Controversy over the Non-Performing Loans (NPL) ratio, an outstanding loans in which borrowers are not paying interest fees or repaying any principal, of the Development Bank of Ethiopia (DBE), has led four vice presidents of the Bank to be removed from their positions.
The dispute began months back after the new President of the Bank, Getahun Nana, came into the scene, replacing the long-serving President, Issayas Bahre. Getahun was vehemently arguing that the NPL of the Bank could reach up to 50pc, but the four VPs strongly insisted otherwise.
Tadesse Hatiya, vice president of Credit Management; Teka Yibrah, vice president of Corporate Services; Almaz Tilahun, vice president of Finance & Banking Management; and Dereje Awgichew, vice president of project financing, are the VPs who lost their positions.
But one of the VPs who was claimed to be standing by the side of the president, Teshome Alemayehu, stays at his current position as vice president of Lease Finance & Branch Operations.
In a letter issued and signed by Getahun, the outgoing VPs, who had stayed in the banking industry for over two decades, were suddenly removed effective as of May 2, 2017. The letter excludes the primary reason leading to the removal of the VPs, but it says they are acknowledged for their works at the Bank.
“Restructuring the management and bringing new blood to the team, are the main reasons to change the VPs,” Getahun replied to Fortune via SMS.
But this is a small and clandestine reason for the people who are close to the case.
“Getahun is well experienced in supervision, not in operations, and he got confused when he became head of operations as he is very new to the concepts of project financing,” said a person who is very close to the case.
“When he came to the Bank, he had the perception of the Bank’s performance as destitute, which is not correct,” commented another senior executive who is also close to the case.
The executive believes that Getahun has a misconception about non-performing loans of the Bank.
“He assumed that the NPL ratio would accelerate, but this was not accepted by the outgoing VPs who explained the rate could not reach to that level, referring to the nature of project finance, and their experience at the Bank,” added this executive.
Getahun denies the sentiment given by the executive.
“This would be silly to remove them with disagreement over numbers, and the NPL ratio could be close to 20pc not to 50pc,” he said.
The Bank restructured its management team last year. It slashed, merged and detached some of the management body.
The new vice presidents of the Bank who were assigned by Getahun Nana are Getachew Waqe, vice president of project financing; Haileyesus Bekele, vice president of Credit Management; Hadush Gebreegziabher, vice president of Corporate Services and Endalkachew Mihretu, vice president of Finance & Banking Management.
Before assuming their current posts, Hadush was Mekele Branch District Manager, Getachew was director of Branches Operation and Coordination, Haileyesus was also VP of Corporate Office at DBE mainly assisting the president. Endalkachew was director of International Banking at Bunna International Bank.
The fate of the outgoing VPs is not yet decided, but they individually approached Getahun about their stay at the Bank, and they were informed to take their leave, for the time being, and would be assigned to new positions if they are willing to stay at the Bank. This means they will be demoted technically, according to sources close to the case.
The assignment of the new VPs, which are referred to as the new blood, must be approved by the central bank of Ethiopia.
“We did not receive any request from the DBE yet for for approval of the new vice presidents,” Teklewold Atnafu, governor of the National Bank of Ethiopia told Fortune.
Hailu Misganaw, acting communications director of DBE claims the Bank has a six-month period to send a request to the central bank and get an approval of the new vice presidents. And also the central bank was copied in the letter sent to the new and outgoing VPs to be informed about the changes, according to Hailu.
The NPL ratio of DBE has reached 16.1pc, going a bit above the global standard of 15pc, according to the nine-month performance report of the National Bank of Ethiopia. So far the bank has outstanding loans of 36 billion Br, while commercial banks disbursed outstanding loans of 526 billion Br.
“The new VPs have not assumed their posts yet as some of VPs need to hand over the position after an audit is made. But, for now, the jobs are undergone by the workers who were directly under the outgoing VPs,” Hailu told Fortune.
The continuing VP, Teshome, was not available to comment, he neither responded to phone call nor the SMS inquiry sent to him by Fortune until the paper went to press.
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