Home BusinessBanking Ethiopia: Commercial Banks’ Npl Soars Due to Tigray Conflict

Ethiopia: Commercial Banks’ Npl Soars Due to Tigray Conflict

Namibia: Peugeot Will Export 'Once Issues Are Resolved'

Commercial banks in Ethiopia are witnessing an increase in non-performing loans (NPL) as customers based in the embattled Tigray region are unable to repay their loans.

Ever since war broke out between the forces of the defunct Tigray People’s Liberation Front (TPLF) and the Ethiopian National Defence Forces (ENDF) almost three and half months ago, business has been at a standstill in the region with banks being forced to close their doors for over a month.

The ongoing fighting in the region, coupled with the economic uncertainty, made it difficult for banks to collect loans and follow-up financed projects, a situation which is raising their non-performing loans. Some banks are even facing difficulties to discover the whereabouts of their customers, according to sources.

Especially banks which have relatively higher presence in Tigray have been highly impacted by the conflict. This includes Commercial Bank of Ethiopia, Wegagen Bank, which was highly linked with the Endowment Fund for the Rehabilitation of Tigray (EFFORT), a conglomerate of businesses that were owned by the TPLF, and Lion Bank, which was in the midst of constructing its headquarters in Mekelle.

“Every one of us has been affected by the fighting. No bank is immune to the problem,” Getachew Solomon, President of Lion Bank, told The Reporter.

The two biggest private banks, Dashen and Awash, have also been highly impacted by the fighting and they are likely to witness an increase in bad loans since they were not able to collect loans from the region.