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Six banks that were previously prohibited from providing loan insurance by the National Bank of Ethiopia have asked the government to intercede on their behalf. The reason the national bank gave for the prohibition was that these banks do not have the financial capability to provide these services.

Now, the banks have appealed to the government via the Ethiopian Bankers Association (EBA). The association is made up of the presidents of many of Ethiopia’s banks and, after taking the issue into advisement, has deemed that the government should be part of the process in determining an appropriate course of action.

As such, the association has submitted a letter asking the government to weigh in on the issue and outline some sort of measure that alleviates the pressure on the banks.

An anonymous president of one of the banks has affirmed that there has indeed been an irresponsible method of providing loan insurance over the past years, but that factors such as security issues, galloping inflation rates, and other domestic and foreign issues should be taken into consideration.

In related developments, the National Bank of Ethiopia has also introduced a new paid-up capital requirement for banks. 

The new requirement stipulates that the paid-up capital of banks has to be ETB 5 billion. Four banks (Awash, Amhara, Dashen, and Nib Bank) have already met the requirements. Existing banks are given 5 years and new banks 7 years to fulfill the requirement.

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