Financing Pattern of the Development Bank of Ethiopia (DBE)

Abstract

This study model over view the financing pattern of the Development Bank of Ethiopia ((DBE), Documentary evidence, annual reports, and accounts form the data basis of this paper. A Simple Multiple Regression Model was developed incorporating two independent variables (liquidity and shareholders fund) and one major dependent factor (loans and advances), representing the bank's financing pattern. The model was used to examine the extent to which these predictor variables explain the bank's loan and advances during the period 2006-2013. The regression results reveal that liquidity is an important factor in explaining the financing pattern of DBE in Ethiopia. However, a contrary impact has been documented concerning shareholders' funds. Based on the evident result from hypothesis one which says Liquidity does not have significant predictive power over DBE loans and advances can be conceived that the amount of loan and advances to be dished out in form of equity or credit financing by BOI is dependent solely on the availability of liquidity. The paper recommends the need for BOI and other DBE to maintain constant liquidity planning to keep abreast of societal credit needs in the form of loans and advances. In addition, the study further recommends the need for the bank to continually reduce the allocated amounts to shareholder's funds in the form of reserves to enable it to improve on developmental activities.