ASSESSMENT ON THE ROLE OF FINANCIAL INSTITUTION IN

PROMOTING PRIVATE INVESTMENT (IN CASE OF

DEVELOPMENT BANK OF ETHIOPIA AT DEBRE BIRHAN
BRANCH)

A RESEARCH PROPOSAL SUBMITTED TO DEPARTMENT OF

ACCOUNTING AND FINANCE IN PARTIAL FULFILLMENT OF
THE REQUIREMENT FOR B.A DEGREE IN ACCOUNTING AND
FINANCE

DEPARTMENT OF ACCOUNTING AND FINANCE

COLLEGEOF BUSINESS AND ECONOMICS

JIMMA UNIVERSITY

Prepared By: MELESEGN EMIY

ADVISOR: W/MIKEL SHIBRU (MSC)

JIMMA, ETHIOPIA

JAN, 2016
 ABSTRACT

The student research paper will be conducted on the role of financial institution in
promoting private investment case study on development bank of Ethiopia Debre birhan branch.
There are also specific objectives in the study that will be mentioned. In order to achieve the
objectives of the study descriptive data design will be used. The source and method of data
collection in the study will from primary in the form of questionnaires and interview; and
secondary sources of data will gather from annual report of DBE, NBE and investment office,
and available literature from published and unpublished material. Judgmental sampling
technique will apply. The data analysis and presentation will in the form of tables, graphs and
percentages.

ACKNOWLEDGMENT

First and for most, I would like to thank the almighty God for helping to do this study. Secondly,
my best appreciation is belongs to my advisor W/mikeal Shibru who put me in the right track of
the research proposal and for his continuous and constructive comments with a best approach
and endless assistance to write up the final proposal paper. Finally, I would like to express my
gratitude for my best friends for their support to me in accomplish this research proposal.
 TABEL OF CONTENTS

CONTENT PAGE

Abstract--------------------------------------------------------------------------------------------------------I

Acknowledgment--------------------------------------------------------------------------------------------II

1. INTRODUCTION----------------------------------------------------------------------------------------1

1.1BACKGROUND OF THE STUDY---------------------------------------------------------------1

1.2 Statement of the problem ---------------------------------------------------------------------------4

1.3 Research questions---------------------------------------------------------------------------------4

1.4. The objectives of the study-----------------------------------------------------------------------5
 1.4.1. General objectives----------------------------------------------------------------------------5

1.4.2. Specific objectives----------------------------------------------------------------------------5

1.5. Significance of the study------------------------------------------------------------------------------6

1.6. Scope of the study---------------------------------------------------------------------------------------

6

1.7. Limitation of the study--------------------------------------------------------------------------------6

1.8. Organization of the study ----------------------------------------------------------------------------7

CHAPTER TWO--------------------------------------------------------------------------------------------8

2. Literature review -----------------------------------------------------------------------------------------8

2.1 investments and financial institutions------------------------------------------------------------8

2.1.1 Investment prospective in developing countries-------------------------------------------8

2.1.2 The role of financial institutions for capital formation---------------------------------9

2.1.3 Problem of investment in emerging markets ------------------------------------------11

2.1.4 Major financial institutions------------------------------------------------------------------ 12

2.1.4.1 Commercial bank ------------------------------------------------------------------------13

2.1.4.2 Savings and loan association, saving banks and

Credit union ----------------------------------------------------------------------------14

2.1.4.3. Finance companies ----------------------------------------------------------------------15

2.1.4.4 Insurance companies---------------------------------------------------------------- ----15

2.1.4.5 Investment companies ------------------------------------------------------------------16

CHAPTER THREE----------------------------------------------------------------------------------------17

3. Methodology of the study and data sources -------------------------------------------------------17

 3.1. Research design-------------------------------------------------------------------------------------17

3.2 Source of data ------------------------------------------------------------------------ --------------17

3.3 Sampling technique---------------------------------------------------------------------------------18

3.4 Data analysis and presentation------------------------------------------------------------------18

CHAPTER FOUR -----------------------------------------------------------------------------------------19

4.1Time budget--------------------------------------------------------------------------------------------19

4.2Cost budget---------------------------------------------------------------------------------------------20

Reference-----------------------------------------------------------------------------------------------------21

Appendix------------------------------------------------------------------------------------------------------

CHAPTER 1

1. INTRODUCTION
This chapter includes the main introduction part of the research paper which includes background of the
study, background of the organization, Statement of the problem, research question, objective of
the study, significance of the study and organization of the research paper in detail.

1.1 Background of the study

Efficient and stable investment activities present various opportunities to developing countries.
In fact, investment is associated with both economic and social rewards. That is, investment not
Only plays an important role in job creation but also has a role to play in provision of both
infrastructure and social services. However, finance is required for a nation to reach in a
sustainable level of investment. To provide the needed finance, there are varieties of institutions
rendering financial services; such institutions are called financial institutions. Banks are among
such institutions that render financial services. They are mainly involved in financial
intermediation, which involves channeling funds from the surplus unit to the deficit unit of the
economy, thus transforming bank deposits into loans or credits, (Mugume, 2008). Banks have
historically been viewed as playing a special role in financial markets for two reasons. One is
that they perform a critical role in facilitating payments; the other is that they have long played
an important role in channeling credit (loan) to households and businesses (Gurley, et al, 2006).

Investment is process of exchanging income during one period of time for an asset that’s
expected to produce earning in future period, or it is defined as the placing of capital on lying out
of money in a way intended to secure income or profit its employment (Cambell, 1994).
Financial institutions are involved in the process of increasing the level of investments of various
Economic sectors, particularly the capital goods needed for raising productivity. In developing
countries like Ethiopia, income is very low and as such high level of investment cannot be
executing the ideas. It is instructive to note that the banking sector has stood out in the financial
sector as of prime importance, because in many developing countries of the world, the sector is
virtually the only financial means of attracting private savings on a large scale, (McKinnon, 2007
as cited by Adeniyi, 2006).

Financial institutions historically, have always played a pivotal role in stimulating economic
growth and development. This role stems largely from their basic fundamental function in the
'capitalization' of savings through which surplus funds are mobilized in financing productive
investments. With the new Banking and Financial Institutions act coming into effect on 1st
October 1989, the connotation of "financial institutions" now includes a whole multitude of
institutions ranging from commercial banks, finance companies, merchant banks, discount
houses and money market intermediaries to institutions involved in credit, development finance,
leasing and factoring (Journal ekonomi of Malaysia :1990, p79-89).

In our country Ethiopia first the Addis Ababa bank, Banko Di Roma which was private owned
banks were amalgamated and forms governors owned bank known as Addis bank. Later on
Addis bank of Ethiopia since the nationalization of all private banks on January 1, 1975 on
words, the financial sector passed through mono banking and insurance system and guided by
the central plan like other sector until 1990 /91(Birritu: 2012p:21). Before January 1, 1975
Ethiopians financial sector was open for domestic and foreign private investor. However,
following the over throw of the feudal government in 1974, the Dreg regime nationalized the
emerging financial system then development of financial sector in Ethiopia has stopped,
following the overall economy reform of 1992/new monetary and banking proclamation was
enacted, but, financial sector development has shallow and immature until 1994 EC where
private participation in the sector was allowed for Ethiopian nationals. These after several
amendments in interest rate policy have taken place step by step so as to encourage market
oriented financial system in the country. Accordingly, at the end of fiscal year 2012/13 ended on
June 30, 2013, Ethiopia’s financial sector consists of 15 private and 3 government owned bank
(including DBE) 14 private and 1 government owned insurance companies ( IBID).With regard
to this, some researchers were studied on the related title to the contribution of financial
institution in Dire Dawa town and in Addis Ababa. But, no researcher has conducted on this title
in Debre Birhan area, so, this study was conducted on this area to evaluate the investment
problems, and to assess the role of banks in promoting private investment.

1.2 Background of the organization

The development bank of Ethiopia (DBE) is one of the financial institutions engaged in
providing short, medium and long term development credits. Its distinguishing feature is it’s
“project; based lending tradition. Since its establishment in 1909, the bank has been playing a
significant role in prompting the overall economic development of the country. The bank has
regional and branch offices which are strategically located throughout the country. In order to
facilitate the services rendered to its customers the bank has recently given all regional officers
the authority to appraise, grant and disburse loans on their own up to certain marked limit. In its
long years of service, DBE has established recognition at national and international levels.
Nationally, it is the sole bank with reputable experience in long term investment financing.
Internationally, it is recognized as an important on-lending channel for development programs
financed by bilateral and / or multi- lateral source. The recent focus of the government in relation
to DBE is to provide medium and long—term loans for investment project, which are engaged in
commercial agriculture- agro- processing and manufacturing industries, preferably export
focused. Currently the authorized profit of the bank is birr 491,000,000 (four hundred million
birr). Now DBE have 43 main branches in our country, from this Debre birhan branch is one.
DBE Debre birhan branch was established in Hidar 1981; is one of the financial institutions
engaged in providing short, medium and long term development credit. Since its establishment in
1981 the bank has been playing a significant role in promoting the overall economic
development of the area. The banks organizational set-up comprises a manager, senior officer
economic planner, senior engineer senior loan officer, casher and internal auditor.

1.2 Statement of the Problem

Financial institution in Ethiopia promotion is one of the approaches that the government has
focused its attention in recent years in pursuit of its long term vision of providing sustainable
financial services to majority of Ethiopian population for investment purpose. Before the current
financial and banking restructuring took place, most of financial services for rural and urban
investment were offered by the few licensed commercial banks. The realization of the above
shortcoming led to the Government's decision to initiate deliberate action to facilitate alternative
approaches in the creation of a broad based financial system comprising of a variety of
sustainable institutions with wide outreach and offering diverse financial products. The
government's choice of financial institutions was influenced by the conviction that, given
adequate attention, financial institutions have the potential to contribute considerably to the
Promotion of private investments in the country because it is more adapted to the needs of the
investors. For that reason, the government has put in place a competitive, efficient and effective
financial system bringing about increased access to basic financial services by the majority of the
Ethiopians particularly investors. Therefore it was worth assessing the contribution of financial
institutions in promoting private investment. Economic development is something all countries
especially the less developed ones strive for so, this processes cannot take place without efficient
mobilization and allocation of resources for the production of goods and services in economy.
(Melak Yohannes; 2011) In this regard, the researcher will be decided to full fill the gap of the
previous researchers and undertake the study to investigate the role of financial institutions in
promoting private investments in Debre birhan town using a case study of Development Bank of
Ethiopia.
1.3 Research questions

1.5 Research questions

 How does development bank of Ethiopia promote private investment?

 What is the investment condition of Debre birhan town in the current period?

 What are the investment and related activates performed in Debre birhan town?

 How does the bank (DBE) use trends in credit extension system?

1.4. Objectives of the study

1.4.1 General objective

The general objective of the study is to assess the role of DBE in promoting private investment
in Debre Birhan area.

1.6. 2 Specific objectives

 To identify the bank (DBE) investment promotion means and it’s activity to promote
investment in the current period.
 To assess the current investment condition of Debre Birhan area.
 To examine investment and investment related activates performed in Debre Birhan
area.
 To examine trends in banks (DBE) credit extension system in current period.
1.5 Significance of the study

The researcher believes that the study is important for the following points;

 The main purpose is enable to assess the role of banks in promote private investment.
  It helps as a bench mark for policy makers on financial institutions to play role in private
investment and helps to identify the problem of private investor.
 The study will helps any financial institution to identify private investment promotion
means.
 It also helps the bank (DBE) to correct its weakness from the finding of the study and it
used as a reference for other researcher to conduct relative title with this study.
1.6 Scope of the study

Even though, financial institutions play a vital role in promoting private investment in our
country, due to the broadness of our country area and lack of experience of the researcher the
study is limited to assess the role of financial institutions in promoting private investment in case
of Development Bank of Ethiopia Debre birhan branch.

1.7 Limitation of the study

During the computation of the study the researcher was faced for the following problems that
hinder the study to complete easily and in well defined way those are; the researcher faces in
obtaining sufficient and reliable data from the financial institutions ,even un willingness of the
party to give necessary information which is important to the researcher.

1.8 Organization of the paper

These research papers are organized in five chapters. The First chapter is about the core purpose
of the study which includes background of the study, statement of the problem, research
question, objectives of the study, significance of the study, scope of the study, and limitation of
the study. The second chapter includes literature review of investment and financial intuitions.
The third chapter describe about methodology of the study and data source, research design,
methods of data collections, sampling techniques& source of data. The fourth chapter includes
data analysis and presentation. The last chapter is conclusion and recommendation.
 CHAPTER TWO

LITERATURE REVIEW

2. Introduction
This chapter deals about part of investment and specialized financial institution in detail. In
investment part it includes investment prospective in developing countries, areas of investment
in Ethiopia, and problem of investment in emerging markets. The second part of this chapter
specialized financial institution part includes specialized financial institution in developing
countries, and functions and owner ship of development banks in detail.

2.1 investments and specialized financial institutions

An investment is the current commitments resources for a period in the expectation of receiving
future resource are committed; the expected rate of inflation and the risk the uncertainty of the
future payments (K. Relly and A Norton 2004, P, 5).

2.1.1 Investment prospective in developing countries

The investment prospective in developing countries might be considered the most positive
teachers of the global economy. These countries are expected to grow features than the
industrial works for the fore seeable future as they have in recent year the invest climate in sub-
saran Africa remains challenging despite some improvement private investment both domestic
and foreign is still low. In this content regions has four components; promotion of small
business capital market development, financing of projects in manufacturing instruction only and
natural resources based industries and advisor services and technical assistance for government
and business .(IFC, 1994:p30).

2.1.2 Areas of investment in Ethiopia

In developing countries like Ethiopia, some investment projects require substantial investment
out lays and their gestation periods might be long and may not be attractive and /or profitable to
private investors. Such projects normally core that give rise to back ward and fore ward linkages
and are regulated to the overall national economy. Some areas have been reserved for public
investments and others for joint ventures. All other areas opened and reserved to private
domestic and/or foreign investments. The high lights are as follows:

1. Areas reserved for public sector investment

The areas of investment reserved for government are; postal service, large scale supply of
electric energy, and rail and large scale air transport services.

2. collaborative investment
The government may invest, on its own or in collaboration with private investors, both foreign
and domestic, on limited key areas essential for the development of the economy to stimulate
development in a responsible manner. The essential includes:

A. large scale engendering and metallurgical industries;

B. capital and technology incentive investment in large scale mining and energy
production;

C. large scale Pharmaceutical and fertilizer plants; and

D industries supplying strategic raw materials to chemical industries;

3. Private investment

Private investors, both domestic and foreign, can invest more areas and sectors of the economy
on their own, in partnership or in joint venture. Small and medium transport operations,
production and supply of electric energy and certain economic activate with in the financial and
technical capability of nationals are designed to be exclusively reserved to them. Furthermore,
the government shall study the conditions and modalities of private domestic investments in
banking and insurance businesses and decide their fact. Most other areas and sectors are open for
both domestic and foreign investors.

These include investment areas and sectors indicated above under “investment opportunities” in
agriculture and agro-possessing; in manufacturing and manufacturing industries. Furthermore, as
mentioned above, there are also possibilities for collaborative investments (Dr. Knife; 2001; p;
219).

Limited access to equality or long term debt financing in emerging markets can defer private
investment financial institutions plays an important role in promoting private sector firms where
it is otherwise not available and reducing the aggregate volatility of capital flows to these firms
(IFC, 2002;p 67) .

Ethiopia governments comprehensive structural adjustment program designed to transform the

instrument of economic management and raise investment particularly but the private sectors
will be supported (World Bank; 1993; p 122)
2.1.3 The objective of investment promotion was

 To improve countries image with in the investment community as favorable locations or

investment.
 To generate investment directly.
 To provide service to prospective and current investors or investment service activity.

2.1.4 Problem of investment in emerging markets

There are a number reasons why investment managers in developed countries are reluctant to
invest more significant amount of money in emerging markets and why investors are often
warned to be want to investment in such markets these reason include:-

1. Information cost:- in developed financial markets, most quoted companies are subject to
detailed financial analysis and the cost of acquiring good quality information are relatively
low.
When investing in emerging markets, however, these are language barriers and also for less
dissemination of information, which means that the costs of acquiring good quality information
are relatively high.
2. Foreign exchange risk: - investment in emerging markets any result in capital and income
gain measured in the currency of the emerging market economy. However, there
investments need to be converted of the develop countries currency for a campaign to mad
with domestic investments. The currency charge may provide gain or low representing an
addition list that is not present with domestic investment.
3. Political risk: - in developed financial markets governments are relatively stable and the
election the opposition to government does not necessary have any significant influence on
financial markets. In emerging markets, however, investors faces the risks controls being
imposed restricting the out flow of their investment and often faces withholding tax or the
threat of imposition of such taxes.
4. Controls on foreign investment: - in many emerging market managements can impose
costly restriction on son how foreigners can invest have only be allowed a certain
proposition of investment in domestic companies or allowed shares that have more limited
voting rights than domestic investment.
5. Higher transaction costs :In developed financial market deregulation and greater
computations have the effect of greatly reducing brokerage commission .In most emerging
markets these cost are significantly higher and there are also additional costs associated with
foreign exchange commission and communication for the execution of orders.
Source: Frank Fabozzi and Frabco Modulian

2.2 Specialized Financial Institution

Apart from the concern with the growth and maturity of commercial banks, a further
concern should be the emergence and development of specialized financial institutions.
Specialized financial institutions include those that generally raise funds through long-
term or specialized types of deposits. These specialized intermediaries often lend to
particular types of borrowers such as investment, industrial, construction and development
banks. Their importance in overall economic growth emanates from the specific
function they play building on their objectives. http://elibrary.acbfpact.org/acbf/collect/a

2.21 Specialized financial institutions usually perform the following functions:

 Advance long-term loans and credits for the development of specific sectors;
 Act as a guarantor of liabilities and projects for viable entities;
 Supervise and control the activities of projects financed by the bank;
 Participate in some cases in the equities of business entities and projects;
 Accept current and time deposits so as to mobilize funds for investment; and
 Monitor and follow-up end use of loans advanced.

As a mechanism for encouraging investment in strategic sectors of the national economies,

counters have in most cases established or allow the possible creation of such specialized banks
IN Ethiopia two specialized banks namely such specialized banks include: the Construction and
Business Bank and the Development Bank of Ethiopia ( Ali I. Abdi (PhD) and Emerta A. Aragie
(MSc) September 2012 ;p ;21) http://elibrary.acbfpact.org/acbf/collect/a

2.2.2 Development banks

Among the institutions whose role in the development of the less developed regions is well
Recognized but inadequately emphasized are the development banks. Playing multiple roles,

These institutions have helped promote, nurture, support and monitor a range of activities,
though their most important function has been as drivers of industrial development.

All underdeveloped countries launching on national development strategies, often in the

Aftermath of decolonization, were keen on accelerating the pace of growth of productivity
and per capita GDP. This was the obvious requirement for alleviating poverty and reducing
the developmental gap that separated them from the developed countries. To realize this
goal, they considered industrialization to be an important prerequisite. This stemmed from
the perspective that modern economic growth was a process characterized by an increase in
the share of employment in the non-agricultural sector, and within the latter by a change in
the scale of productive units, the growth of factory production and a shift from personal
Enterprise to the impersonal organization of economic firms http://www.networkideas.org.

2.2.3 Development bank by tracing developing countries

2. Development Banks The development of national and regional development banks
is another way out to break the credit challenge for long-term productive investment.
Despite the existence of functioning national development banks in the region, there is still a
credit limit as the sources of funds for lending in the banks are the local economic units and
small and poor national government. The East African Development Bank was re-
established in 1980 and has Kenya and Uganda among its members

24Other shareholders include the African Development Bank, bilateral donors and some
foreign commercial banks. The specific objectives of the Bank are the provision of financial and
technical assistance for the promotion and development in member states of industries,
agriculture, forestry, tourism, transport and infrastructure, with preference for projects
which promote regional cooperation. The bank provides a range of products and services
which are tailor-made for the region’s development requirements. As of 2009, the
capitalization of EADB is valued at approximately US$275 million. The Bank gives due
attention to sectors that ensure regional integration. Of the total support extended by the
Bank, the development of infrastructure such as energy, transport and telecommunications
accounted for 48 percent, was followed by tourism and other services at 28 percent,
industry at 20percent, and agriculture and for 4 percent. http://elibrary.acbfpact.org/acbf/collect/a

2.2.4 FUNCTION OF DEVELOPMENT BANKS

The principal function of a development bank is the provision of medium and long term
finance for fixed assets. It also helps to provide, in addition to finance, such other essentials
of productive investment as entrepreneurship, technical skills and managerial experience. It
relies on the success of the enterprises it finances for recovery of its investment rather than
on the security of collateral, and it does so in a manner that balances commercial standards
of operation with economic benefit Promotional activity is crucial to its role.... in the
concept of the development bank are combined several strands of 19th and 20th century
tradition: vigorous mobilization of financial resources and promotion of investment, special
assistance to particular groups or regions in the country, and pursuit of broad national
economic objectives by filling perceived gaps or inadequacies in the elements required for
productive investment? http://www.francophonie.org/.

Beyound we see the above( http://kalyan-city.blogspot.com indicated the rols they play in
economy of acountry by tracing indea such as.

 to promote and develop and develop small scall industries.

 to finance development of housing sector.
 to inable large scale industries.
 to help in agricultural and rular development.
 to inhance forigen trade.
 to help to review(cure) sic industrial units.
 to incorage development of interpreneurs.
 to promote economic activetes in bacward regins.
  to assist in growth of capital markets.

2.2.5 OWNERSHIP OF DEVELOPMENT BANKS

State-owned and privately-owned development banks

The development banks can be owned both by the state and privately. In the developing
countries it is a positive characteristics that privately-owned development banks are profit
oriented institutions and can acquire more funds for credit purposes; private enterprises more
readily contact private banks which can employ more-qualified experts that state institutions
can't, and because they are profit oriented they select and finance more efficient developments.
The advantages of state development banks is that their collection of capital and placing are
guaranteed by the state; they realize projects complying with national priorities; and among
others, they undertake a considerable role in the financing of infrastructure, which private
banks are less inclined to do. There is also an opinion according to which in the
developing countries profit has not proved to be a means of allocation of satisfactory
efficiency, hence, in accordance with the long-term ideas of governments, developments must
be financed by state-run institutions. The governments have to support development banks and
have to ensure them funds for credit purposes. This is held by the majority of economists
concerned with this topic. This also means that the governments can influence the direction of
credit granting. However, the view is also held that regarding personnel, organization and
business policy, the development banks must be independent of the state

In his study Perera summarized the essential features of privately owned development
banks17: (i) Industrial entrepreneurs are more willing to talk with private than with public
institutions, (ii) Entrepreneurs are more willing to give up equity to private institutions,

(iii) Private development banks tend to be more efficient than public banks in process sing loans
and investments, (iv) Private development banks find share-holders can be more effective
than public development banks in mobilizing private foreign capital and know-how for local
projects, (v) Private development banks prefer to promote on an equity basis, where they buy
shares directly or are given an option to convert a part of a loan into stock, (
http://www.jstor.org) .
 CHAPTER THREE

RESEARCH DESIGN AND METHODOLOGY

3. Research design
The study under consideration was apply the descriptive research design and various data
collection methods which are suitable for successful accomplishment of the descriptive research.
The major purpose of descriptive research is description of the state of affairs as it exists at
present. The study was under taken in Debre birhan Development Bank of Ethiopia.

3.1 Source of data

The researcher use both primary and secondary source of data in order to gather necessary data
regarding the subject of study from the bank and investment office. Primary source of data was
used to gather necessary data from the respondent for the completion of the study; and secondary
source of data was used for support the primary source of data in order to fulfill the shortage of
data from the respondent.

3.2 Data collection technique

The student researcher was collect primary data through qualitative method of data collection
technique in a direct communication with respondents through; questionnaire (open end and
close end questions), because it is easy to get data easily and in well defined way and in short
period of time; and will use interview in order to gather information by asking the respondent
orally. In addition to the primary data, the researcher use secondary sources using quantitative
method of data collection like; annual reports of investment office, annual reports of NBE,
annual reports of Development Bank of Ethiopia, books, magazine and etc to full fill the
information which is unavailable from primary data. .

3.3 sample size and Sampling technique

In the study the researcher use judgmental sampling techniques and data was collected from
employes and manager of DBE at Debre birhan branch and from Debre birhan investment office.
The total numbers of population in the study was 26 employees of DBE at Debre birhan branch
and targeted sample size are 17 employees of the bank.

3.4 Data analysis and presentation

After all necessary data was gathered from the respondents the data was analyzed by using
descriptive method of analysis like percentage, tables, and graphs.
 CHAPTER FOUR

DATA ANALYSIS AND PRESENTATION

4. Introduction

In this chapter primary data obtained through interview and questioner and secondary data
obtained from annual report and document from DBE Debre birhan branch and Debre birhan
area investment commission has been analyzed and interpreted. The chapter answers research
questions listed in chapter one, also the analysis includes background of private investment of
Debre birhan area, banks activity to promote investment (DBE), service, amendments, trends in
extension of credit and loan disbursement for each investment area and economic sector.

4.4 Analysis of questioner

4.4.1 Sample on respondents

From the total of 17 questioners distributed for employees of DBE Debre birhan branch 13 of
them completed fully and three of them completed partially, totally 16 of them submitted where
as 1 does not submitted.

The first part of questioner is personal information of the respondents which includes sex, job
status and work experience as shown in table 4.1.

Table 4.1persenal information of respondents

NO ITEM NO OF PERCENT (100%)
RESPONDENTS

1 Sex
Male 11 68.75%
Female 5 31.25
Total 16 100%
2 Job status
Credit team(loan officer) 7 43.75%
Casher 1 6.25%
 Accountant 1 6.25%
Economist(planer) 1 6.25%
senior officer 3 18.75%
Appraisal officer 3 18.75%
Total 16 100%
3 Work experience
Less than one year 3 18.75%
1-5 year 7 43.75%
6-10 year 3 18.75%
11-15 year 3 18.75%
Total 16 100%

Source; questioner 2016 for employees of DBE Debre birhan branch

The above table shows respondents background on sax that 93.75% 0f the respondents are male
and 6.25% of the respondents are female. This shows the bank have more male employees. The
second part of the table shows job status which includes 43.75% of the respondents credit
team(loan officer), 6.25% of the respondents casher, 6.25% of the respondents engineer, again
6.25% of the respondents economist (planer), 18.75% of the respondents senior officer and
again 18.75% of the respondents appraisal officer. This shows the effort of researchers to collect
data from different professional workers to gain available evidence. The third part of the table
shows work experience of the respondents which includes 18.75% of the respondents less than
year, 37.5% of the respondents 1-5 year, 18.75% of the respondents 6-11 year, 18.75% of the
respondents 11-15 year and 6.25% of the respondents above 15 year this shows data collected
from many year workers who have seen bank service to give answer for the question provided.

4.4.2The role of development bank of Ethiopia

The role of development banks is wide and varying. It does not only encompass lending-out of
money but includes a range of other financial services. Among the services are extension of
credit, promotion of small and medium industries, developmental role, role in corporate
recovery, financial and investment advisor. Let us see the current accomplishment of DBE Debre
birhan branch in the above activity in promoting investment.

Table 4.2 Extension of credit

Question alternative Frequency Percentage

Banks Very good 12 75%

accomplishment Good 4 25%
Medium 0 0%
Poor 0 0%
Neutral 0 0%
Total 16 100%

Source; questioner for employees of DBE Debre birhan branch for the year 2016

The role of banks as supplier of funds for the promotion of investment reflected through in the
volume of credit extended to business community. DBE Debre birhan branch have good
accomplishment in the extension of credit about 75% of the respondents say very good and the
remaining 25% says good. So the bank gives good credit service in the recent period.

Table 4.3 Promotion of small and medium scale industries

Question alternative Frequency Percentage

Banks Very good 2 12.5

accomplishment Good 3 18.75
Medium 4 25
Poor 5 31.25
Neutral 2 12.5
Total 16 100%

Source; questioner for employees of DBE Debre birhan branch for the year 2016
Consistent with the national socioeconomic objectives of the Government, DBE lending to
certain priority sectors of the economy to ensure their ready access to bank credit at reasonable
cost. These special groups include commercial agriculture, agro processing, manufacturing and
extractive industries preferably export focused.

The industrialization plans call for a bigger role of the small and medium scale industries in
providing the vital supporting ancillary services and to create inter industry linkage to strengthen
the industrial base. Based on the above table the promotion of small and medium scale industries
by DBE Debre birhan branch is poor about 43.4% 0f the respondents say poor and neutral the
remaining 56.25% respond medium and above to clarify this researcher asked employees orally
about this issue they assure medium and small scale industries does not financed by Debre birhan
branch up to know.

Table 4.4 Developmental role (reorientation in lending)

question alternative Frequency Percentage

Banks Very good 9 56.25%

accomplishment Good 5 31.25%
Medium 1 6.25%
Poor 0 0%
Neutral 0 0%
Total 16 100%

Source; questioner for employees of DBE Debre birhan branch for the year 2016

Re-orientation in lending means financial institution specialized in providing loan service for
specific economic sector or favor for some selected sectors of the economy. As shown in table
4.4 the bank (DBE) have good accomplishment about 56% 0f the respondents say very good this
shows the bank’s lending in project based (recent priority focus) makes it effective.

Table 4.5 corporate recovery

Question alternative Frequency Percentage
 Banks Very good 0 0%
accomplishment Good 1 6.25%
Medium 2 12.5%
Poor 10 62.5%
Neutral 2 12.5%
Total 16 100%

Source; questioner for employees of DBE Debre birhan branch for the year 2016

Corporate recovery and turnaround has received much attention not only from corporate
managers and political leaders alike, but even more from bankers. Causes of corporate failures
are many. And some even say that banks are equally responsible. Banks were accuses of "taking
away your umbrella during a rainy day" or "the first to run for cover when you are in trouble",
based on the 4.5 table DBE Debre birhan branch have been poor accomplishment in financing
projects in rescission about 75% of the respondents respond poor and neutral.

Table 4.6 role in Financial and investment advice

Question alternative Frequency Percentage

Banks Very good 12 75%

accomplishment Good 4 25%
Medium 0 0%
Poor 0 0%
Neutral 0 0%
Total 16 100%

Source; questioner for employees of DBE Debre birhan branch for the year 2016

The advisory role of banks as “financial doctors” transcends the financial and business fraternity
between the community and the Government. On the one hand, the banker acts as corporate
adviser to the business community in such areas as corporate restructuring, expansion of
business activities and portfolio and investment management, to name but a few. On the other
hand, while providing the linkage between businessmen and Government industrial development
efforts, banks also provide the supporting advisory role for many Government development
programs. Bankers are the ones best suited to 'sniff' out clients, whether in trading or other
sectors, whom they feel have the financial and management capability as well as the interest
to diversify into new industrial projects. They may be aware of clients with sufficient technical
capability but who are in a state of excess capacity. These will be excellent contract
manufacturers for foreign industrialists seeking new sources of supply. As investment advisers,
bankers can represent their client’s overseas and local investment programs and assist in bringing
together potential foreign partners and the local investors.

Table 4.6 shows the bank (DBE) have good Accomplishment about 75% of the respondents
says very good so as we understand that the bank is public to provide linkage between
governmental programs and business man it provides supporting advisory role for many
government projects effectively.

4.4.3 Recent changes in the participation of investors from the service of the bank

The data that were collected from respondents shows the change clearly that all of them respond
yes, in addition they describe the change by writing the recent policy and strategies of the bank
to provide only for priority area by laying down the past other service sector. It gives only for
agriculture and agro processing. Previously the bank give service for the construction of hotel
and minimarket, construction of real estate and construction of elementary school, but know the
bank does not provide to this service sector rather it provides only area of focus to facilitate the
developmental strategy of government. Agriculture, agro processing manufacturing and
extractive industries preferably export focused were the government prioritized area but Debre
birhan branch give service only for agriculture and agro processing. As the bank changes its
loan policy some investors change their project to agriculture and agro processing. The bank
gives service of loan for domestic and international trade by carefully selected.

4.4.4 Special investment service by development bank of Ethiopia

Most respondents give answer by starting the nature of DBE as specialized financial institution
to promote the national development agenda through development finance and close technical
support to visible projects from the priority area of the government by mobilizing fund from
domestic and foreign source through continuous capacity building, customer focus and concern
for the wider environment. The bank give service like: - international banking, domestic banking,
time and demand deposit for its customers like other commercial banks. Beyond similar service
as other commercial banks it provides special investment service providing long and medium
term loan service in lower interest rate. The long term loan is up to 20 years which is not
financed by other commercial banks because of risk but DBE financing this by taking risk. Since
its objective is to assist the national development of the country rather project oriented.

the counseling service even given by other commercial banks DBE give this service up to train
the employees of the project, ways of financing, controlling mechanisms…etc by following the
project nature and its implementation. In loan provision the bank gives debt equity ratio of
70:30for projects which exported 60% of their product (service) and 60:30 for domestic and low
percentage of export. This also does not provided by other commercial banks.

4.4.5Comparison of area of focus and other sectors accomplishment

Respondents compare priority area and other sector and banks engagement by writing the
advantage of priority area over others sector. Priority area has high technology transfer, high
employment opportunity and foreign currency generation than other sectors of the economy. By
understand this bank give service for priority area and other service sector (non priority area)
previously but know it engage only in propriety area (manufacturing, agro processing, extraction
or mining sector). In that period the accomplishment of non priority sector over other is good.
Currently the bank promotes more agricultural and manufacturing sector which is available in
investor’s participation. The current government attention sector agro processing has low due to
lake of investor’s engagement.

Table 4.7 banks accomplishment in priority area and non priority area
Item Banks accomplishment

Very good Good medium poor Neutral

Priority 87.5% 6.25%

sector(area of
 focus)
Other sector 18.75% 43.75% 31%

Source; questioner for employees of DBE Debre birhan branch for the year 2016

The above table shows banks accomplishment in providing service (financing) priority area. The
bank has good accomplishment that 100% (all of the respondents) say very good by taking
agriculture sector accomplishment. The remaining 6.5% says good and they express the
weakness of the bank to work more in agro processing.

For non priority area respondents have given different answers 18.75% and 43.7% of the
respondents say very good and good respectively by writing the previous accomplishment write
in case the present service where as 31% of the respondents neutral and they write the service
of the bank only priority area in the current period.

The Bank provides loans for Commercial Agriculture, Agro-Processing, Manufacturing and
Extractive Industries, preferably export focused. The economic sub-sectors for which the loan
able financial resource will be availed are: investors who participate in the area below gain
service from DBE Debre birhan branch. Activates in Debre birhan area includes:-

Agro processing; Commercial scale dairy products production (pasteurized milk, cheese &
butter); Commercial scale poultry projects (broiler, egg and one day old chicks production);
Commercial scale bovine animals and/or shoat’s production and processing and/or canning;
Commercial scale food processing plants including pasta production integrated with milling and
Commercial scale coffee processing (roasting and grinding);

Commercial agriculture Commercial scale food grain farming (wheat, barley, teffetc );
Commercial scale poultry framing & processing; Commercial scale stockbreeding with ranch
development; Commercial scale Horticulture products, vegetables, fruits, mushrooms and the
like; Commercial scale oil seeds farming & processing including sesame; Commercial scale
Apiculture;
Service; construction of hotel and minimarket

Analysis of interview

4. 1Background of private investment of Debre birhan area

4.11Major investment activates in Debre birhan area

Based on finding of interview from manager of Debre birhan town investment commission
investment activates in Debre birhan includes manufacturing, agricultural and service sector. The
activities performed in manufacturing(industry) includes two giant beer factory(HABESHA &
DASHEN BEER),Debre birhan Blanket factory, wood processing, glass factory are the major
manufacturing activities. Investors activates currently in agriculture sector include commercial
scale barley production and & oilseed farming, and commercial scale fruit and vegetable
production and animal husbandry. Currently government give high value for agro processing but
up to know agro processing is low or in a starting stage. Activates include in agro processing are
commercial scale barley products, and commercial scale food processing. In service sector
activates include construction of hotel and mini market are the most activates in the current
period.

4.1.2 Resource availability of the zone and investor’s capability and interest to invest

Most investor both wealthy and moderate ask the investment commission to give license for
them for manufacturing land at this time the commission advice them to participate in other
field. without the above exception the zone resource availability can much with investors
interest but in case of capacity some investors in service sector does not began and finish their
project based on the duration of license. In this case the commission gives warning and takes
measure up to take and give for others.
The manager describes investor’s capacity and interest in three economic sectors in such alike:-
investors who participate in agriculture have greater capacity because of excess labor force and
input. The service sector has some ups and downs. The interest of investors in the current period
goes to service sector but agriculture is the leading in number of investors up to know. Beyond
the above two sector the recent government focus sector (agro processing) have good progress in
success of the project but investors have no much interest to invest.

4.1.3 Investment related problems in Debre birhan area

The manager classified investment related problems in Debre birhan such as from government
regulation side, from investor side and from financial institution side. The usual question of
investor’s is infrastructures such as road, network, light, etc. especially investors participated in
agriculture sector the road access usually but no problem in case of license submission. From
investors side problems like:-investors in service sector does not began the project in the period
and does not finish in the convention period are the serious problem. And others like expand
their project without additional license disturb the community and chats the commission by
separating license ownership and loan provision ware seen in all sectors. From financial
institution side problems like does not give the loan in the appropriate period, quick repayment
period of loan were the most.

Results of interview from manager of DBE Debre birhan branch

4.2 investment promotion means by the bank (DBE) Debre birhan Branch

The bank investment promotion means are many but to list a few communications, technical and
counseling service were the most focus in the current period.

In communication the bank (DBE) preparing suggestion box and inspecting weekly,
communicate with in registered phone number, direct new polices and strategies of the bank and
investment related issues of government by registered email address are the most. The
counseling and technical service were the most service provided by the bank than other private
commercial banks to advocate investment. The bank gives counseling service for prospective
investors and its clients.
It gives the service continuously. Before investment activity the bank by appraisal study about
the project advice new entrants about nature of the project its economical advantage with relating
other project and its current demand and supply condition. Also the bank gives technical service
for employees of the project without payment. During investment activity It gives counseling and
technical service such as costing methods, managing finance and controlling risk and soon.
During expansion of the project it gives service such as ether to continue with the present project
or change to other related profitable projects. This shows the banks effort to encourage and
promote investment rather than to generate high profit like other commercial banks as it is public
owned development bank.

4.3 Banks relation with deferent sector and authority promote investment

Providing linkage between government and business man government development efforts DBE
have great role as it is government owned bank the bank announce the authority (government)
investment related issues from investor side and polices, strategies and new issues for investor
from government side.

4.5 Secondary data analysis and interpretation

The following data organized from short guide to access DBE loan for its clients

4.5.1 Credit service

The bank extends loan service to applicants after undertaking appraisal studies in reliable
methods to ascertain the viability of the proposed projects.

The bank extends credit to credit worthy borrowers and projects that have through appraisal and
found to be financed and economically viable and socially desirable in terms of environment
protection, employment generation capacity and other social benefit that may be included in the
frame work of development regulation act of government. Although DBE extends credit mainly
for medium and long term loans, it also avails short term working capital loans to its clients, the
term of loan is, however to be determined based on specific needs and requirements of the
projects. The term of loan explained below:-
 1. Long term loan: The maximum length of the time the bank advance long term loan is
fixed at 20 years including any grace period. Any additional loan or rescheduling must also
fall within 20 years. Permanent working capital also considered as part of long term
investment loan of a project that will be recovered 5-15 loan repayment period. long term
loan is mainly use for the purpose of construction of building, acquisition of machinery and
equipment, irrigation, plantation of crops, vehicles and communication equipment and for
any other infrastructure related with project to be financed.

2. Medium term loan: This type of loan is a loan repayable within three or five years
including any grace period. Such loan is mainly used for the purpose of building
construction, machinery and equipment, furniture and vehicle.

3. Working capital: In addition to the permanent working capital that is part of the project
cost working capital loan service serves as abridge finance and is availed on the base of the
cash flow of project itself. The purpose of working capital finance is for extension of
inventory cycle, increased capacity utilization and to cover the occasional short term cash
flow problems of existing customers.

3.5.2 Banking service

The bank provides banking service such as deposit facilities in the form of time deposit and
current account as well as money transfer service. This service is mainly proved to its clients and
funding institutions. the bank also gives international banking service and relative activates,
providing letter of credit service to its clients for importation of machinery and raw materials for
foreign suppliers and export of produce

4.5.3 Loan buys out

The bank may buys out loan extended by local banks; however the loan purchased under the loan
buy out loan facility should be viable going concern and priority sector projects.

4.5.4 Loan amendment by DBE to promote investment

 Penalty interest rate
The bank has 3%penality interest rate on investors who cannot pay in the appropriate period
or paid latterly. The interest rate calculated on all part of beginning loan this crate additional
impact on the project currently the penalty interest rate calculated only from the bad debt.
  Performa invoice
Based on loan policy article 5.6 loan applicants for they purchased material or usage they
present a minimum of three Performa invoice but this crates wastage of time on
customers by understanding this the bank decides to get a loan applicant present only
one Performa invoice.
Beyond this in loan disbursement /procurement period if the purchased material
presented in the bank data base and Its price does not grater presented in the data base the
activates finished by one Performa invoice. If the material does not present in banks data
base it is activated by three Performa invoice. If the problem is above the listed the bank
make cost revision. But any material purchase that is above one million dollar it done by
national bank of Ethiopia.
 expansion loan policy
Based on loan policy article 5.13 expansion loan applicants debit equity ratio of 60:40 but to
increase the country’s foreign trade the bank changed its debt equity ratio to 70:30 for an
exporter who export 60%and above of its products.

4.6 Investment and investment related activates in Debre birhan area

Table 4.8 the four year activity of investment in Debre birhan

NO TYPES OF YEAR
ACTIVATES 2012 2013 2014 2015 Total

1 New investment 25 11 20 8 64
license
2 Renewed license 150 111 58 46 425
3 Total 175 122 78 54 429
4 Changed projects 7 4 0 2 13
 5 Money collected 36500 33000 31600 1900 120100
6 Followed projects 140 132 99 85 456
7 Assisted projects 70 547 47 30 191
8 Rural land 4125.015 256.33 1011.15 800 6192.493
9 Urban land 0.5 6 0.2 0 6.7
10 Total 4125.515 262.33 1011.15 800 6199.193
11 Warned investors 25 0 11 36
12 Capital accumulation 107.200 147.215 702.40 51.6 2308.4215
13 Proved investment 18 20 27 8 73
related question and
give solution
14 creating permanent 100 118 90 12 320
job opportunity
15 Creating temporary 450 571 425 380 1826
job opportunity
15 Total 550 689 515 42 1796
Source; annual report of Debre birhan Jimma zone investment commission for the year ended
2012 -2015 half

Since the period 2012 - 2014and 2015 half Debre birhan town investment commission has given
licensed to 429 investment projects which had an aggregate capital of 2308421500 birr.

During the period from 429 projects 14.9% (64) of them are new projects where as the rest 85 %(
365) are renewed license projects. In terms of capital all 100% covered by domestic private and
cooperative investors. The investment has classified in to three sectors namely agriculture, agro
processing and service.

Out of the total licensed projects about 65% were given to agriculture sector, 31 % of the total
project given to service sector and the remaining 4% of the total project given to agro processing.
In this period 15 projects changed to other sector. 26.7% changed to agriculture sector whereas
33% changed to service sector but the recent government focus agro processing have low
percentage amounting 4% only. The project crates job opportunity for 1796 workers about 320
permanent and 1820 temporary. In the period 120100 birr collected from licensed permission,
whereas 456 projects followed by the commission. In this period the commission assisted 191
projects. The commission Proved investment related question and give solution for 73 projects.

4.7 Trends of DBE Debre birhan branch in the extension of credit

DBE is the largest source of institutional credit for developmental credit for developmental
projects which play significant role in investment and economic development. The next two
graph show trends in DBE Debre birhan branch in the extension of credit for the past four year.

Figure4.1 actual loan approval, collection and disbursement

1300000
1100000
900000
700000
amount in thound

500000
300000
100000
2010/11 2011/12 2012/13 2013/2014 2014/15 half total
approval 44913 80542 261609 349374 523107 1259545
disbursement 23267 54931 132831 240894 365042 816965
collecton 23820 20175 21917 34572 7099 107478

Sources; annual report DBE Debre birhan branch for the year ended 2012 – 2016 half

In four and half the bank approves total of 129545000birr for private and cooperative area of
investment from this above 99%of the total for agriculture sector and the remaining less than
1%of the total for service and manufacturing sector. The bank does not approve for any other
sector except the two sectors. Also the bank disburse loan total of 819665000birr. It also provide
for cooperative and private area of investment. Which includes 89.2% agriculture and the
remaining 0.18% includes agro processing and service sector of the economy. In case of
collection it varies from approval and disbursement which includes small and medium enterprise
that the bank collects 7.3% from the total. Also the bank collects 68.7% of the total from
agriculture, 23.8% of the total from service sector, and 0.3695 from agro processing sector. The
bank collects money from service sector continuously. This shows DBE Debre birhan branch
highly approves and disburses from agriculture sector in all years and collects money from
service sector continuously and also it approves and disburses the service sector in the past one
year only in year 2011. In case of Agro processing it has no approval and low disbursement but it
has good collection. This shows the current engagement of the bank and investors to participate
in the sector.

Figure 4.2 Actual loan disbursements for each investment area

850000000
750000000
650000000
550000000
450000000
amount in thousand

350000000
250000000
150000000
50000000
2010/11 2011/12 2012/13 2013/14 2014/15 total
public 0 0 0 0 0 NaN
private 21386000 49953000 131992000 240055000 365042000 808428000

coopra- 18880710 4978000 839000 838780 NaN 8536490

tive

Sources; annual report DBE Debre birhan branch for the year ended 2011 – 2015 half

Figure 4.2 shows loan disbursement for each investment area. Since the period 2011-2015 half
DBE Debre birhan branch disburse loans for private and cooperative area of investment
amounting birr 99816964490. Each area share 99%and1%share respectively. The bank does not
disburse loan for public area of investment. In private area of investment the bank disburse loan
for agriculture, service and agro-processing. Agriculture held’s the lions share contains above
99% of the total the remaining less than 1% has been given for agro processing and service
sector. Agriculture take part in all years in privet area of investment where as serves and agro
processing take part only in years 2011 and 2012 respectively. This shows the banks current
engagement in priority area that it laid down non priority (service) area and it gives loan for agro
processing currently as it is recent focuses by government. In cooperative area of investment it
gives loan for only agriculture sector for all years.

CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5. Introduction
In this section attempt is made to summarize the major finding of the study focusing on the role
of DBE Debre birhan branch in promoting private investment in Debre birhan, finally
recommendation forwarded for those problems identified.
5.1CONCLUSION

On the base of interview, questioner, self-review, internet, document and annual report data
organized from assessing this study come up with the following conclusion.
 Investment activates in Debre birhan zone includes three sub sector agriculture, agro
processing, and service sector of the economy. Investors have high interest in agriculture
sector but currently the interest of investors increase in service sector, agro processing is
the lest but in case of success it is the leading sector in short period. Agriculture has good
accomplishment while service sector have some ups and downs. The resource availability
of the zone can much with investor’s capability and interest except agricultural Buna
land. Problems related to investment include infrastructure, financial service, delay of
project, and illegal way to expand project and cheating separation of licensee and loan
provision.
 DBE Debre birhan branch played great role in counseling and technical service for its
clients and customers without fees and direct new events and polices in registered email
and also communicate with registered phone no with investor. The bank hasn’t any
relation with any authority and other party in Debre birhan. The relation of the bank
limited to investors and the central government which is directed by Debre birhan
distract.
 DBE Debre birhan branch have played great role in the economic development of Debre
birhan and its border area. activates done by the bank includes extension of credit,
financial and investment advice, and reorientation in lending in good accomplishment
where as corporate recovery, and promotion of small and medium scale enterprise in poor
accomplishment. Recently the bank provides service for priority area only this causes the
shift of investor to agriculture and agro processing from service sector.
 Beyond this the bank provides special investment service such as giving medium and
long term loan in lower interest rate. The long term loan covers 15-20 year, counseling
and technical service and higher debt equity ratio in comparing other financial
institutions. The bank also provides banking service credit service loan boys out service
to its clients and new entrants.
 Nationally the bank DBE have been taken loan amendment such as calculate penalty
interest rate only in bad debt, decrease three Performa invoice in to one and increase debt
equity ratio for investor to 70:30 for projects which exported 60% of the total product
or service. Priority area by the bank has good accomplishment in the period. The service
sector have good accomplishment in the earlier period, but know the bank provides
service only priority area.
 Both Numbers of prospective and permanent investors decrease continuously, because of
most prospective investor’s interest only on agricultural Buna land and other agriculture
sub sector which is continuously renewed by permanent investors. The commission
makes some activates to promote investment such as: proved investment related
questions and give solution, followed and assist projects and give command for investors
to began and finish in the appropriate period.
 The agriculture sectors have high approval, collection and disbursement greater than 98%
of the total sector. The other less than one present share by agro processing and service
sector.
 The bank disburse loan for private and cooperative area of investment only. Private
investment held’s the lion’s share which includes agriculture, agro processing and the
earlier service sector with higher proportion of loan amounting greater than 98% share.
Remaining less than one percent shared by cooperative area of investment which includes
 only agriculture sector only. This shows the advantage of private participation over other
area for economic and investment development for a given country.

5.2 RECOMMENDATION

Private Investment promotion by public development banks increase the computation of

investment this causes increase the wealth of nation which improve the living standard of the
society, so DBE Debre birhan branch have to take the following action to promote private
investment also the investment commission take part to promote investment.

 Even the Investment commission advice investors to participate in other economic sub
sector it are not enough. So the commission could advice prospective and permanent
investors to get loan from DBE in lower interest rate and long repayment period.

 Even the bank focus on communication, counseling and technical service it is not
enough, so the bank could prepare annual meeting after conducting research with investor
and related authorities to announce them about profitable and risky projects, supply and
demand condition of products or service of each project, and new policy and strategy of
government.

 The bank would create linkage with investment commission and other related parties to
know investors willingness to invest and their investment related problem using
investment commission and other parties as intermediary between investor and the bank.

 As much as possible the bank try to amend its weakness in corporate recovery (financing
projects in recession after appraisal study) and promoting small and medium enterprise.

 Even extension of credit by the bank increase from year to year no of prospective and
permanent investors decrease continuously, because of investors focuses only in
agricultural Buna land and other agricultural sub sector only that is withhold by
permanent investors. Measure take by bank as much as possible in cooperation with
 investment commission during submission of license to advice investors to participate in
manufacturing, small and medium scale enterprise, agro processing and extractive
industries to alleviate this problem. also the bank advise the pubic to invest in
cooperation with private investor in agro processing, manufacturing, and extractive
industries to increase capacity of investor.

 The bank by itself try to announce investors who participate in service sector previously
to change their project to priority area or to begin new project in case the bank finance
their project again rather collect the previous loan continuously from investors.
 APPENDEX

JIMMA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

This questionnaire is prepared to gather relevant data for the study entitled the role of financial
institution in promoting private investment in development bank of Ethiopia in case of Debre
Birhan branch

You are kindly requested to give your genuine response for each of the forth coming questions so
that will be in opposition to draw conclusion and recommendation accordingly. More ever the
output of the study may be used by policy maker as an input.

Additionally, I promise the confidentiality of the data you are going to proceed. i.e. not release
to any third party without your permission and notice.

THANK INADVANCE FOR YOUR COOPERATION!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 Please put “x ” in the box for your choice

Part I: Personal information

1) Sex male female

2) Age 21-30 31-39

40-49 50 and above

3 your academic qualification

Elementary High school

Certificate degree and above

Diploma

.
4. Indicate your work experience in the banking industry
A) Less than 1 year C) 6-10 year
B) 1-5 year D) over 10 year

5. Your job status (specific responsibility)

A) Casher C) economist (planner)

B) Loan officer (credit team) D) senior officer E) other specify----------------

part two: bank service related questions for employees of (DBE)

1. Fill the space provided below:

Rank them in order of their

accomplishment
Bank activity to promote
private investment Very Good Medium Poor
Good

Extension of credit

Financial and investment

advice(counseling service)

promotion of medium and

small scale industries

2. How does you compare banks area of focus (priority list) and investors participation in
economic sector to
invest?------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------

3. is there any change existed from the past in investor’s participated area?

Yes No

4.If you say yes fore question no 3write the change

---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------
 5. compare priority lists(area of focus) by bank and other sectors
accomplishment?------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
-------------------------------------

Fill the table below

Economic sector Their accomplishment

Very good good medium poor

Priority areas
(area of focus)by
the bank

Other sector

6. Does the bank give special investment service than other banks?

Yes No

7.if you say’ yes’ explain the service provided by the bank
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 Interview for manager of DBE Debre birhan branch

1. How does DBE promote investment?

2. Does the bank have relation with any other party to promote investment?

Interview for Debre birhan town investment commission

1. What are the major investments activates performed in Jimma zone

2. Is there other contribution of DBE other than lending credit?

3. Does the resource availability of the zone can much with investor’s capability and interest to
invest?

4. Is there investment related problems in Debre birhan town?