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

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