Development Bank of Ethiopia may ease debts for flower farms

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Authorities at the state-owned Development Bank of Ethiopia have begun contemplating rescheduling the debt repayment period of flower farms based on the farms’ current performance.The current new thinking of the authorities is an outcome of DBE’s credit team’s assessment of the flower farms, a top official of the bank told Capital.

The credit team authorised by the bank to investigate the challenges of the flower sector came up with results that identified quality problems with the flower farms, a lack of managerial supervision and other factors that resulted in poor market performance. The team also criticised the bank’s credit requirement for this specific sector and recommended a way out from the crisis.

The assessment result is now in the hands of DBE’s management and with the Horticulture Development Agency so that the latter can resolve the identified challenges of the sector. “We are currently advising the farms to plant seeds so that they can grow quality flowers,”deputy head of the agency told Capital. Quality products are marketable on the international markets and earnings are better than from exports defined by quantity, he explained. There are 37 flower farms that entered into the sector after getting loans from DBE some five years ago; however, some are currently unable to fully service their debts, which total one billion birr.

Their failure pushed the bank to seize some farms a year ago and hold an auction for five of them; however, no interested buyer emerged. This led the bank to hire experts and to begin administering at least three of them.

The flower sector is now one of the country’s most valuable export industries, regardless of many farms’ incapability to service their debts. The government has a responsibility in considering the current challenges of the sector as it did some years ago to draw investors into the sector, an agro-economist told Capital.

Agricultural and food items, like coffee, cereals, milk, meat, fruits and vegetables, were Ethiopia’s basic export items. There were very few farms engaged in horticultural production until 2001. However, in 2006, Ethiopia was the second largest exporter of large roses to Dutch floral auctions, after Kenya, and the third largest supplier for small roses, after Kenya and Uganda, according to reports obtained from EHPEA.

Source: Capital (28 Sept 2009)

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