Major Causes of Project Implementation Delay: the case Study of Development Bank of Ethiopia; Jimma District Financed Projects

Abstract

Well over 80% of Development Bank of Ethiopia, Jimma District financed projects did not meet implementation as per the schedule. Such failure is the main culprit behind massive accumulation of Non-Performing Loans position of the Development Bank of Ethiopia in general and its Jimma District in particular. The major causes of project implementation delay can be classified as bank specific, borrower related and external factors to identify and rank the factors. Structured questionnaire is administered on purposively and conveniently selected customers. Statistical analysis methods: Frequencies, degree of severity and importance indices are applied to rank the identified causes. As per the findings, the top-five borrower related causes include poor project implementation management skill, unable to raise equity, improper planning and scheduling of the project, loan diversion and poor knowledge on the chosen business while the top-five bank specific include unable to pass timely decisions when unforeseen circumstances occurred, weak Know Your Customer assessment, lack of flexibility to accommodate change, weak project implementation follow up and appraisal study. The top-five external causes include; price escalation, currency fluctuation, shortage of foreign currency, political unrest; and lack of infrastructure like road, power and water. Accordingly, the study recommends: to check the availability of foreign currency before loan approval; make sure that project planning and scheduling considers the movement of domestic prices and foreign currency exchange rate; practice prudent lending and undertake pertinent follow up activity after the loan is disbursed to the borrower, and undertake the right and timely decision when a project faces unforeseen problems with contingency plans