The Role of Commercial Bank of Ethiopia in the Mobilization of Foreign Currency to Support Fertilizer Imports
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Date
2016-01
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Addis Ababa University
Abstract
Foreign currency deposit mobilization strategy of CBE is part of the corporate strategy
formulated on June 2015 to be in effect for the coming consecutive five years. The strategy aims
to maximize the foreign currency earning of the bank to meet the import needs of the country
especially fertilizer. Several sources are identified by the bank’s corporate strategy as major
sources of foreign currency. Some of them are remittances, export and cash purchase (service
receipt). This paper assesses and examines the overall efforts of the CBE in mobilizing foreign
currency to finance major import items like fertilizer. The study was conducted in a descriptive
way of qualitative research approach. The unit of analysis for this study is the CBE’s foreign
currency deposit mobilization strategy to support fertilizer import in which the bank
implemented as part of corporate plan. Data were collected through questionnaire exporters of
the bank and interview of key informants located on CBE, NBE and AISE and critically
reviewing documents as well as reports. The sample for the interviews is purposive sampling as
most of the information can be found from few individuals that are nearer to this activity. Based
on the analysis of the study, the findings are that fertilizer is among the critical items of import
by the bank on each budge year. Despite the challenges of mal-practices by some private banks
on the collection of foreign currency, CBE manages to identify and collect foreign currency to
support the import of inorganic fertilizer. Credit, Fund management and Trade Service
departments of the bank are involved on the fertilizer import process in coordination with section
of the Ministry of agriculture AISE. The country wide low performance of the export sector is
also the other challenge the bank faces during mobilization of foreign currency. Furthermore,
the study also identified that the bank has priority sectors while allocating the collected foreign
currency similar to the GoE growth and developmental direction. Hence, the bank’s strategy to
mobilize foreign currency has positive country wide implication in alleviating the scarcity of
foreign currency especially supporting critical import items like chemical fertilizer. And the bank
has to make sure that across department process integration is mandatory for the efficient and
smooth mobilization of foreign currency. In addition for the successful execution the strategic
plan, critical assessment of progress at the end of each quarter is also necessary by the top
management
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Keywords
Fertilizer imports, Currency to support