In a move aimed at ensuring its long-term sustainability and competitiveness within the evolving Ethiopian financial sector, the Commercial Bank of Ethiopia (CBE) has announced a moderate adjustment to its loan interest rates, effective March 7, 2025. This decision comes amidst the government’s push for market-oriented policies and the bank’s own extensive transformation efforts.
The CBE, a cornerstone of the Ethiopian banking industry, has been actively working to streamline its services and introduce new, customer-centric credit options. However, the bank has faced challenges in maintaining profitability due to high savings collection costs and comparatively low loan interest rates in the current market.
“While our ongoing reforms have significantly reduced operational and administrative costs, the high cost of savings collection and our relatively low loan interest rates have impacted our sustainable profitability,” stated a CBE spokesperson. “This adjustment is necessary to ensure we can continue to play our vital role in the economic development of our country.”
The new interest rate structure, as detailed in the provided table, reflects a nuanced approach. Notably, the bank has reduced interest rates for agricultural loans across short, medium, and long-term tenures.
Furthermore, the existing interest rates for residential condominium loans (40/60, 20/80, and 10/90 schemes) will remain unchanged.
For commercial loans, the changes vary based on the loan type and tenure. While some short-term and medium-term rates have seen slight increases, long-term commercial loan rates remain largely stable. There are also adjustments to specific categories such as “Advance on Import bills” and “Merchandise Loan/Facility.”
A significant adjustment has been made to loans extended to Microfinance Institutions, with rates increasing across all tenures. This reflects a broader market trend and aims to ensure the sustainability of these crucial financial intermediaries.
The CBE also clarified that it has adjusted the difference in interest rates between government and private borrowers, aiming for a more equitable lending landscape.
New rates:
1. Agricultural Loans:
- Short Term: Reduced to 11.5%
- Medium Term: Reduced to 12%
- Long Term: Reduced to 12.5%
2. Residential Condominium Housing Loans:
- 40/60 Scheme: Remains at 7.5%
- 20/80 Scheme: Remains at 8.5%
- 10/90 Scheme: Remains at 9.5%
3. Commercial Loans:
- Short Term: * Overdraft: Increased to 17%
- Advance on Export Bills: Increased to 14.5%
- Advance on Import Bills: Increased to 17%
- Medium Term: * Increased to 16.5%
- Long Term: * Remains at 16%
- Merchandise Loan/Facility: Increased to 17%
4. Microfinance Institutions:
- Short Term: Increased to 14%
- Medium Term: Increased to 14.5%
- Long Term: Increased to 15%
5. Export-Related Loans:
- Term Loans:
- Short Term (including overdraft): Increased from 8.5% to 12%
- Medium Term: Increased from 10% to 13%
- Long Term: Increased from 11.5% to 14%
- Pre-shipment Loans: Increased from 8.5% to 12%
- Merchandise Loans: Increased from 8.5% to 12%
6. Personal Loans to Other Retail Customers:
- Mortgage Loans: 14%
- Vehicle Loans: 15%
- Personal Loans: 15%
