As Is Documentation 7feb07 R1

Development Bank of
Ethiopia
Business Process Re-Engineering

Study on
Core Process of the Bank
As Is Documentation
Report
Core Process Reengineering Team

Core Business Process Reengineering Documentation Report ii
Table of Contents
I. Introduction........................................................................................................1
1.1 Preamble.......................................................................................................1
1.2 Vision, Mission, and Values..........................................................................3
1.2.1 Vision.....................................................................................................3
1.2.2 Business Mission...................................................................................4
1.2.3 Core Values............................................................................................4
1.3 Statement of the Problem.............................................................................4
1.4 Objectives of the Study.................................................................................5
1.5 Scope of the Study...................................................................................6
1.6 Methodology Employed................................................................................6
1.7 Organization of BPR Team...........................................................................8
II. Background.....................................................................................................12
2.1 Profile of the Bank......................................................................................12
2.2 Credit Operations (An overview of Past Performance)..............................15
2.3 Human Resource Position..........................................................................21
2.4 Capital Structure of the Bank (Assets and Liabilities)................................23
2.5 Financial Performances..............................................................................23
III. Rational for Business Process Reengineering..........................................26
3.1. Customers Expectations............................................................................27
3.2 Core Business Process..............................................................................29
3.2.1 Selection Criteria..................................................................................29
3.2.2 Process Mapping.................................................................................30
3.2.3 Process Matrix.....................................................................................33
3.2.4 Cycle Time...........................................................................................34
3.2.5 Cost Build up........................................................................................38
3.2.6 Control System....................................................................................40
3.3 Factors Affecting Current Performance......................................................40
3.3.1 Organizational Structure and Manpower.............................................40
3.3.2 Material Resources..............................................................................46
Development Bank of Ethiopia

Core Business Process Reengineering Documentation Report iii
3.3.3 Policies and Procedures......................................................................47

3.3.4 Information Technology........................................................................48
IV. Gap Analysis and Benchmarking................................................................51
4.1 Gap Analysis...............................................................................................51
4.2 Benchmarking Best Practices.....................................................................58
VI. Challenges.....................................................................................................60
VI. Annexes..........................................................................................................62
Acronyms
BOM Board of Management

BPR Business Process Reengineering
Customer Individuals, Private or Government Companies who are seeking
service of the Bank for partial financing viable investment projects.
DBE Development Bank of Ethiopia, the Bank
EMI Ethiopian Management Institute
HRM Human Resource Management
IT Information Technology
SPM Strategic Planning and Management
VMV Vision, Mission and Values

Core Business Process Reengineering Documentation Report 1
I. Introduction
1.1 Preamble
The Ethiopian Civil Service has long years of experience in rendering

service to various individuals, companies and government and non
government organizations. Yet the system is crippled and is not rendering
the required service and hence is not meeting the mission for which
organizations are established for. Over its long existence the Ethiopian
Civil Service system remained hindrance and did not contribute to the
anticipated level due to ill orientation, attitude and work practices of the
bureaucracy established to carry out government policies.
Owing to this the Government of Ethiopia recognizing the need for

transforming the overall civil service delivery and hence has launched
various programs and projects to expedite the envisaged transformation.
The public service improvement sub-program in which the financial
institutions are considered as part and parcel of same targeted to make
changes in areas Management/Leadership/, Human Resource
Management, Service Delivery, Resource Utilization Management, and
Ethics. The whole effort reveals Governments intention to bring about
quality service.
The Development Bank of Ethiopia, in view of the above understanding, set

up BPR Team which conducted a full-fledged study implemented as of
November 2005. In one year performance the expected result however
could not be achieved due to both problems of the recommendation of
report and implementation of same.

Being one of the actors of the financial sector reform program, currently
the Bank has decided to reorganize a new Core Business Process
Reengineering Team to carry out the BPR effort on the core process in line
with the current business and technology situations. The re-design core
process is expected to address customers expectations in terms of cost,
quality, service level and speed in areas of service delivery. The
transformation process focuses on key service areas listed below as stated
in the regulation for the re-establishment of the Bank. The services are
ranked in order of their impact for the change:
(1) Provide investment credit to viable projects,
(2) Provide technical and managerial services,
(3) Providing banking services to its borrowers,
(4) Mobilizing fund,
(5) Accept time deposit,
(6) Issue and sell bonds,
(7) Managing funds entrusted to it,
(8) Open and operate Bank account,
(9) Participating in equity investment,
(10) Guarantee loans and other financial obligation,
(11) Perform other activities as is customarily carried out by

Development Banks,
(12) Act as trustee,

The Bank considering the immediate need of major stakeholders in general

and customers in particular prioritized the credit service delivery process
(the core process) for reengineering.
To properly handle the re-engineering program DBE sets up Steering

Committee, whose members are the President, Vice Presidents,
Department Managers and Service Heads, who have committed themselves
to undertake a holistic change by establishing the Bank's VMV and sharing
same with employees. The Committee also sets up Core Business Process
Re-engineering (BPR) and Strategic Planning Teams. The following are
some of the activities performed the Core Process Re-engineering team:
Produced Terms of Reference that explains and guides the

purposes of the study and the result intended to achieve,
Define and map the As Is business process that is vital to
meeting customers and stakeholders requirements.
1.2 Vision, Mission, and Values
The Banks vision, mission, and core values are adopted from the revised
(i.e., draft) strategic plan of the Bank dated 2006/07.
1.2.1 Vision
The vision of the Development Bank of Ethiopia is to be an excellent Bank

by international standard in the provision of customer focused
development project finance in the Country."

1.2.2 Business Mission
The mission of the Development Bank of Ethiopia to accelerate the

Country's economic development through the provision of medium and
long term investment credit as well as short term loans along with
technical advice to viable development projects in line with Government
priorities. To meet its business purpose, and to be profitable in order to
maintain its sustainability, the Bank relies on its qualified, experienced
and multi disciplinary employees who are loyal and honest to the Bank's
customers.
1.2.3 Core Values
o Customer satisfaction
o Integrity (honesty, truthfulness, transparency)
o Teamwork (harmony, cooperation, synergy)
o Learning organization (flexible, change-oriented)
o Innovation
o Excellence (competence, dedication to work professionalism)
1.3 Statement of the Problem
The business mission of DBE as stated earlier is extending loan to viable

development projects and also maintain sustainability. Yet over the past
years the performance of the Bank with respect to fulfillment of customers

expectation is rated as very poor. Such ill service delivery in addition to

adversely affecting customers satisfaction is also becoming one of the
major factors behind the long standing poor operational and financial
performance of the Bank. The Government is also urging most of the public
organizations including DBE to transform and improve service delivery.
Owing to the importance of service delivery to performance of the Bank

and to meet the expectation of the Government, at this juncture, revisiting
the service delivery and implementing corrective action became
mandatory. The study will, therefore, address problems related to service
delivery so that corrective actions to the level of customer satisfaction will
be made during re designing.
1.4 Objectives of the Study
The objectives of the core business process reengineering effort are:
o Bring about positive attitude change and work culture among staff
members towards efficient and effective service to the extent of
satisfaction of service users.
o Transform the Bank into effective and modern organization capable
of executing the Government's National Development endeavor
through,
a) Identifying the bank's credit services and activities

b) Identifying problems that causes inefficiency and bottlenecks in
the existing workflow ,
c) Cost effectiveness, identifying the efficient use of human and
material resource in the work process,

d) Timeliness, Providing speedy services to stake holders

e) Transparency,
f) Assessing level of service delivery in a clear and specific manner
g) Accountability: Assessing accountability in light of exercising
authority and responsibility.
h) Quality services
1.5 Scope of the Study
The BPR Team will focus on examining the existing complete cycle of
credit delivery process at the Head Office. Problems related with service
delivery will be identified, gaps with respect to customers expectations and
performance of other related organizations will be pin pointed.
1.6 Methodology Employed
Designing Formats
Forms required for data collection are designed. The designed formats are
used for documenting workflows, cycle time and cost. This was required in
order to analyze and endorse the credit delivery that had been conducted
over the reporting period.
Process Mapping and Data Collection

So as to fully understand the problems and bottlenecks of service

deliveries, process maps are used. Process mapping shows whether the
current business process enables to meet the objectives the Bank is set up
for. The current core process has been mapped in the form of As Is"
documentation.
Questionnaires
In addition to the opinions surveyed by the former BPR Team,

questionnaires were prepared and administered by the current Core BPR
Team to assess the opinions of various selected stakeholders and
development partners. The Study Team has designed and distributed
questionnaires to Head Office Staffs and selected development partners.
Participation of Management & Employees
Management and employees of the Bank have participated directly or

indirectly in collection of data and discussed the results therein. Hence,
activities which have been done by the BPR Team were performed by
involvement of management, and all employees at Head Office.
Experience Sharing
To enrich its purpose and widen its scope, the Team has given importance
and due attention to learn from the success story of some public and
private banks which are in the same industry though there are differences
in areas of specialization and concentration.

Observation
Work environment assessment, i.e. staff discipline, office layout,

organization structure in effect, etc. have been checked through
observations and supporting documentation.
1.7 Organization of BPR Team
The BPR Team consists of ten members. This Team has the responsibility
of performing the day-to-day activities of the reengineering and reports to
the Steering Committee. Team members are pooled from different
functional units of the Bank which includes those staff members under the
core process.

Figure 1.1 Organization Chart of DBEs Transformation Program
National Steering
Committee
DBES Steering Committee
Strategic
BPR Team Plan
Tea
Sub Teams Customer &

Other
Institutio
ns
Customer & Other

Institutions Department/Service
/Offices
Departments/
Service/offices
Employees
Head Office
Employees Branches
The Core Business Process Reengineering Team comprises of ten members

as listed below:

Table 1.1 Lists of Members of the Core BPR Team
1. Ato Bahiru Haile RUFIP Chairman
2. Ato Darge Berkesa Public Relations Service Secretary
3. Ato Getnet Temechew Legal Department Member
4. Ato Mebratu Gebeyehu Engineering Department
5. Ato Kibru Fonja Branch Operations Department
6. W/ro Felekech Zewde Finance & Banking Department
7. Ato Mekete Shiferaw MIS Department
8. Ato Solomon Megersa HRM & Logistics Department
9. Ato Bekabil Berhanu Appraisal Department
10. W/rt Kewser Reshid CR Department
Furthermore, Ato Temesgen Busha is assigned as Head of the Secretariat of

the team. The therefore participates in the activities of the Team.
Formation of Sub Teams
The business process re-engineering consists of strategies, process,

technologies, and manpower resources as well as fundamental analysis of
the organization & redesign of:
a) Business process flows, control processes & cost build-up
b) Benchmarking and customer requirements,
c) Organization structure and human resource issues,

Five teams therefore are organized to speed up the core process

reengineering effort:
a) Organization Structure and HR

b) Documentation and Editing
c) Process Flow, Cost build-up and Control Processes
d) Policies and Procedures
e) Benchmarking and Customer Requirements

II. Background
2.1 Profile of the Bank
Development Bank of Ethiopia is one of the financial institutions engaged

in providing short, medium and long-term development loans. The Bank
has a distinguished feature of business missions; which is ''Project "based
lending.
The Bank's history has undergone substantial changes since 1909 and the
policy changes that have been influencing its credit operations and other
activities have also been following the changes in the name with
subsequent changes in the business objectives of the Bank. Changes in the
name of the Bank may be summarized as follows with implied changes in
its activities over the years under consideration:-
1909-1935: The Societe Nationale DEthiopie Pour Le Development

1945-1948: Agricultural Development Bank of Ethiopia
1949-1951: Agricultural and Commercial Bank of Ethiopia
1951-1970: Development Bank of Ethiopia
1970 DBE and Investment Bank of Ethiopia (IBE) merged
and formed AIDB S.C.
1970-1978: Agricultural & Industrial Development Bank S.C.
1979-1994: (Re-established) Agricultural and
Industrial Development Bank
1994 on wards Development Bank of Ethiopia
Hence, one has to bear in mind while analyzing the loan operations of the
Bank that it has always been highly influenced by the various policy

changes that have been enacted by the various governments of Ethiopia

since 1909.
In its service years, before 1970, the main objective of the Bank was to
accelerate the development of Agricultural and Industrial production by
initiating the investment of private capital for productive purposes. To this
end, the Bank granted its loans to the industrial sector, which was mainly
allocated for textiles, mineral water, and flour mills. In the agricultural
sector, the Bank assisted coffee plantation, field crops, dairy projects as
well as fruits and vegetable farms.
After the establishment of Agricultural and Industrial Development Bank

S.C in 1970, the Bank had become the Governments principal instrument
for extending medium and long-term credits and equity participation in
commercially justifiable projects in agriculture as well as in industry,
mining and allied sectors of the Economy. The Bank was also active in
guaranteeing foreign loans, opening letters of credit, and channeling
foreign funds from international capital sources.
In 1979, Agricultural and Industrial Development Bank was re-established

and framed the role of the Bank in centrally planned national economy.
The Bank, in conformity with the directives of the National Bank of
Ethiopia as its supervisory authority, was empowered to perform the
following activities. In order of fulfillment of its objectives, among others
the followings were activities of the Bank.
Fund management on behalf of government or international

agencies for a fee, equity investments, project identification and

promotion and dissemination of technical, managerial and

financial knowledge
Moreover, DBE has played a significant role in implementing the

Governments effort to reverse the declining trend in production and hence
increase the foreign exchange earning capacity of the country. To this end,
the Bank has financed the construction and improvement of wet coffee
processing stations, and dry coffee hulling industries.
DBE has provided a number of farm machinery with the necessary

equipments to producer and service cooperatives. The Bank also assisted
small-scale irrigation, livestock fattening, dairy projects and oil mill/grain
mill projects.
In addition to the financial support DBE provided to its clients, it has given
advisory services to prospective borrowers, organized training programs to
government and cooperative societies, employees as well as farmers to
improve managerial capacity of respective organizations. It was the pioneer
financial institution in the provision of agricultural inputs and technology
credits aimed at food self sufficiency of the Country which is the current
aim of the Government.
The 1991 change in Government and economic policy changed the

objectives and modus operandi of the Bank. Since its establishment of the
as per Public Enterprise Proclamation No 25/1992, the Bank has been
playing a significant role in promoting over all economic development of
the country through an organized set up to contribute to the private sector
development objectives and efforts of the Country.

2.2 Credit Operations (An overview of Past Performance)
The credit operations, financial performances and related aspects for fiscal
years 1998/99 - 2005/2006 have been compiled in this report. Year
1998/99 is selected as a start year as it is the years for the first
restructuring. Previous eight years positions of the Bank and the trends of
credit operations over these years therefore is presented to compare what
is happening over the current and recent restructuring of the Bank. Effort
has also been made to compare operational results of the year under
consideration against actual results of the preceding year. Moreover, the
report tries to provide the loan positions of the Bank segregated into
outstanding and loan in arrears for the respective years. The summary of
activities and results of the Bank over the eight years considered are
illustrated in the following table below (Table 2. 1).

Table 2.1 Summary of Credit Operations & Financial result (1998/99 2005/06)
000
Particulars 1998/99 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006
Birr Birr Birr Birr Birr Birr Birr Birr
1. Credit Operations
Loan Approval 604,915 306,664 212,929 127,337 120,866 382,274 781,399 1,667,314
Loan disbursement 553,714 456,959 227,683 111,292 69,177 294,896 504,667 626,702
Loan collection (P+I) 397,080 411,099 350,801 242,472 266,290 182,497 477,261 595,487
O/S Loan (P+I) 2,499,433 2,783,464 2,898,963 2,976,787 2,996,380 4,331,087 4,911,826 5,376,475
Loan in arrears 989,982 1,211,675 1,293,544 1,625,113 1,807,182 1,946,076 1,651,768 1,609,228
2. Financial Performance
Total Income 195,190 212,553 223,056 247,697 210,720 188,887 285,256 401,585
Total expenses 103,776 114,482 118,671 118,042 104,449 93,917 111,651 187,799
Net profit/Loss after Tax &
provision 26,305 29,081 21,706 16,087 -15,531 (1,906) 40,955 28,101
Total Assets 3,838,342 4,245,882 3,108,135 3,163,186 3,362,257 4,812,373 5,360,911 5,936,698
Total Liabilities 3,448,066 3,839,987 2,687,050 2,730,385 2,837,700 4,287,949 3,533,212 4,078,123
Net worth 390,276 405,900 421,085 432,801 524,557 524,424 1,827,699 1,858,576
Profit margin 30% 28% 31% 34% -7% -1% 14% 8%
3.Manpower ( in number )
Newly recruited 28 92 53 57 55 69 84 68
Termination 91 58 52 46 67 50 85 54
Ending balance 778 806 806 811 799 818 817 830

The total loan approval decreased from Birr 604.9 million in 1998/99 to
Bir127.3 million in 2002/2003, but registers an increased to Birr 1,667
million in 2005/2006. Similarly the total loans disbursed decreased from
553.7million to Birr 69.2 million during the years under review except an
incensement to Birr 626.5 million in 2005/2006. Likewise, loan collections
also registered decreasing trends from Birr 397.1 million to Birr
266.3million, respectively although moderate improvements were
observed during fiscal years 1999/2000, 2004/2005 and year 2005/06.
Please refer to Figure1 for loan approved, disbursed and collected during
the seven years under review.

Figure 2.1 DBE Credit Operations
Years 1998/99 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006

Loan Approval 604,915 306,664 212,929 127,337 120,866 382,274 781,399 1,667,314
Loan disbursement 553,714 456,959 227,683 111,292 69,177 294,896 504,667 626,702
Loan collection (P+I) 397,080 411,099 350,801 242,472 266,290 182,497 477,261 595,487

The outstanding loans of the Bank, during the eight years period, show a
continuously increasing trend from Birr 2,499.4 million to Birr 5,376.5
million. Loans in arrears showed the highest increase in fiscal year
2003/2004. The increasing trends were also observed through out the
years from Birr 989.9 million in 1998/99 to Birr 1,946 million by the year
2003/2004. In the year 2005/2006, Loan in arrears showed relatively
decreased figure (i.e., Birr 1,609 million). Please see Figure 2.2 for loans
outstanding and arrears of the Bank over the reporting periods.

Figure 2.2 DBE Loan Position (1998/99 2005/06)
Years 1998/99 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006
O/S Loan (P+I) 2,499,433 2,783,464 2,898,963 2,976,787 2,996,380 4,331,087 4,911,826 5,376,475
Loan in arrears 989,982 1,211,675 1,293,544 1,625,113 1,807,182 1,946,076 1,651,768 1,609,228

2.3 Human Resource Position
The total number of employees of the Bank varied between 778 (1998/99)
to 830 (2005/2006). The manpower balance for 2005/2006 was 830
despite variations in the current year. Out of the total staff of the Bank by
the year 2005/2006, 328 (40%) were professional and high level
supervisors, 200 (24%) were semi-professionals and clericals, 75 (9%) were
technical and skilled, while the remaining 227 (27%) were manual and
custodians. Figure 2.3 shows the human resource of DBE over the
reporting period.

Figure 2.3 Human Resource Position

2.4 Capital Structure of the Bank (Assets and Liabilities)
The paid up capital plus reserve as net worth of the Bank increased from
Birr 390.3 million to Birr 1,854 million from years 1998/99 to 2005/2006.
The paid up capital has been declared to be Birr 1.800 billion as at the end
of the fiscal year 2005/2006. The authorized capital however is Birr 3
billion.
The total asset has increased from Birr 3,838.3 million to Birr 5,936.5
million between years 1998/99 and 2005/2006. Similarly total assets
started increasing from fiscal year 2000/2001 onwards reaching to Birr
5,936.5 at the end of 2005/2006. Correspondingly, liabilities of the Bank
registered the highest increase between years 1998/99 and 2005/2006
from Birr 3,448.0 million to 4,078 million respectively. Significant
increases in total liabilities were observed between years 2000/2001 (Birr
2,687.0) and 2005/2006 (Birr 4,078).
2.5 Financial Performances
The total income of the Bank has been registering continuous increases,
although it was modest during the first four fiscal years from Birr 195.2
million in 1998/99 to Birr 401.5 million in 2005/2006 with a sudden drop
of Birr 188.5 million during the 2003/2004 fiscal year. Similarly, total
expenses increased from Birr 103.8 million in 1998/99 to Birr 187.8
million by year 2005/2006. The following two fiscal years of 2001/2002
and 2002/2003 registered decreased expense of Birr 118.0 million and Birr
104.5million, respectively. As a result Net Profit/Loss after tax and
provision for doubtful debts increased from Birr 26.3 million in 1998/99 to
Birr 29.1 million in 1999/2000. However, continuous decreasing trends
were observed during years 2000/2001 to 2002/2003 from Birr 21.7

million (-25%) to-15,531 million (-197%) as compared to the performance

of the previous year. Figure 2.4 illustrates profit/ loss position of the Bank
for the last five fiscal years.

Figure 2.4 Net Profit/Loss (1998/99 2005/06)

III. Rational for Business Process Reengineering
In todays world where competition to market, resource, etc, is stiff

businesses exist in the market if and only if they could properly serve their
customer. Organizations therefore should always look forward and
transform if possible to surprise customers by providing unexpectedly high
quality service if not to render optimum service and remain in the market
as existence depends on how the organization manages customers,
competition and changes.
Business process re engineering is one of the main ways in which

organizations become more efficient and modern. It transforms
organizations in ways that directly affect performance.
The main argument of impact of business process re engineering in

efficiency of an organization is that process and people are the two
cornerstones of any organization. No matter how much individuals are
motivated and work hard, if the business processes are cumbersome with
non essential activities, organizational activities will remain poor. BPR by
transforming how people work, improves efficiency of organizations.
Experience of organizations implemented BPR reveals that minor changes
in process could have dramatic changes in cash flows, service delivery and
customer satisfaction. Owing to this positive impact DBE set up Core BPR
Team that conducts re engineering on the core process of the Bank.

At the documentation stage the Team evaluated customers expectation

and current performance of the Bank with respect to fulfillment of this
expectation. Data collected by previous BPR team is considered in
evaluating customers expectation. The current performance of the Bank in
line with this expectation is evaluated by conducting process matrix, cycle
time, cost and control process analysis. Factors responsible for the current
performance like Organizational structure, manpower, material resources
of the Bank and policies procedures related to the credit delivery will also
be addressed in the report.
3.1. Customers Expectations
The previous business mission of DBE was to support the acceleration

of the countrys economic development through the provision of medium
and long-term investment credit as well as short-term loans along with
technical advice to viable projects in line with Government priorities.
This implies that the Bank is set up to fulfill the expectation of customers in
providing loan to viable investment projects. The operational performance
and hence fulfillment of the mission statement of the Bank therefore is
mainly evaluated based on the level of customer satisfaction. Like wise the
whole purpose of re engineering the core process of the Bank Credit
Delivery is to evaluate where the Bank is in the eyes of customers and to
make the necessary adjustments as per customer expectations.
The current BPR Team owing to the time limitation in finalizing the whole
reengineering of the core process was not in a position to conduct survey

on customers expectations. Yet the Team adopted what has already been
done by the earlier BPR Team as documented in their report.
Of the 127 customers approached by the previous BPR Team, 88 (70%)

responded and commented in areas of leadership, timeliness,
transparency, accountability and ethics. The response of these customers is
summarized as follows. For the detail, please refer Annex 1.
Table 3.1 Summary of Customers Opinion Survey
S. No Description Good/satisfactory Unsatisfactory

1 Transparency 77.6% 22.4%
2 Timeliness:
- In securing loan 10.7% 89.3%
- Building cost estimate 45.8% 54.5%
- Contract signing 47.0% 53%
3 Effecting disbursement 73.2% 26.8%
4 Ethics of employees 85.9% 14.1%
5 Employees professional capacity 78.3% 21.7%
Allowing equal weight to all responses one can conclude that the service
delivery of the Bank is rated as unsatisfactory by about 40.2% of its existing
customers which is a huge rate by any standard.
To identify the gap between what our customers expect and current
performance there is a need to conduct assessments in areas of customers
interest. In the following sections services that are of interest of customers
will be selected.

3.2 Core Business Process
The Banks core business processes are those processes central to the
Banks business functioning. They are typically primary value-chain
activities and relate directly to external customers. The generic example is
the credit delivery process in which the Bank is expected to have shortened
lead-times, improve quality, reduced material and information flows, and
administrative steps.
These core processes, which mainly have a system, require formal study
and detailed assessment which in turn has significant impact on the
operations of the Bank.
3.2.1 Selection Criteria
As an entry point, selection criteria were considered to select core

processes for immediate reengineering. These criteria are normally helpful
in emphasizing on those processes which should get instant solutions up
front. The key criteria (i.e., decisive factors) considered and summarized
for selecting and making order for reengineering support processes
include:
o Business process which has been in trouble
o Substantial dissatisfaction by customers

o Have highest impact on outside customers and their satisfaction
o Processes which may be feasible with regard to different resources

and factors (i.e., material and manpower resources, scope, time, etc.)
o Processes which may have a good return on the transformation

efforts
o Process with strongest link to organizational mandate & mission,
o Process that has customer dissatisfaction & time taking procedural

hurdles (major area of complaint),
o Process with the highest potential return,
o Less complex process where improvement goals can be achieved

with in a short period of time i.e. 1 months,
o Process which may result in significant change in the total

operations of the Bank,
Considering the above criteria, it is apparent that the core service area,
which expected to meet customers expectations, is the credit delivery.
3.2.2 Process Mapping
The Core Business Process Reengineering Team used Process mapping/a

workflow diagram, which is believed to bring forth a clear understanding of
processes. It aids communication about processes and acts as a basis for
understanding the As Is processes of the Bank. It could also be referred
to as the technique by which the business process is clearly visualized with

out the distinction of the organizational structure/internal politics. That is,

it bridges the fragmentation of the business process encountered due to
functional organizational structure of an entity.
By connecting/bridging all steps following the cross functional work flow,

process mapping makes the business process visible for re engineering.
Process mapping is therefore one of the most important steps in business
process re-engineering, mainly conducted both to visualize the existing
practice AS IS and re design a higher level process. The process mapping
during documentation stage is the AS IS process. At this stage process
mapping helps as a basis of analysis and review in terms of identifying
process steps that are the potential causes of bottlenecks, delays, barriers
and errors.
In conducting the study at documentation stage, the Core Business Process

Reengineering Team has mapped the As Is core process (credit delivery)
of the Bank. In doing so, agreed up on symbol depicting the action at each
stage of the process are selected and activities taking place at each level of
the process center is clearly stated in the diagrams.
The main objectives of the AS IS process mapping among others are the
followings.
(1) Understand the existing processes of work, their span, linkages and
bottlenecks,
(2) To identify and detect drawbacks in time, cost, quality and efficient
service delivery to the customers.

(3) Initiate employees rethink of the past culture and operational
experiences and help as a spring board for re engineering.
Not withstanding that the As Is core process of the Bank can be

visualized as one complete process, it has been divided into various sub
processes for the purpose of clarity and understanding. The sub processes
are the following.
(1) Loan Application sub process: It consists of sub processes

such as provision of information, collecting of documents from
customers, evaluation of the legal documents, revision of
building cost estimate and due diligence assessments (know your
customer and other customer screening assessments)..
(2) Loan Appraisal sub process: It is the sub process which

purely contains the loan appraisal process only. Project appraisal
involves the technical, economic, organizational and financial
analysis to assess feasibility and viability.
(3) Loan Approval sub process: The approval sub process

encompasses discussing the result of the appraisal report with
clients, deliberation of loan approval, disclaimer and contract
preparation, signing and insuring the property of the project and
the collateral.
(4) Disbursement sub processes: The disbursement sub process

consists of release of equity and disbursements of loan.

The loan appraisal and approval sub processes are presented as

attachments while other sub processes (loan application and disbursement
sub processes) are presented in the main document. Furthermore other
sub processes are also presented as attachment in the core process
mapping. Furthermore, the relevant assumption of the existing process of
the credit delivery is also attached to this document. The purpose of
incorporating the basic assumption of the process explains why jobs are
performed this way and the reasons for most of the steps. Detail of list of
the attached sub processes is presented as follows.
The following attached flows are part of the core process under study:
o Request for field Vehicle
o Request for Travel & other advance payment
o Request for credit information
o Insurance procurement and renewal
o Engineering cost estimate
o Legal opinion
o Contract preparation
o Equity deposit
o Effecting disbursements
The As Is process mapping and assumptions of core process of DBE is

presented under annex 2.

3.2.3 Process Matrix
The whole purpose of conducting process matrix is to properly understand

the mapped core process. The process matrix renders a high level view so
that the Team will have the intuition and insight necessary to a totally new
and superior design from clean sheet of paper. The matrix therefore is
conducted in such a way that it answers the followings:
a) What the current process does?
b) Why it does that way?
c) How well (or poorly) it performs and the critical issues that governs
its performance?
d) Who are the customers? And how customers get served?
e) The process inputs and outputs.
As can be seen from the attached process matrices, a good share of steps of
the core process are non-value adding, time consuming, costly and sources
of customers grievance. The detail is presented under annex 3.
3.2.4 Cycle Time
Cycle time is one of the indicators of the level of the service delivery of an
organization. It is also the major factor that needs to be addressed in
improving customer satisfaction.
Information collected reveals that the Bank over the period of one year
(i.e., November 2005 to November 2006) used to finance projects in two

distinctive ways. For those projects applied for loan after fulfilling all the
required information as per the credit policy (i.e. with three Performa
invoices, approved plan, bill of quantity, feasibility study, land holding
certificate, etc.) the Bank approves loan right away as per recommendation
of first appraisal study. Others whose implementation schedule is long and
also did not fulfill the documents as per the policy the Bank finances
projects based on two level approvals.
Average data of cycle time elapsed at each sub process of the core process is
considered. Considering the time coverage of the report which is only one
year, it is assumed that incorporating projects which have passed all the
loan delivery cycle might limit the data coverage. Therefore all projects
though did not complete the over all loan delivery stage are considered.
The average cycle time of projects in the analysis is summarized and
presented based on the two approval processes practiced in the reporting
period.
Limitation of Data Collection
o Absence of required information from some of the files.
o Absence of time indicators of the work process movements from one

unit to another.
o The difficulty to understand the designed data collection formats
o Repeated change of decision concerning the data population

coverage and loan processing activities to be assessed.

Table 3.2 Cycle time of projects financed at first level appraisal stage
S. No Description No of days Share (%)

1 Application sub-process 46.56 22
2 Appraisal sub-process 28.41 13
3 Approval sub-process 45.96 21
4 Equity release
- First equity release 10.32 5
- Second equity release 30.44 14
5 Disbursement
- First disbursement 23.11 11
- Second disbursement 29.15 14
Total 214.15 100
From the experience of the Bank over the reporting period, the quickest
service is delivered to those projects financed passing only one level
approval process. Yet including possibility of more than two disbursements
in equity utilization and loan, the average number of days projects elapsed
in the Bank is 214.15. The maximum time spend in the credit delivery
process described above as stated in table3.2 is during application sub
process especially in preparing the due diligence report. The sub process
that stands second in terms of cycle time is loan approval. This sub process
encompasses the time taken in discussing the case with clients and
understanding the report, time taken for approval of the appraisal report,
covenant and loan contract preparation and insurance. Release of equity
and loan for the second time are also one of the top in the list of credit
delivery cycle time.
Table 3.3 Cycle time of projects financed at second level appraisal stage

S. No Description No. of days

Share (%)
First level approval stage
1 Application sub process 46.56 17
2 Appraisal sub process 28.41 11
3 Approval sub process 30 11
4 Equity release
- First equity release 10.32 4
- Second equity release 30.44 11
Sub total 145.73
Second level approval stage
1 Application process 33.12 12
2 Appraisal process 11 4
3 Approval process 26.96 10
4 Disbursements
First disbursement 23.11 9
Second disbursement 29.15 11
Sub total 123.34
Total 269.07 100
The cycle time of the core process in the second scenario is 269.07 days.
The difference in cycle time of the two scenarios is 55 days. It can be
observed from the two tables that the first level application process took
longer time followed by application process of second level approval stage.
The first level approval and second level equity release also accounted for
about 30 days each from the total cycle time of 269 days.
3.2.5 Cost Build up

As the major cost component in the cost structure of the service delivery of
the Bank is salary, the cost structure of credit delivery is directly related to
the cycle time. Those processes with longer time, therefore, cost the Bank
higher than the shorter once. Owing to the direct relation between cycle
time and cost, the cost of the service delivery is evaluated based on two
stages of the loan approval processes.
Table 3.4 Cost of projects financed at first level appraisal stage
Ser. No Description Cost Share (%)

1 Application sub process 2830.28 8.76
2 Appraisal sub process 3390.32 10.5
3 Approval sub process 5824 18.04
4 Equity release
- First equity release 288.96 0.89
- Second equity release 9585.41 29.68
5 Disbursement
- First disbursement 732.41 2.27
- Second disbursement 9640.56 29.86
Total 32,291 100
An average of Birr 32, 292 is spent to deliver credit service for project
finances at one go approval level. Of the sub processes incorporated under
first level approval credit delivery, release of second disbursement is the
costly one followed by second equity release. Similar to that of cycle time,
cost of projects that pass both levels of approval is higher than those
finalized in one approval stage. The detail is presented as follows.
Table 3.5 Cost of projects financed at second level appraisal stage
Ser. No Description No. of days Share (%)

First level approval stage
1 Application sub process 2830.28 5.78

2 Appraisal sub process 3390.32

6.93
3 Approval sub process 5148 10.52
4 Equity release:
- First equity release 288.96 0.59
- Second equity release 9585.41 19.59
Sub total 21,243
Second level approval stage
1 Application process 10876 22.23
2 Appraisal process 2883.17 5.89
3 Approval process 3559.47 7.27
4 Disbursements
First disbursement 732.41 1.50
Second disbursement 9640.56 19.70
Sub total 27,692
Total 48,935 100
As depicted in the Table the average service cost of two levels of approval
processes is Birr 38,935 which is higher than the fist one by Birr 16,644.
Within two stages approval levels as depicted in the above Table, the first
stage approval level is more costly than the second stage. Second stage
equity and loan release are the top in the cost component followed by first
stage approval.
3.2.6 Control System
Conventional process is a process filled with various check and balances

and control steps. The check and control systems add no value but included
to ensure that people are not abusing the process. Yet costs associated with
strict control are higher and also take time and effort to do all the checking.
Like any organization operating in conventional process, the control

system of DBE is too strong. From the process metrics, it could be observed

that a number of non-value adding steps are conducted at all levels of the
core process just for control purpose.
Reengineered processes however use controls only to the extent that they
make economic sense. The issue of excessive check and control will be re
designed during re engineering process.
3.3 Factors Affecting Current Performance
3.3.1. Organizational Structure and Manpower
The purpose of setting up organization under a given structure is to make

the best use of the organization's resources to achieve organizational goals.
Organizational structure is the formal decision-making framework in
which job tasks are divided, grouped, and coordinated. It is one of the
major influential factors in process flows and also has great implication on
expected results.
The followings are evaluation of the current organizational structure of

DBE.
It is found out that the Bank's existing Organizational structure is set

up based on the assumption that aligning departments / divisions/
offices perform identical tasks and activities of similar processes. .
The structure over emphasizes check & balance
The internal control system in line with the core process is too strong
Due attention is given for risk minimization.

The above findings shows that the organizational structure of the Bank is
not process based but functional with a number of hierarchical levels which
is against the theory of BPR that opts to set up empowered team and
expanded spans of responsibility in a flatter organization .
As per the existing organizational set-up, the Bank has a president who
manages the overall activities of the Bank. The President is assisted by
four vice presidents, 16 Departments and a Service, as well as 35 divisions
at the Head Office. The Bank has 8 Main Branches and 24 Branches
located in different parts of the country. The organizational structure of
the Bank is depicted under annex 4.
Currently 162 employees are engaged in the core process of the Bank. The
qualification and experience of these employees based on their assigned
functional unit is summarized in two tables as follows.
Table 3.6 List of Employees Working on the Core process
Sr. Departments /
No Work Units PHLS SPAC TS MC Total
1 V/P Client R/S & Br. Operation 1 1 --- --- 2
2 Client Relations Dept. 31 10 --- --- 41
3 Br. Operations Dept. 2 2 --- --- 4
4 V/P Credit Appraisal 1 1 --- --- 2
5 Appraisal Dept. 15 3 --- --- 18

6 Engineering Dept. 22 3 --- --- 25

7 Finance & Banking Dept. 16 5 --- --- 21
8 Legal Dept. 2 6 --- --- 8
9 Logistics Division 2 6 23 4 35
10 Main Loan Committee 6 --- --- --- 6
Total 98 37 23 4 162
% 60.49 22.84 14.2 2.47
PHLS = Professional & High Level Supervisory

SPAC = Semi Professional, Administrative & Clerical
TS = Technical & skilled
MC = Manual & Custodian
Of the total 162 employees 98(60%) are categorized under professional and
high level supervisory, while 37(23%) are semi professionals and clerical
employees. The qualification of employees in their respective work units is
shown here under as follows.

3.7 Educational Background of Employees Working on the Core process
Sr. Departments / 2nd 1st

No Work Units M F Degree Degree Diploma Others Total
1 V/P Client R/S & Br. Operation -- 2 1 -- 1 -- 2
2 Client Relations Dept. 24 17 3 22 13 3 41
3 Br. Operations Dept. 1 3 1 -- 3 -- 4
4 V/P Credit Appraisal 1 1 1 -- 1 -- 2
5 Appraisal Dept. 11 7 -- 14 4 -- 18
6 Engineering Dept. 20 5 1 21 1 2 25
7 Finance & Banking Dept. 13 8 1 9 9 2 21
8 Legal Dept. 3 5 -- 4 3 1 8
9 V/P Support -- -- -- -- -- -- 0
10 HRM & Logistics Dept. 28 7 -- 2 5 28 35
11 Main Loan Committee 5 1 3 3 -- -- 6
Total 106 56 11 75 40 36 162
% 65.4 34.57 6.79 46.3 24.69 22.22
As can be observed from the above Table, (86 %) of the employees are first
and second degree holders implying the Bank has adequate professional
staff working on the core process.
Training
Training is considered to be an investment when linked to the mission and

objectives of the organization. It is through training that employees
upgrade their skill and knowledge, their present positions and prepare
themselves for higher responsibilities. This, however, necessitates the need
for proper identification of training need, selection of individuals eligible

for the training, and allocate the required resource either from own or
other sources. The training impact assessment should also need to be
evaluated based on the predetermined objectives of creating flexible work
force which foster the operational efficiency of the organization.
In this regard, although a lot of training has been provided to staff locally
and abroad, most of them were hardly based on need identification. The
Bank used to render trainings with out any proper plan. At times senior
staff members attend trainings meant for juniors. In other times it is
observed that some staff members attend training which has no relevance
with their current job description in the Bank. The impact assessment has
also never been carried out to ascertain whether the training has met its
objectives. Yet, as training is one of the vital concern of human resource
management it has to be given due attention.
Work Culture
Having the right quality and quantity of staff alone does not guarantee best
performance unless it is reinforced by change in attitude and work culture.
In this regard over the past two years extensive training and awareness
creation efforts have been made to put the Banks work force on the right
track so that every one should contribute to the realization of the Banks
mission and objective.
From observation, it is learnt that although there is an indication of

improvement and change in employees attitude and work, still much is

expected from the entire staff of the Bank to come up to the point where
every body contribute the best of his/her capacity.
Employees Performance Management System
The old appraisal method of employees evaluation system which heavily

rests on subjective judgment has been replaced by the Performance
Planning Management System (PPMS) which the Bank has been exercising
for over the past one year.
The objectives of the new Performance Management System are:-

- To alien each employees contribution to the overall mission and
objective of the Bank.
- To avoid subjectivity and evaluate employees contribution
objectively.
- To link performance rating to other HR functions such as
compensation and reward, training needs identification and
developmental purposes are among others.
Yet the PPMS exercise is at its rudimentary stage implying the need for
further training and follow up to institutionalize and meet the intended
objectives.
Recruitment and Selection
Internal and external recruitment process besides being lengthy and time
taking is reported to have weakness in identifying the right personnel to
promotion and recruitment of new employees.

Some of the short comings in this area are:-

- Lack of proper interview techniques to select best fitted candidates
for new entrances.
- Merit has not been given the attention it should deserve for
promotion.
- The existing practice heavily discourages acquiring professionals
from outside for those posts above entry level. Because of this, the
Bank relies on filling senior posts with internal candidates although
they may not be competent.
3.3.2 Material Resources
Space and floor allocation
Certain principles/premises were taken into account while allocating

spaces and floors for existing departments and services
o Departments that have frequent contact of the work flow should be
located on the same or nearest by floor.
o Departments that have frequent contact with customers should be
located upfront.
o Number of employees and their proximity to the immediate
supervisor is considered in determining the space requirement.
o Allowances for smooth movement of work and employees and
necessary light and ventilation is also taken in account
o Since lack of appropriate privacy can lead to poor concentration,
and affects the ability to perform ones duties, reasonable privacy is
maintained for managerial posts.

Office Furniture
Despite the fact that the provision of office desk, chairs, etc, is observed to
be adequate, the standardization of these office furniture and office
facilities among the different levels of staff members and units is arbitrary.
Furthermore, currently the Bank purchased new office furniture in an
attempt to standardize and economize office space utilization, but it
doesnt seem effective as it was initiated.
Field Vehicles
At Head Office the Bank has a total of 24 field vehicles. Most of these
vehicles served for over 10 years and their repair and maintenance cost as
well as down time is increasing over time. Additional investment,
therefore is required to tackle this problem.
3.3.3 Policies and Procedures

The Bank has installed policies and procedures for its core and support
processes. The credit policy which mainly governs the core process of the
Bank adhers functional based operation of the service delivery. The policy
mainly concentrates on issues of check and balance and accountability of
staff members participating in the process. The policy allows exceptional
treatment for divergence from the normal procedure. Such events however

should pass all normal process steps. Then after the issue will be
execptionally approved by the President with report to BOM.
All the procedures and related formats are aso designed based on what is
stated in the policy. The credit policy by installing the functional loan
processing system takes its part to the previously stated extended cycle
time and customers complaint. List of policy procedures related core
service of the Bank are annexed to this report. Please refer annex 5.
3.3.4 Information Technology
In recent times, technology is increasing its presence in the workplace of

banks and becoming the top in creating enabling environment and
competitive factor. Owing to this DBE has been trying to incorporate the
latest technology into its business operations. The appeal of the whole
information technology arena is that it is designed to make the business
operation efficient, and/or profitable through its widespread impact on
manpower resources and organizational arrangements.
Office Automation and Networking
The network infrastructure of the Bank has two major components, which
include the telecom communication infrastructure to link the various
branch offices with the Head Office (HO) and the network facilities in
place.
Currently the local area network system has been established and various
units of the Bank in the HO are linked with each other and with the central

data center. The infrastructure has the capacity to scale up and could easily
be upgraded.
The old computer system has been replaced by networked PCs

connected to the central server for resource sharing and management:
Data, printer, and dedicated leased line Internet sharing is now possible
and Central information storage and management system capability has
been established.
Three branches (i.e., Bahirdar, Jimma, and Awassa) have been connected
using a dial-up communication system, and the communication
infrastructure was tested. The telecom infrastructure would however be
changed into a dedicated broadband line in the near future to properly
accommodate data communication among all units of the Bank.
Desktop computers and related accessories which become basic

requirements at braches have been given so as to accommodate their
needs.
The speed and level of office automation strictly adheres to the software
every unit is using to facilitate their day-to-day operations. That is, the
trend of the office automation follows the level and usage of the new
software applications, which have been implemented in the Bank (i.e.,
Globus banking software). That is, units in the HO have been given
personal computers and other accessories as early preparation activity for
the live run of the software application.

Computers and Printers
It is observed that currently the Bank has adequate computers and

printers. Yet most of the photocopiers allotted to some departments are
non functional and hence are forced to use service of the pool system.
Telephone Line
The existing telephone PABX (public Automatic Exchange) has been

outdated, and the number of direct lines is getting reduced due to the fact
that the machine has served for a long time. Every time there happens
power interruption, the machine resets all its configurations and as a result
necessitates re-configuration. This has therefore been a major
communication bottleneck within the Bank and between the Bank and
external customers. Moreover, the machine has a very limited capacity to
satisfy the demand of the work units. As a result employees are forced to
move to near by areas to answer or make calls. Lack of telephone line also
hindered moving work units such as Research Department and Library to
newly allotted space in the second tower.

IV. Gap Analysis and Benchmarking
4.1 Gap Analysis
The main purpose of the Gap Analysis is to present a conceptual overview

of the present and future scenarios of key business areas which necessitate
radical transformation for getting from current to future redesigned state.
Gap Analysis could further be used in formulating strategies for
redesigning considering the critical success factors.
For the Core BPR Team to conduct Gap Analysis benchmark studies should
be carried on organizations performing best-in-class so that the Team
could have an idea to set a stretched goal for re engineering and also see
where the Bank currently is in the global market. Despite the fact that
external benchmarking is not conducted so far, Gap Analysis is conducted
based on:
1. Domestic bench marking and experience of other banks
2. Customers requirments and desired goal of the Bank to
radically improve the service delivery.
Experience of other banks
The BPR Team had conducted survey on three selected local

banks to learn how they are performing in areas of core business
process. It has been learned that the experience shared with such
organizations through the survey reveals substantial performance
gap especially in cycle time. The outcome of the survey, shows

commercial banks are performing relatively well in some areas

which are of value for DBE to learn from. The following table
gives a summary of the major good experiences shared which may
be used as yardsticks for institutional performance gap
identification and measurements with the necessary cautions as
to their relevance to the development finance core competence of
the Development Bank of Ethiopia. For further detail, please see
Annex 6.
Table 4.1 Summary of Gap Factors
No. Factors/gaps DBE CBE CBB AIB DBE/CBE DBE/CBB DBE/AIB

/ gap gap gap
1 Average credit Max. Max. Max.
delivery time
227/185 18 31 18 days 209/167 196/154 209/167
days days days days days days
2 Interest rate 7.5% 7.5% 7.5% 7.5%
8.5% p.a. p.a.
p.a. p.a. 0-1.5% 0-1.5%. 0-1.5%
3 Equity Min. Min. Min. Min.
contribution
30% 30% 20%- 30% 0 0-10% 0
30%
4 collateral 0-125% 0- 0-100%
100%
100% 0-25% 0-25% 0-25%
5 Feasibility
Study
yes no No no + + +
6 Other various
Requirements
yes yes Yes yes None none none
7 Ethical issues yes Yes Yes yes None none none
8 Technical yes No No no
assistance
+ + +
9 Project Assets All the banks have common problems of project cost and collateral valuation,
& Collateral customer dissatisfaction issues
Evaluation
CBE= Commercial Bank of Ethiopia
CBB= Construction and Business Bank

AIB= Awash International Bank
Customers requirements
Customers requirements and the desired goal of the Bank to

radically improve its service delivery is another area our gap
analysis covered. In doing so understanding customer needs, which
the Banks business process redesign should address, is a bottom
line issue as Banks products and service should live up to
expectations of customers.
It is a well known fact that proper customer handling is critical and

bottom line for the Banks contribution in the development effort of
the Government and, of course, to remain sustainable in the
industry. The major goal here is to address customer requirements,
which is central to the whole reengineering effort.
Gap analysis with respect to customers expectations (where

customers want the Bank to be in the future) and current practice
is properly addressed under and the identified gap is expected to
be bridged while conducting the re engineering. Table (Table 4.1)
compares the Current scenario with customer expectations
and/or desired goals of the Bank under the Future state.

Table 4.2 Gap Analysis based on customer expectations and future target
S. Priority Area Current Future

No
1 Service Delivery
1.1 Cycle Time - It takes a long time to process customer - Service delivery will be shortened and a standard time
requirements from Application to First to be set
Disbursement
- It takes an average of 214 days - An average of xxx days is the future target and
- Inconsistent and lacks standard time. standard time
- Multiple stages of approval - Consistent and short approval process
1.2 Mode of Service - The customer cases go through most of the - There will be a single point of contact and information
processes as the existing system requires access in the Bank to fully handle customer cases
- Team based work to allow decision making where the
work is done by the people who knows the customer
best
- The use of customer relationship officer will be a
significant revelation.
- Customers must visit the Bank to understand all - Requirements should be posted on the Banks Website
the requirements to be fulfilled ahead of the credit so that they can be accessible by customers
application
- The single point of contact attempted is not with all - CR officers or case teams to be empowered
the empowerments and other facilities and thus not
functional
- Process is primarily characterized by various - The check & control systems which add no value will
check and control steps be abandoned and related costs will be reduced

No
2 Point of contact
- There are HO, 8 main and 24 branches serving - Point of contact to be established based on the Banks
customers. These points of contact (or offices) focus areas and customer overloading
were established a long time ago without
reassessment based on Government strategies &
priorities.
- Head Office handles 85% and - The redesigned business process will not only address
- Branches (about 30 in number) handle 15% of the lengthy cycle time for service delivery, it also
portfolios all of which deemed to be inactive makes operation costs lower by establishing
economical organizational set up.
3 Cost of Lending
- There is an operational cost for eight main and 24 - Customers need low cost of processing credit services
branch offices, and the HO. Moreover, there are - They need a lower interest rate
charges and interests in effect on customers - They also need a longer grace period
- The Bank to revise its lending cost and should
reassess the number of its branch offices to offset
operational costs.
4 Collateral
- Collateral is basic requirements for customers to - Customers need credit delivery without collateral
fulfil to secure their loan requirements pledging collateral.
- Collateral requirements or its amount to be reassessed
- Collateral requirements assessment would in line with
minimizing the possible risk factors on the Banks
sustained business.


No
5 Cost Estimate - Lacks transparency and accountability and is an - Cost estimation activity will be supported with
area of customer complaints standards and the process will be transparent & the
officer in charge will be fully empowered and
accountable for the results
6 Equity Contribution
- Customer must contribute 30% equity to secure - Customers need the 30% equity contribution to be
loan taken out from customer requirements list
7 Information
Technology (IT)
- Information technology has been used in back - IT shall be integrated with the core processes to
office batch/data processing and reporting, speed up service delivery
word/spreadsheet processing, and communication - IT shall be streamlined & will be available for online
purposes to mention a few. processing
- IT will be considered as an essential enabler
- Computers and other technology facilities have - Employees in charge of the core process (service
been given to units based on their demand rather delivery) will be given all the necessary technology
than actual requirements facilities
8 Structure & HR issue
8.1 Organization structure - Vertical organization structure and several - Flat and compact structure empowering case
branches all over the country inheriting the past workers/teams supported by technology
scenario of organization set up - Branch offices will be reorganized to fit the actual
business needs of the Bank
- Overlapping of activities and roles which results in - Clearly defined and delineated roles & responsibilities
conflicts between units for units


No
- A number of work units in the current structure - Work units will be changed from functional
(departments, services, divisions, sections, and departments into process teams (case workers/teams).
branches)
8.2 Geographic Location - Branches all over places in the country as it was - Will be located based on focus areas and customer
10 years before overloading
8.3 Manpower Dev. - Hardly based on requirements and plans - Job profile will be prepared to identify knowledge,
skills, abilities, & competencies for all levels of
positions of employees
- Training curricula can be developed from these profiles
- HR development will be considered as an essential
element
8.4 Staffing - Staffing and deployment is a lengthy process - Standard will be set for staffing and deployment
8.5 Incentive & Reward - No reward and incentive system in effect - System will be designed to incentivize and reward
employees who may perform best
- Positive reinforcement will be considered as a powerful
technique to induce change in belief & behaviour
8.6 Promotion &Transfer - Based on qualification and experience - Shall be made based on qualification, skill and
knowledge
8.7 Peoples Role - Peoples role is under controlled and coordinated - Peoples role will be changed from controlled to
empowered to make decisions
9 Office Layout/ facilities
9.1 Office Layout - Offices are hardly arranged based on service - Offices will be laid out based on service proximity and
delivery and close information flow effective flow of information
9.2 Office Facilities - Offices are furnished and equipped with - Standard will be set for furnishing the various positions


No
inconsistently for different positions of employees and office facilities will be given based
on standards

4.2 Benchmarking Best Practices
In determining how best to apply benchmarking data, it is

imperative first to acknowledge the variance in corporate cultures
of different institutions. Corporate culture is formed by many
drivers, including the Banks credit policies and procedures,
organization structure, incentive plans, and customer services or
interactions.
Due to the fact that culture varies among banks, best practice in
one organization may be different for another. When using
benchmarking information, banks are first advised to consider their
corporate culture. Thus, adequate understanding of the Banks
corporate culture would be a prerequisite to identify and implement
any solution.
For benchmarking study to be worthwhile, the Bank needs to

understand the gap between its own performance and best
practices and take action to close that performance gap.
The action plan and related budget to conduct external

benchmarking study has been submitted to Executive
Management. The Business Process Reengineering Team is waiting
for comments and approval as to how to proceed with the external
benchmarking study. This part will therefore be deferred until
approval by management is accepted so as to conduct
benchmarking as per the action plan prepared by the Team.
V. Conclusion and Recommendations
Assessment made in various parts of this report reveals that the past
performance of DBE evaluated in terms of customers satisfaction is
found relatively poor. Results of survey conducted by previous BPR Team
reveals that about 40% of DBEs clients rated the Bank as poor in
fulfilling their expectations. The rate is very high by any standard.
Management theory also recommends need for change for an
organization ill performing at this rate.
Considering the extent of the current ill performance, a bit and slow
improvements will not help as currently the pace of change itself is
changing in an unanticipated rate and customers will not tolerate what is
going on any more. Furthermore, with slow improvement the Bank will
remain way behind what is expected from it in terms of contribution to
the countrys economic development. To bridge the performance gap the
Team therefore recommends a dramatic change which reinstates and
brings the Bank to the newly desired high level.
VI. Challenges
During the course of studying the credit service delivery processes, the
Team has faced several problems of which some of them were inherent to
the status quo. The following are among the main challenges encountered:
o Unclear and varying scope of the reengineering assignment on the

core business process reengineering study and the different
orientation by management;
o The methods of reengineering (before and after the EMI training);
o Too much time spent on re-working on the As Is core business

process documentation by the Core BPR Team;
o The EMI training programs which were not in the plan before had
disrupted the momentum of the Team on the reengineering effort.
o It was challenging to truck and collect all documentations done by

the former BPR Team.
o The Core BPR Team was organized by members who were added to
the Team at different times where it had taken the Team a long
time and effort to be in equal footing regarding the understanding
and orientation of the BPR assignment.
Mechanisms Adopted to Overcome Challenges
It is a normal practice that challenges are facing the business process

reengineering team at every stage of the study and development. In view of
this, the Core Business Process Reengineering Team has exercised the
following solutions to overcome the impacts of challenges specified in the
same section.
o Conducting a series of discussions with Executive Management to

reach consensus regarding the scope of the BPR effort and
discussion with the EMI consultants;
o Team members finally understand and agreed with a common

reengineering method which was strongly proposed during the
EMI training.
o The Team had set a tight timeframe to economically utilize time so

as to meet the required deadline of submitting the BPR
documentation on the core process.
o A good deal of effort was exerted to collect and archive data which
was done by the former BPR Team.
o The effort of team building was successful in bringing all members

together towards a common goal.
VI. Annexes
1. Customers Opinion Survey

2. Process Mapping
3. Process Matrix, Cycle Time, Cost Build up, and Control Process
4. Organization Structure, Human and Material Resource
5. Policies, Procedures, and Guidelines
6. Other Organizations Experiences

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Development Bank of

Business Process Re-Engineering

Core Process Reengineering Team

Development Bank of Ethiopia

3.3.3 Policies and Procedures......................................................................47

BOM Board of Management

Development Bank of Ethiopia

The Ethiopian Civil Service has long years of experience in rendering

Owing to this the Government of Ethiopia recognizing the need for

The Development Bank of Ethiopia, in view of the above understanding, set

Development Bank of Ethiopia

(1) Provide investment credit to viable projects,

(2) Provide technical and managerial services,

(3) Providing banking services to its borrowers,

(4) Mobilizing fund,

(5) Accept time deposit,

(6) Issue and sell bonds,

(7) Managing funds entrusted to it,

(8) Open and operate Bank account,

(9) Participating in equity investment,

(10) Guarantee loans and other financial obligation,

(11) Perform other activities as is customarily carried out by

(12) Act as trustee,

Development Bank of Ethiopia

The Bank considering the immediate need of major stakeholders in general

To properly handle the re-engineering program DBE sets up Steering

Produced Terms of Reference that explains and guides the

1.2 Vision, Mission, and Values

The vision of the Development Bank of Ethiopia is to be an excellent Bank

Development Bank of Ethiopia

1.2.2 Business Mission

The mission of the Development Bank of Ethiopia to accelerate the

1.2.3 Core Values

1.3 Statement of the Problem

The business mission of DBE as stated earlier is extending loan to viable

Development Bank of Ethiopia

expectation is rated as very poor. Such ill service delivery in addition to

Owing to the importance of service delivery to performance of the Bank

1.4 Objectives of the Study

The objectives of the core business process reengineering effort are:

a) Identifying the bank's credit services and activities

Development Bank of Ethiopia

d) Timeliness, Providing speedy services to stake holders

1.5 Scope of the Study

1.6 Methodology Employed

Process Mapping and Data Collection

Development Bank of Ethiopia

So as to fully understand the problems and bottlenecks of service

In addition to the opinions surveyed by the former BPR Team,

Participation of Management & Employees

Management and employees of the Bank have participated directly or

Development Bank of Ethiopia

Work environment assessment, i.e. staff discipline, office layout,

1.7 Organization of BPR Team

Development Bank of Ethiopia

Figure 1.1 Organization Chart of DBEs Transformation Program

DBES Steering Committee

Sub Teams Customer &

Customer & Other

The Core Business Process Reengineering Team comprises of ten members

Development Bank of Ethiopia

Table 1.1 Lists of Members of the Core BPR Team