Agricultural Financing By Banks Of Ethiopia The Case Of Commercial Bank Of Ethiopia

This study is conducted to assess the agricultural financing in the Commercial Bank ofrnEthiopia, with particular emphasis on pre sanction appraisal and post sanction control ofrnagricultural lending. The study also looked at the trend of non performing agriculturalrnloans during the past ten-year period and the factors that account for agricultural badrnloans. It also aimed to identify the different credit risks inherent to agricultural loans andrnthe challenges in agricultural credit risk management of the bank. Both Primary andrnsecondary data were used in the study. Data is collected through questionnaire &rninterview. It is found that the percentage share of agricultural non-performing loans torntotal non-performing loans showed a rapid increment from 2011 onwards except in thernyear 2015. The study also found that, the major risks the bank faced in agriculturalrnlending are production risk, price risk and over indebtedness. Further the study identifiedrnthat lack of technical experts providing their independent evaluation of the agriculturalrnfeasibility study, lack of properly trained consultant to prepare agricultural projectrnfeasibility study, less availability of data and up to date information, less capability ofrncredit performers of the bank to evaluate the technical and financial projections ofrnagricultural projects, are some of the major challenges to proper management ofrnagricultural credit risk in the bank. Regarding the causes for agricultural loan default,rncrop damages, inadequate supervision or follow up, diversion of borrowed funds, willfulrndefault, lack of proper investigation before lending and lack of good communicationrnfacilities are the major causes for agricultural non-performing loan. To minimize thernagricultural credit risk, some measures are recommended to the management. These are;rnhiring more agricultural expertise, strengthening the bank’s MIS and the marketing,rnresearch and development departments, providing regular training for all creditrnperformers, revising the sufficiency of loan delivery time to evaluate the bankability ofrnagricultural loan requests.rnKey words: Agricultural financing, Commercial Bank of Ethiopia

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