Borrowers are required to provide an initial cash equity contribution of at least 30% of the total project cost, but this is highly depending on the actual qualifications of the manager/ investor, the set-up of the project and the risk level. Although in some circumstances banks approve equity contributions of 30%, in most cases they require contribution of up to 40- 50%. Most banks want to be sure that the investor is committed to the project, and require
an initial investment with the investor’s own funds before they make their first payment.

Required documents

Most banks require the following documents from applicants planning to establish a new project:
1. Completed application form (ask for the bank’s form)
2. Business plan/feasibility study

The feasibility study or business plan must be prepared by a licensed and known consultancy firm. A copy of the consultant’s current license must be included.

The feasibility study shall contain the following:

• Project summary
• Background information: brief history and details of the enterprise/promoter, type of project, scope and objective, legal form of business
• Numbers and certificates: registration number and date, license number and date, TIN, VAT Registration Certificate
• Updated market study and marketing arrangements

• Technical study: location, project design and engineering
• Organization and management study
• Financial statements (balance sheet, income statement, cash flow)
• Financial analysis
• Social and economic aspects of the project
• Conclusion and recommendations
• Implementation program
• Any other relevant documents.

3. Licenses

• Work permit
• Principal Registration Certificate
• Investment Permit
• Certificate of the commercial register
• Taxpayer Identification Number (TIN)
• Any other license you have obtained.

4. Land lease agreement

• For land leased via the Government, the contractual lease agreement (or Land Holding Certificate – LHC) entered into with the proper Government authority.
• For projects located in rural areas with land leased from farmers, the contractual land use agreement contracted with the local farmers (approved by the appropriate Government authority).

5. Engineering plan

Construction plan (blue print) designed by a licensed consulting firm. The construction plan must be sealed and signed, and include:

• Architectural plan

• Structural plan
• Electrical plan
• Sanitary plan
• Plan of farm roads
• Plan for canals diversion weirs if the project site is to be irrigated
• Land development
• Soil and water analyses for the project area by certified professional personnel and/or a licensed institution
• Construction permit
• Bill of quantity (in both hard and soft copies).

6. Utility availability

Written confirmation by the responsible authorities of the availability of power, water, telephone, Internet and fax access at the project site.

7. Marriage certificate/sole proprietorship

For married applicants only: a marriage certificate, authenticated by the Ministry of Foreign Affairs of the country where the marriage took place.

8. Credit information

Credit information will be sought; credit ratings and other background checks will be conducted. You will be required to provide personal and business references and authorize the bank to conduct credit ratings and other checks. Bank guarantees from outside Ethiopia may also be asked for.

9. Power of Attorney

A power of attorney is required for all loan applications submitted through an agent or any other third party.

Business organizations (PLCs and share companies) are required to submit the following documents in addition to those listed here above:
• Copy of memorandum and articles of association

10. Other

• Copy of the relevant pages of the passport of the applicant.
• Investors must write a letter of request for all loan disbursements, indicating the specific purpose of the disbursement.
• Borrowers shall open a letter of credit with the bank for procuring all items to be imported as well as for exporting products.
• A current account must be opened.
• To disburse loans, the bank will assess the value of the building(s) so as to ensure that pre-conditions for disbursement are fulfilled. If the property does not belong to the investor/applicant, the bank will require the mortgagor’s consent. All fixed assets of the project will be used as collateral.

Development banks

The FMO (Financiele Maatschappij Ontwikkelingslanden) is the development bank of the Netherlands. It provides loans within half a year but requires a security and a guarantor in the Netherlands. The Development Bank of Ethiopia extends loans with a repayment starting after 3 years. The interest rate is approximately 7%. Initial cash equity contribution is 30% of the estimated needed loan. In practice the Development Bank provides 45 to 50% of the requested loan. Duties to be paid include a commitment charge of 0.75% of the total loan amount and a service charge of 0.75%.

It may take up to one year for your loan application to be complied with. Pro-actively following up progress does help speeding up the process.

Required documents

In addition to the documents described in the section here above, the Development Bank of Ethiopia requires the following papers:

• Proforma invoices: Proforma invoices, with specifications and catalog, from three different suppliers are required for: machinery and equipment, raw materials and packing material, vehicles, office equipment, furniture and fixtures, greenhouses, plant material, chemicals and fertilizers, irrigation systems, farm tools..
• Environmental impact assessment (EIA): Written confirmation from the Ethiopian Environmental Protection Authority regarding compliance with provisions of the EIA Proclamation as to the project’s impact on the surrounding environment.