Hotel owners could soon face a hefty interest fee if they don’t repay the loan they secured from commercial banks as part of the stimulus package put forth by the central bank in response to the coronavirus pandemic.
The hospitality establishments secured over three billion birr loan from the central bank in 2019 after the outbreak paralyzed industry players, with hotels registering an occupancy rate of below two percent soon after Ethiopia reported its first case of coronavirus.
It was a part of the 15 billion birr stimulus package the National bank of Ethiopia (NBE) approved in response to the outbreak, with 12 billion birr loans going to manufacturing, horticulture, and microfinance sectors.
The central bank made the loan available through commercial banks at a five percent interest, but that was soon reduced by 0.5 percentage points. The difference was meant to be transferred to commercial banks, which had no share in the loan the central bank had provided to the hospitality establishments first.
Officials at the central bank expect the bank to collect the loan and repay it within six months of the disbursement. Though the repayment period was extended by over a year, the borrowers failed to repay their loans on time, forcing the banks to come up with a new strategy to collect the loan.
“Though some are paying their loans on time, those who have defaulted entered into a new agreement to change the credit to a commercial one with an interest rate of at least 13.5 percent, the minimum we could charge,” said Dereje Zebene, president of Zemen Bank.
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Hotels are still pressuring the central bank to push commercial banks to extend the repayment period of the loan, though they have not succeeded thus far. Through their lobby group, the Addis Ababa Hotel Owners Association, which has 120 active members, wrote a letter to the Addis Ababa City Tourism Bureau to find a way to support the establishments, citing the sector is far from recovering from the impacts of the pandemic.
“We are demanding authorities to extend the repayment period with a low interest rate, as we are still facing a business slowdown,” said Aster Solomon, president of the Association.
Under the leadership of Hirut Kassew (PhD), former Minister of Tourism, the Addis Ababa Culture & Tourism Bureau wrote a letter to the Ministry of Finance and the central bank, demanding the authorities to extend the loan provided to the hotels and tour operators.
“We are exerting efforts to win the hearts of officials at the Ministry and the National Bank of Ethiopia,” said Hirut.
If the hotels do not sign another agreement to switch their type of credit from low interest to commercial, their property will be confiscated based on the agreement they entered when they took the loan.
SOURCE: The reporter
