The National Bank of Ethiopia (NBE) has announced increase in interest rate for savings with a view to encouraging savers.

Accordingly, interest rate for savings has been increased to five per cent from four per cent previously

NBE Governor, Teklewold Atnafu told Journalists on Monday that the bank has made the change effective for various savings as of November 2, 2010.

He said the bank has also started a new bid bond saving scheme to encourage culture of saving among low-income communities in any parts of the country.

The list price of a bond is 500 Birr, he added.

He said financial institutions and banks will be accessible in all parts of the country within the next five years and customers can buy bid bonds and save easily.

The governor said bid bond holders can use bonds as collateral to get loans from banks.

He said the interest rate of the bond would be calculated in consideration to the national inflation rate.

The payment rate for the bond from one to five years is 5.5 per cent. For more than five years would be 6 per cent.

He said bid bond owners can sale the bond to a third party legally.

Anyone embraced by the housing development program and saved 40 per cent of the needed amount will get 5.5 per cent interest, he said and adding, the bank will provide the rest 60 per cent of the construction cost in loan.

Customers are required to save the money within three years time and they would reimburse the loan within 17 years.

According to Teklewold, a saving scheme for the procurement and rent of investment machinery has also been launched to encourage small and micro enterprises.

A customer who saves 40 per cent of the money for procurement of investment machinery within two years can get the rest the balance in loan from the bank.

The program would be undertaken by an enterprise to be established by the Commercial Bank of Ethiopia.

The program would be executed in collaboration with all financial institutions to address the problems of small and micro enterprises to get loan and collateral.

With a view to strengthening and expanding the social security service, the monthly pension contributions of employees of government and non-governmental institutions would be channelled to buy government bond.

The current pension deduct from a civil servant is raised from four per cent to eight per cent while government’s contribution is increased from six per cent to ten per cent.

A fund administered by a board would be established to coordinate the social security of employees of the private sector.

ETV Reports