr.
Criteria Measure
No.
1 Debt Settlement
The Project shall be under Performing
loan status.
Projects established for export,
 At least 75% of the planned
production has to be exported.
Generate/Save Foreign
2 25
Exchange
Projects established for import substitution,
 100% of the actual production has to
be sold in the domestic market.
3 Employment Creation Create employment opportunity for at least
80% of the target set in the appraisal report.
Full settlement of the required business
4 Generate Tax Revenue
income tax
Note: To be Successful a project should achieve ≥85% of the total weight
Measure
Weight Means of verification Remark
(%)
According to the NBE Directive, the
50 T-insight and Loaning Units reports. Performing loans shall only include Pass
and Special Mention loans.
Report of International Banking Unit,
Bank‘s follow-up report and It includes bank financed projects established
documents from Ethiopian for import substitution and/or export
Commodity Exchange
15 Appraisal study and Follow-up report
- Confirmation of tax payment from
client/tax authority.
10 It does not include tax exempted projects
- If the project is in tax holyday the
weight will be distributed to the
above three measures
Page | 98
 B. Approval
From the total DBE‘s loan approval plan of about Birr 112.3 billion for the coming five years the
share of industry sector constitutes 50.3 billion (45%), followed by agriculture about 19.3 billion
(17%), SMEs 41.5 billion (37%), and ECG and consumer loan Birr 1.17 billion (1%).

Approval for industry will grow by 19.8% from the base year (2014/15) as adopted
from the GTP-II draft document;
Approval for Agriculture will grow by 8% from the base year (2014/15) based on
the growth rate used by the government for projection of GTP II of the sector;
Approval projection of SMEs is based on the assumption that it will reach 20%
(11.5 billion) at the end of 2016/17. The forecast is made using the industrial sector
growth rate which is 19.8% then after;
There is no approval projection assumed for service sector as the sector is out of the
Bank‘s priority area list;
There will be no new approval projection for RUFIP as the program has ended yet;
and
Approval projection of consumer/staff is projected in consideration of the credit
demand of staff of the Bank.

C. Disbursement

From the total Bank‘s loan disbursement plan of Birr 104.3 billion for the coming five years, the
share of industry, agriculture and SMEs will account for about Birr 42.56 billion (41%), Birr
18.15 billion (17%) and Birr 41.53 billion (40%) respectively, while the remaining balance of
Birr 2.09 billion (2%) will be disbursed for ECG, staff loan and RUFIP.

Underlying assumptions for projection:

Disbursement plan during the strategic period is composed of balance in

commitment of the year 2014/15 (Birr 9.7 billion) and Birr 94.63 billion from new
approval of next strategic period (2015/16-2019/20);
On the average implementation of new project is assumed to take 3 years;
The existing balance in commitment will be disbursed in the proportion of 60% and
40% in the first and second years, respectively;

Page | 99
 Disbursement for agricultural and industrial projects is assumed to be effected on
installment basis with a proportion of 30% at first year, 40% in the second year and
30% in the third year;
100% disbursement for SMEs will be released during the same year;
ECG will be released on the proportion of 50% during the first year and 50% during
the second year; and
Consumer/staff loan will be fully disbursed within one year.

D. Collection

In order to provide projected financial support to the economy, DBE need to mobilize fund. The
main source of fund for DBE is its collection from financed project and borrowing both from
local and foreign sources.

A total collection of about Birr 39.15 billion is anticipated based on collection demand of the
Bank from projects for the coming five year strategic plan period. Out of which collection from
the industry sector will be about birr 18.77 billion (48%), Birr 4.63 billion (12%) will be from
agriculture, Birr 13.62 billion (35%) from SMEs and the remaining balance of birr 2.14 billion
(5%) billion will be from service sector, ECG, RUFIP and staff loan in cumulative.

Underlying assumptions for Projection:

Old loan shall be collected over three year‘s period in the ratio of 20% first year,
30% during second year and the remaining 30% during third year;
From current demand 100% will be collected during the same plan period;
Three years grace period is assumed for principal loan collection. Accordingly,
principal loan collection from the new disbursement starts from the 4th year;
Loan availed to SMEs will be repaid within 8 years; and
RUFIP, ECG and Consumer loan collection depends on their individual agreement.

9.3 Other Issues to be addressed

To ensure the accomplishment of the above mentioned credit plan within the intended strategic
period, the Bank should address the following major issues.

Page | 100
A. Manpower and Organizational Development
The Bank should craft and implement comprehensive Human Resource
Development Strategy;
Succession planning will be implemented fully during the strategic plan period
The Bank will continuously improve employee engagement by implementing
organizational development programs;
Implement a short and long term succession plan and career development program;
Strengthening job rotation scheme;
The Bank will facilitate need-based technical, behavioral and leadership
development training and development programs;

B. Ensuring Accountability and good governance

The Bank will establish accountability framework for performance results;
Improve risk related and operational audit activities and take timely measures on
the findings;
Improve employee-management relation to raise employee satisfaction and
productivity.

C. Others
Improve the Bank‘s information capital;
Improve customer sourcing mechanism;
Build image of the Bank through different publicity programs;
Enhance Customer and Stakeholder relationship;
Improve a system of Monitoring, Evaluation and taking Corrective measures;
Enhance partnership relationship with local and foreign development research
institutions and universities.

Page | 101
ANNEXES

Page | 102
 Annex I

Development Bank of Ethiopia

2015/16-2019/20 Credit Demand Projection
Approval
000
2014/15 Actual

2015/16 2016/17 2017/18 2018/19 2019/20 Total

Sector NL Amount NL Amount NL Amount NL Amount NL Amount NL Amount NL Amount
Agriculture
1.1 Public - 54,947 - - - - - - - - - - - -
1.2 Private 115 3,042,283 124 3,285,666 134 3,548,519 145 3,832,400 156 4,138,992 169 4,470,112 729 19,275,689
1.3 Cooperative 34 174,480 - - - - - - - - - - - -
Sub-Total 149 3,271,710 124 3,285,666 134 3,548,519 145 3,832,400 156 4,138,992 169 4,470,112 729 19,275,689
Manufacturing
2.1 Public 1 7,272 3 8,712 4 10,437 5 12,503 5 14,979 3 17,945 20 64,576
2.2 Private 104 5,621,786 125 6,734,900 149 8,068,410 179 9,665,955 214 11,579,814 257 13,872,617 924 49,921,695
2.3 Cooperative - - - - - - - - -
Sub-Total 105 5,629,058 128 6,743,611 153 8,078,847 184 9,678,458 219 11,594,793 260 13,890,562 944 49,986,271
Mining & Energy
4.1 Public - - - - - - - - - - - - - -
4.2 Private 3 36,019 4 43,151 4 51,695 5 61,930 6 74,192 7 88,882 27 319,850
4.3 Cooperative 3 148,172 - - - - - - -
Sub-Total 6 184,191 4 43,151 4 51,695 5 61,930 6 74,192 7 88,882 27 319,850
Small & Medium
Enterprise(SME)
5.1 Public - - - - - - - - - - - - - -
5.2 Private - - - - - - - - - - - - - -
5.3 Cooperative - - 920 4,600,000 1,380 6,900,000 1,653 8,266,200 1,981 9,902,908 2,373 11,863,683 8,307 41,532,791
Sub-Total - - 920 4,600,000 1,380 6,900,000 1,653 8,266,200 1,981 9,902,908 2,373 11,863,683 8,307 41,532,791
Services
6.1 Public - - - - - - - - - - - - - -
6.2 Private 5 7,469 - - - - - - - - - - - -
6.3 Cooperative - - - - - - - - - - - - - -
Sub-Total 5 7,469 - - - - - - - - - - - -
RUFIP 51 537,147 - - - - - - -
ECG - - 25 72,105 40 105,847 44 111,311 44 111,500 48 110,868 201 511,631
Consumer(Staff Loan) 618 55,943 803 72,726 1,044 94,544 1,358 122,907 1,765 159,779 2,295 207,712 7,265 657,668
TOTAL 934 9,685,518 2,004 14,817,259 2,756 18,779,451 3,389 22,073,207 4,172 25,982,164 5,151 30,631,820 17,472 112,283,900

Page | 103
 Annex II
Development Bank of Ethiopia
2015/16-2019/20 Credit Demand Projection
Disburseement
000
Base Year Year of Projection
Actual Balance in
Sector Performance Commitment 2015/16 2016/17 2017/18 2018/19 2019/20 Total
Agriculture
1.1 Public - - - - - - - -
1.2 Private 1,702,104 3,242,242 2,931,045 3,675,719 3,554,827 3,839,214 4,146,351 18,147,155
1.3 Cooperative 187,488 - - - - - - -
Sub-Total 1,889,592 3,242,242 2,931,045 3,675,719 3,554,827 3,839,214 4,146,351 18,147,155
Manufacturing
2.1 Public 413,128 466,609 282,579 193,259 10,539 12,626 15,126 514,130
2.2 Private 3,589,294 4,575,325 4,765,665 6,944,613 8,147,620 9,760,849 11,693,497 41,312,244
2.3 Cooperative 20,294 13,960 8,376 5,584 - - - 13,960
Sub-Total 4,022,716 5,055,894 5,056,620 7,143,456 8,158,160 9,773,475 11,708,623 41,840,334
Mining & Energy
4.1 Public 25,000 - - - - - - -
4.2 Private 58,986 351,770 224,007 173,477 52,202 62,538 74,921 587,145
4.3 Cooperative - 134,117 80,470 53,647 - - - 134,117
Sub-Total 83,986 485,887 304,477 227,123 52,202 62,538 74,921 721,261
Small & Medium
Enterprise(SME)
5.1 Public - - - - - - - -
5.2 Private - - - - - - - -
5.3 Cooperative - - 4,600,000 6,900,000 8,266,200 9,902,908 11,863,683 41,532,791
Sub-Total - - 4,600,000 6,900,000 8,266,200 9,902,908 11,863,683 41,532,791
Services
6.1 Public 61,653 365,252 219,151 146,101 - - - 365,252
6.2 Private 10,326 10,304 6,182 4,121 - - - 10,304
6.3 Cooperative - - - - - - - -
Sub-Total 71,979 375,555 225,333 150,222 - - - 375,555
RUFIP 710,811 540,120 270,060 270,060 - - - 540,120
ECG - - 72,105 105,847 111,311 111,500 110,868 511,631
Consumer(Staff Loan) 63,768 7,852 80,578 94,544 122,907 159,779 207,712 665,519
TOTAL 6,842,852 9,707,550 13,540,218 18,566,971 20,265,607 23,849,413 28,112,159 104,334,367
Annex III
Page | 104
 Development Bank of Ethiopia
2015/16-2019/20 Credit Demand Projection
Collection
000
Year of Projection
Sector 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total
Actual (P+I) Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest
Agriculture
1.1 Public - - - - - - - - - - - - -
1.2 Private 453,472 380,548 457,497 384,142 485,162 353,029 503,035 423,147 487,499 392,034 510,097 1,932,901 2,443,291
1.3 Cooperative 90,553 59,830 3,130 54,816 3,072 48,995 2,802 40,751 1,893 34,929 1,622 239,321 12,519
Sub-Total 544,025 440,378 460,627 438,958 488,234 402,023 505,837 463,898 489,392 426,964 511,720 2,172,222 2,455,810
Manufacturing -
2.1 Public 106,833 308,812 244,504 308,874 285,584 283,150 272,293 180,612 95,833 154,888 82,627 1,236,336 980,840
2.2 Private 2,694,783 1,416,608 1,931,508 1,413,683 2,024,874 1,295,145 2,063,447 1,250,698 1,892,439 1,132,160 1,997,062 6,508,293 9,909,331
2.3 Cooperative 16,351 7,739 2,821 7,659 3,084 7,001 2,893 4,608 1,338 3,950 1,147 30,957 11,283
Sub-Total 2,817,967 1,733,159 2,178,833 1,730,217 2,313,542 1,585,297 2,338,633 1,435,917 1,989,610 1,290,997 2,080,836 7,775,586 10,901,454
Mining & Energy
4.1 Public 8,273 - - - - - - - - - - - -
4.2 Private 39,514 10,136 6,306 9,122 6,897 8,109 7,649 9,792 8,593 8,779 9,768 45,938 39,214
4.3 Cooperative - - 1,084 - 975 - 867 - 758 - 650 - 4,334
Sub-Total 47,787 10,136 7,390 9,122 7,873 8,109 8,516 9,792 9,352 8,779 10,418 45,938 43,548
Small & Medium
Enterprise(SME)
5.1 Public - - - - - - - - - - - - -
5.2 Private - - - - - - - - - - - - -
5.3 Cooperative - - 437,000 575,000 655,500 1,437,500 785,289 2,470,775 940,776 5,191,599 1,127,050 9,674,874 3,945,615
Sub-Total - - 437,000 575,000 655,500 1,437,500 785,289 2,470,775 940,776 5,191,599 1,127,050 9,674,874 3,945,615
Services - -
6.1 Public 138,312 69,415 22,287 66,717 21,439 60,482 19,440 43,641 13,990 37,406 11,991 277,661 89,146
6.2 Private 104,585 58,371 30,903 58,369 31,406 53,505 28,915 34,052 17,440 29,188 14,949 233,485 123,614
6.3 Cooperative 39 - - 26 22 24 20 21 17 18 15 88 75
Sub-Total 242,936 127,787 53,190 125,112 52,867 114,010 48,375 77,714 31,448 66,612 26,955 511,235 212,835
RUFIP 307,793 112,699 122,564 101,681 110,407 90,453 98,167 78,595 85,678 67,368 73,439 450,797 490,255
ECG 95,825 33,484 8,406 30,233 11,066 26,901 11,306 27,832 11,049 24,499 10,771 142,949 52,597
Consumer(Staff Loan) 30,990 43,321 19,178 38,989 18,570 34,657 18,255 34,870 18,324 30,538 18,890 182,376 93,218
TOTAL 4,087,323 2,500,965 3,287,187 3,049,314 3,658,058 3,698,951 3,814,378 4,599,394 3,575,629 7,107,355 3,860,078 20,955,977 18,195,331

Annex IV

Page | 105
 Development Bank of Ethiopia
2015/16-2019/20 Credit Demand Projection
Loan Position
000
Year of Projection
Sector
2014/15 Actual 2015/16 2016/17 2017/18 2018/19 2019/20
Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest
Agriculture
1.1 Public - - - - - - - - - - - -
1.2 Private 4,168,612 177,204 6,719,109 391,618 10,010,685 907,525 13,178,050 1,721,658 16,553,365 2,887,602 20,272,752 4,398,952
1.3 Cooperative 129,207 5,141 69,377 6,365 14,560 2,166 - - - - - -
Sub-Total 4,297,819 182,345 6,788,485 397,983 10,025,246 909,691 13,178,050 1,721,658 16,553,365 2,887,602 20,272,752 4,398,952
Manufacturing
2.1 Public 2,372,926 660,700 2,346,693 636,537 2,231,078 565,963 1,951,749 476,193 1,779,155 548,042 1,635,444 619,635
2.2 Private 15,246,491 747,545 18,595,548 582,614 24,126,478 849,756 30,978,954 1,729,309 39,489,105 3,588,335 50,050,443 6,346,065
2.3 Cooperative 1,721 1 2,358 - 283 - - - - - - -
Sub-Total 17,621,139 1,408,247 20,944,600 1,219,151 26,357,839 1,415,718 32,930,702 2,205,502 41,268,260 4,136,377 51,685,886 6,965,700
Mining & Energy
4.1 Public - - - - - - - - - - - -
4.2 Private 170,964 2,916 384,835 33,168 549,189 78,444 593,282 127,157 646,028 179,936 712,171 237,824
4.3 Cooperative - - 80,470 6,561 134,117 18,327 134,117 30,201 134,117 42,184 134,117 54,275
Sub-Total 170,964 2,916 465,305 39,730 683,306 96,771 727,399 157,358 780,145 222,120 846,287 292,099
Small & Medium
Enterprise(SME)
5.1 Public - - - - - - - - - - - -
5.2 Private - - - - - - - - - - - -
5.3 Cooperative - - 4,600,000 - 10,925,000 382,375 17,753,700 1,283,688 25,185,833 2,735,565 31,857,917 4,635,018
Sub-Total - - 4,600,000 - 10,925,000 382,375 17,753,700 1,283,688 25,185,833 2,735,565 31,857,917 4,635,018
Services
6.1 Public 302,556 5,094 452,292 37,082 531,649 69,499 471,144 83,425 427,482 104,954 374,855 122,982
6.2 Private 207,979 21,509 155,790 9,301 101,542 - 48,037 - 13,985 - - -
6.3 Cooperative - - - - - - - - - - - -
Sub-Total 510,535 26,604 608,081 46,383 633,191 69,499 519,181 83,425 441,467 104,954 374,855 122,982
RUFIP 2,383,372 56,766 2,540,733 236,698 2,709,112 451,385 2,618,659 667,457 2,540,063 886,586 2,472,696 1,109,871
ECG 593,548 7,494 632,169 74,949 707,783 148,817 792,193 232,574 875,861 326,629 962,230 431,326
Consumer(Staff Loan) 100,458 260 137,714 - 193,269 4,623 281,519 20,150 406,427 50,597 583,601 101,739
TOTAL 25,677,835 1,684,632 36,717,088 2,014,895 52,234,746 3,478,878 68,801,402 6,371,812 88,051,421 11,350,430 109,056,225 18,057,686

Page | 106
 Annex V

DEVELOPMENT BANK OF ETHIOPIA

Projection of Income Statement
For The Strategic period From 2015/16-2019/20
000
Average Base
PARTICULARS
Growth Year Projection
Rate
I. INCOME 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Total
1. Interest Income on Loans 57% 2,045,503 3,582,552 5,238,909 6,968,371 8,951,146 11,131,501 35,872,479
2. Interest earned on treasury bill 21% 385,603 294,559 294,559 294,559 294,559 294,559 1,472,795
3. Interest earned on Local & foreign deposits 1958% 65,651 7,766 11,648 17,473 26,209 39,314 102,409
4. Gain/Loss on Foreign Currency fluctuation 43% 8,633 181,236 217,483 260,980 313,176 375,811 1,348,685
5. Services charges/commissions earned 6% 104,525 63,861 76,633 91,959 110,351 132,421 475,224
6. Other income 49% 34,947 39,604 43,564 47,920 52,712 57,984 241,784
Total Income 33% 2,644,862 4,169,576 5,882,797 7,681,262 9,748,153 12,031,589 39,513,376
II. EXPENSES -
7. Employees' salaries & allowances 31% 110,819 222,685 252,682 258,200 263,883 275,749 1,273,199
8. Employees benefit 37% 69,890 329,911 383,064 392,640 414,034 427,259 1,946,907
9. Interest & charges 35% 1,070,411 1,956,758 2,767,844 3,339,485 4,816,006 6,584,581 19,464,673
10. Depreciation expense 45% 47,250 38,517 50,886 85,421 106,337 105,887 387,049
11. General expenses 27% 70,402 149,948 192,726 244,562 274,910 400,689 1,262,835
Total Expenses 33% 1,368,773 2,697,817 3,647,203 4,320,308 5,875,170 7,794,165 24,334,663
13. Operating income ( loss ) before tax & Provision 34% 1,276,089 1,471,759 2,235,594 3,360,954 3,872,983 4,237,424 15,178,714
14. Extraordinary income (loss) -
15. Prior year adjustment -
16. Provision Expense 121% 475,942 736,435 1,195,846 1,394,395 1,483,474 1,618,704 6,428,854
17. Net income (loss) before tax 24% 800,147 735,324 1,039,748 1,966,559 2,389,508 2,618,720 8,749,859
18. Income (profit) tax -6% 121,773 132,230 223,557 501,600 628,485 697,248 2,183,119
19. Net income/loss after tax and provisions 55% 678,374 603,095 816,191 1,464,959 1,761,024 1,921,472 6,566,740

Page | 107
 Annex VI

DEVELOPMENT BANK OF ETHIOPIA

PROJECTED BALANCE SHEET
For the Strategic period From 2015/16-2019/20
000'
Average
PARTICULARS Base year Financial projection
Growth
ASSETS Rate 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Cash on hand 7% 31,569 162,187 156,894 185,795 224,689 140,682
Balance with local bank 0% 1,481,953 1,865,151 1,804,278 2,136,648 2,583,921 1,617,846
Deposits ( reserves ) A/C with NBE - - - - - -
Cash in foreign currencies -
Balances with foreign banks 23% 1,295,656 1,735,510 1,678,869 1,988,137 2,404,321 1,505,395
Foreign securities -
Special drawing rights -
Investment international inst. -
Interest Receivables 50% 1,684,632 3,699,527 3,967,225 6,860,158 11,838,777 20,818,976
Debtors and other debit balance 190,929 826,597 1,479,113 3,979,825 4,846,810 5,595,931
Loans and advances (App-IV) 34% 25,633,442 36,717,088 52,234,746 68,801,402 88,051,421 109,056,225
Equity investment 0% 11,376 11,370 11,370 11,370 11,370 11,370
Loans transferred from C.B.E -
Uncleared effects Local 40% 16,039 11,315 17,765 27,891 43,790 68,750
Foreign 101
Treasury bills -1% 13,087,637 10,087,637 10,087,637 10,087,637 10,087,637 10,087,637
Ethiopian Gov't Bonds -38% 57,604 2,686,135 2,668,035 2,650,792 2,650,792 2,650,792
Other accounts
Promissory notes
Customer liabilities for commercial
letters of credit and acceptance 0
Fixed assets at cost 21% 440,602 540,966 764,527 954,529 1,058,614 1,158,620
Less: accumulated depreciations 19% 248,018 286,535 337,421 422,842 529,180 635,067
Net fixed asset 23% 192,584 254,431 427,106 531,687 529,435 523,554
Acquired property -
Less: accumulated depreciation -
Net acquired property -
Sub-Total 26% 43,683,522 58,056,949 74,533,038 97,261,342 123,272,961 152,077,156
Investments in subsidiary companies -
Assets transferred to Gov't institution -
Total Assets 26% 43,683,522 58,056,949 74,533,038 97,261,342 123,272,961 152,077,156

Page | 108
 Annex VI (Continued…)

000'

Average
PARTICULARS Growth Base year Projection
LIABILITIES Rate 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Demand deposits ( App. III ) 0.22 427,245 588,162 691,470 812,923 955,708 1,123,573
Saving deposits (App.III) -1% 13,230 15,394 14,584 13,817 13,089 12,401
Time deposits (App.II) 10% 363,157 - - - - -
Borrowings from local banks 25% 23,951,566 31,655,092 43,300,775 57,285,503 74,095,257 98,403,137
Borrowings from abroad 36% 4,030,990 3,886,672 3,741,543 3,569,413 3,393,283 3,469,413
Direct
Through Ministry of Finance
Grand Renaissance Dam Bond Payable -45% 6,220,324 4,461,135 4,098,863
Co-finance
Stabex Fund
Managed Fund -19% 85,972 33,824 30,807 28,060 25,557 23,278
Export credit guarantee risk fund 13% 153,129 172,934 194,680 219,162 246,721 277,747
Interest Payable -15% 861,566.22 1,565,466 2,829,880 4,365,250 7,377,141 9,516,287
Other credit balances 1,345,299.79 4,731,107 6,579,908 14,779,292 17,606,898 16,083,075
Provisions for doubtful debts 15% 1,975,404 2,711,838 3,907,684 5,302,079 6,785,554 8,404,258
State dividend payable 452,321 1,064,465 2,163,184 3,483,951 4,925,055
Business profit tax payable 132,230 223,557 501,600 628,485 697,248
Total Liabilities 20% 39,427,884 50,406,175 66,678,216 89,040,281 114,611,644 142,935,471
Capital and Reserve
Paid up capital 47% 1,800,000 7,500,000 7,500,000 7,500,000 7,500,000 7,500,000
Legal reserve 53% 465,459 150,774 354,822 721,061 1,161,317 1,641,685
Retained earning 1,308,093 - - - - -
Capitalized profit earned under Swiss Stabex
Donated Capital 3,713
Unappropriated Profit net of tax 678,374
Total Capital and Reserve 20% 4,255,638 7,650,774 7,854,822 8,221,061 8,661,317 9,141,685
Total Liabilities and Capital 20% 43,683,522 58,056,949 74,533,038 97,261,342 123,272,961 152,077,156
Page | 109
 Annex VII

DEVELOPMENT BANK OF ETHIOPIA

PROJECTED CASH FLOW STATEMENT
For the Strategic period From 2015/16-2019/20
000'

Average
Growth Base year Projection
PARTICULARS Rate 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20
Net cash inflow/ (outflow) from operating activities 25% (3,700,618) (13,592,572) (12,040,585) (13,705,351) (16,316,201) (26,531,639)
Cash flow from investing activities
Interest income from foreign deposits 24% 8,633 7,766 11,648 17,473 26,209 39,314
Income earned from treasury bills 0% 385,603 294,559 294,559 294,559 294,559 294,559
Gain on disposal of fixed assets -39% 4,487 3,624 2,226 1,367 840 516
Rent Income 14% 7,647 7,495 8,535 9,719 11,067 12,602
Acquisition of fixed assets 25% (71,653) (223,561) (190,002) (104,085) (100,006) (72,239)
Decrease/(Increase) - Treasury Bills (Net of Discount) (1,821,576) 3,000,000 0 0 0 0
Net cash inflow/(outflow) from investing activities -168% (1,486,858) 3,089,883 126,966 219,032 232,668 274,751
Cash flow from financing activities

Employees Contribution for Grand Renaissance Dam Bonds 766,893 782,519 860,771
Grand Renaissance Dam Bond 465,290 378,223 416,045
GERD Bond Redemption (687,774) (390,713) (3,778,486) (1,964,590)
Corporate Bond Issued - CBE
Long term loan obtained- NBE Priority Areas 36% 698,728
Long term loan obtained via MoFED (Foreign) 95% 24,968
Borrowing from NBE (3-Year NBE Bills) 4,725,700 3,023,200 1,768,400
DBE-Bond Purchase 9,676,600 14,575,700 16,956,300 29,416,200 32,575,800
Long term loan Repaid -NBE Priority Areas ( NBE Bills) (6,250,000) (6,252,000) (4,005,000) (8,475,700) (6,123,200)
Long term loan repaid - indirect borrowing via MoFED
(principal) 160% (104,667) (75,318) (76,130) (76,130) (76,130) (76,130)
Borrowing repaid to China Development bank (69,000) (69,000) (96,000) (100,000) (104,000)
State Dividend Paid
Time deposit withdrawal (363,157) - - - -
Capital Injection 2,650,792 - - - -
Net cash in/ (out) flow from financing activities 1,851,212 11,456,359 11,790,812 14,156,857 16,985,884 24,307,880
Net cash in/ (out) flow -86% (236,265) 953,669 (122,807) 670,539 902,351 (1,949,008)
Cash and cash equivalents at beginning of the year 2,809,178 2,809,178 3,762,848 3,640,041 4,310,580 5,212,931
Cash and cash equivalents at end of year
Composition of cash and cash equivalents as at 2,809,178 3,762,848 3,640,041 4,310,580 5,212,931 3,263,923
Bank deposit balances with NBE 1,061,542 1,421,918 1,375,511 1,628,897 1,969,880 1,233,382
Cash and bank balances with local banks 451,980 605,420 585,661 693,547 838,729 525,146
Cash balances with foreign banks 1,295,656 1,735,510 1,678,869 1,988,137 2,404,321 1,505,395
Page | 110