Causes of Failure of Projects Financed By Development Bank of Ethiopia: The Case of Corporate Credit Process
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Date
2015-02
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Addis Ababa University
Abstract
Corporate Credit Process (CCP) of DBE is the major lending unit of the Bank and through which more than 75% of the total annual lending amount of the Bank has been granted to borrowers. However, failure of projects financed by the Process is becoming a big problem. According to the annual performance report of DBE (2013), 72% of the projects financed by the Process were under failure category. Hence the objective of this research project was to identify the major causes of failure of projects that were financed by CCP of DBE. Document analysis was employed to identify the major causes. As a result, technical support given by the Bank, implementation delay, project’s manpower quality and overestimation of project’s return were found to be the major causes of failure of projects that were financed by the Process. 80 projects, of which 40 were failed projects while the rest were successful projects, were selected for the study. The sample projects were from the three economic sectors, agriculture, industry and service. After collecting the required data, a regression analysis using the logistic regression model and comparison of the mean between and within these economic sectors using ANOVA had been conducted. The results of the analysis had shown that implementation delay, overestimation of project return and manpower quality of projects are found statistically significant while technical support given by the Bank was found statistically insignificant for failure/success of projects that were financed by CCP of DBE. Moreover, the highest ratio of project failure was found to be in the agricultural sector while the lowest ratio was registered in the service sector.
Key Words: Project failure/success, Corporate Credit Process, Development Bank of Ethiopia
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Keywords
Project failure/success,, Corporate Credit Process, Development Bank of Ethiopia