Agricultural Financing by Banks of Ethiopia the Case of Commercial Bank of Ethiopia

No Thumbnail Available



Journal Title

Journal ISSN

Volume Title


Addis Ababa University


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



Agricultural financing, Commercial Bank of Ethiopia