Ethiopian Banking Industry: Challenges and Prospectuses
1.????? Introduction 1 ; Formal and Informal Financial Institutions in Ethiopia
The following formal and informal financial institutions work in Ethiopia and play as an actor in the financial sector as financial institution of various size.
a)?????? Commercial Banks
b)?????? Insurance Companies
c)?????? Microfinance Share Companies
d)?????? Financial Leasing Companies or Capital Goods Financing Companies
e)?????? Credit and Saving Associations1.????? Introduction 1 ; Formal and Informal Financial Institutions in Ethiopia
The following formal and informal financial institutions work in Ethiopia and play as an actor in the financial sector as financial institution of various size.
a)?????? Commercial Banks
b)?????? Insurance Companies
c)?????? Microfinance Share Companies
d)?????? Financial Leasing Companies or Capital Goods Financing Companies
e)?????? Credit and Saving Associations
f)??????? Indigenous Financial Institutions: Equbi and Edir
g)?????? Public and Private Social Security Agencies
h)?????? Public Servant Health Insurance Agency and community health insurance agency
i)??????? ?Vehicles third party insurance agencies and road funds and other various funds
2.????? Introduction 2; Ethiopia Banking Industry Yesterday, Today and Tomorrow
A.?????????? Past or Yesterday
Historically: Menelik Regime:King Menlik II Erra was coinage erra and it was started to exchange by Amole and Cloths and the like. Foundation for next erra.
??? ii.??????????? King Hailesselassie Regime:
The following banks were there:
a)????? State Bank of Ethiopia
b)????? National Bank of Ethiopia
c)????? Commercial Bank of Ethiopia
?iii.??????????? Derge Nationalization of Financial Institutions Regime
a)????? 1984 Proclamation
b)????? Domestic Investors Privation Policy of Banking Industry Partial Liberalization Err
c)????? 2008 Proclamations’
a)?? Domestic Investors Liberalization and By Batch for Comparison of Performance and to Understand the Industry Progress
Original there: CBE,CBB,DBE and NBE
1st Batch: AIB and DB
2nd Batch: BOA,WB, UB and NIB
3rd Batch: COOP,ZB and OIB and LIB
4th Batch: Bunna and Berhan and AB,ADIB
5th Batch: DGB and EB
6th Batch: SB,TSEB,OB,…
B.??????????? Today or Now
a)????? International Consultant Regime…Consulting International firms for Large Peer Banks
b)????? Frankfurt School of Finance and Management…CBE
c)????? Delloite…WB and UB
d)????? Earnest and Young or E and Y….DB
e)????? KPMG….AIB,DB, and? NIB
b)?? International Consultancy of the Sector Erra
* School of Frankfurt and its Partners CBE
*KPMG: AIB,DB and NIB
*Delloitte: WB,BOA, and UB
*Earnest and Young (E and Y): DB and Others
*DAI: DBE and CBE IFRS
*McKenna’s and Company (AIB and DB)...etc
c)??? Financial Access Policy and 30% of Branching of Last FY No. per Year Policy and the Policy Impact:
*Resulted in Branching Boom and Loose of Standard Branch facilitates and Management and some of the call Baby Managers run branches
PPP Regime
7th Batch: ZemB,HB,BEB,AHB,TSB,AHAB,GB,ShB,SIB,
a)????? Diaspora Shares Ownership Liberation
b)????? Full-fledged IFB Banking Model Permition than the only IFB Window Model
c)????? Regional Politics and Emerging New Banks
d)????? Religion Politics and Coming New Banks
e)????? New Paid Up Capital and New Banks migrate to MFI
f)?????? Policy Announcement of Liberalizing Financial Sector to Foreign Investors
C.?????????? Tomorrow or Future
?????????????????????????????? i.??????????? MSME
a)?? Micro Enterprises
b)?? Small Enterprises
c)??? Medium Enterprises
d)?? Large Enterprises
***From Developing Point of View
@ One of the pillar reasons of poverty is lack of finance for the poor and assisting the poor by microfinancing and hence bring development by financing to the poor to the country
***From Developed Country Point of View
@Before GFC and After Great Financial Crises
*Initial Stages of MSME and Expansions
*MSME Growth Based Savings and Credits
??????????????????????????? ii.??????????? Consumer Sector or household sectors
***Need focus and attractive and viable products and services above advert
???????????????????????? iii.??????????? Payment System:
*Retail Focuses
*Cash Intensive Focuses like Transports and Hotels
???????????????????????? iv.??????????? Efficiency and Effectiveness of the Sector
*Channels:
*Branches,
*P2P,
*Electronic Banking,
*Agent Banking,
*Forex Bureau,
*IMTO,
*Call Center Banking,
*Door to Door Banking
??????????????????????????? v.??????????? Domestic Economy Banking
**Import Substitutions areas…costs advantages and quality advantages
**High Demand Goods and Services areas
???????????????????????? vi.??????????? Remittances Efficiency and Effective service
***Establishing IMO subsidiaries with Diasporas abroad especial working in financial sectors and consulting services in particular and others as well as businesspersons abroad in general like where first- and second-generation diasporas found (USA, Europe, South Africa and Middle East and elsewhere) Eg Marathon International Bank.
3.? Challenges of Financial Institutions in Ethiopia:
a)????? High Human Resource Costs
b)???? High Rent Costs
c)????? High Equipment and Furniture Costs
d)???? High Software and Hardware Costs
e)????? Highly Dried Deposits and Savings due to Competition Wars and Inflations
f)?????? Competitions Wars with ambitious and unrealistic objectives without accompanied needs and wants identification that is important for new products and services
g)????? Lack of Products and Services varieties or Existing Homogenous Products and Services i.e. Lack of Heterogeneous products and services
h)???? Awkward or unsuitable Marketing Strategies and practices
i)????? Weaknesses
*Poor Human Resource Management and Successions
*Poor Organization and Staffing
*Poor Product Development
*Concentration to Corporate Markets…etc
4.??? PROSPECTUSUS OF Banking Industry in Ethiopia
*Relatively Branch Networks Progress
领英推荐
*Market Experiences or Customer Networks
*Branding Advantages and Long Positions by Advertising
*Existing Infrastructures
5.??? Conclusions and Recommendations
Without considering the regulatory incapacity and poor service, liberalizing the financial sector may bring inevitable financial crises and messy. Taking into account macroeconomic instabilities, strong foreign banks may not come, and weak foreign banks may come as well as may abuse the financial institutions and financial sector.
I recommend strong risk management and capacity building both at central bank as well commercial banks. Eventually, delay the liberalization. Otherwise, time will judge us!
f)??????? Indigenous Financial Institutions: Equbi and Edir
g)?????? Public and Private Social Security Agencies
h)?????? Public Servant Health Insurance Agency and community health insurance agency
i)??????? ?Vehicles third party insurance agencies and road funds and other various funds
2.????? Introduction 2; Ethiopia Banking Industry Yesterday, Today and Tomorrow
A.?????????? Past or Yesterday
Historically: Menelik Regime:King Menlik II Erra was coinage erra and it was started to exchange by Amole and Cloths and the like. Foundation for next erra.
??? ii.??????????? King Hailesselassie Regime:
The following banks were there:
a)????? State Bank of Ethiopia
b)????? National Bank of Ethiopia
c)????? Commercial Bank of Ethiopia
?iii.??????????? Derge Nationalization of Financial Institutions Regime
a)????? 1984 Proclamation
b)????? Domestic Investors Privation Policy of Banking Industry Partial Liberalization Err
c)????? 2008 Proclamations’
a)?? Domestic Investors Liberalization and By Batch for Comparison of Performance and to Understand the Industry Progress
Original there: CBE,CBB,DBE and NBE
1st Batch: AIB and DB
2nd Batch: BOA,WB, UB and NIB
3rd Batch: COOP,ZB and OIB and LIB
4th Batch: Bunna and Berhan and AB,ADIB
5th Batch: DGB and EB
6th Batch: SB,TSEB,OB,…
B.??????????? Today or Now
a)????? International Consultant Regime…Consulting International firms for Large Peer Banks
b)????? Frankfurt School of Finance and Management…CBE
c)????? Delloite…WB and UB
d)????? Earnest and Young or E and Y….DB
e)????? KPMG….AIB,DB, and? NIB
b)?? International Consultancy of the Sector Erra
* School of Frankfurt and its Partners CBE
*KPMG: AIB,DB and NIB
*Delloitte: WB,BOA, and UB
*Earnest and Young (E and Y): DB and Others
*DAI: DBE and CBE IFRS
*McKenna’s and Company (AIB and DB)...etc
c)??? Financial Access Policy and 30% of Branching of Last FY No. per Year Policy and the Policy Impact:
*Resulted in Branching Boom and Loose of Standard Branch facilitates and Management and some of the call Baby Managers run branches
PPP Regime
7th Batch: ZemB,HB,BEB,AHB,TSB,AHAB,GB,ShB,SIB,
a)????? Diaspora Shares Ownership Liberation
b)????? Full-fledged IFB Banking Model Permition than the only IFB Window Model
c)????? Regional Politics and Emerging New Banks
d)????? Religion Politics and Coming New Banks
e)????? New Paid Up Capital and New Banks migrate to MFI
f)?????? Policy Announcement of Liberalizing Financial Sector to Foreign Investors
C.?????????? Tomorrow or Future
?????????????????????????????? i.??????????? MSME
a)?? Micro Enterprises
b)?? Small Enterprises
c)??? Medium Enterprises
d)?? Large Enterprises
***From Developing Point of View
@ One of the pillar reasons of poverty is lack of finance for the poor and assisting the poor by microfinancing and hence bring development by financing to the poor to the country
***From Developed Country Point of View
@Before GFC and After Great Financial Crises
*Initial Stages of MSME and Expansions
*MSME Growth Based Savings and Credits
??????????????????????????? ii.??????????? Consumer Sector or household sectors
***Need focus and attractive and viable products and services above advert
???????????????????????? iii.??????????? Payment System:
*Retail Focuses
*Cash Intensive Focuses like Transports and Hotels
???????????????????????? iv.??????????? Efficiency and Effectiveness of the Sector
*Channels:
*Branches,
*P2P,
*Electronic Banking,
*Agent Banking,
*Forex Bureau,
*IMTO,
*Call Center Banking,
*Door to Door Banking
??????????????????????????? v.??????????? Domestic Economy Banking
**Import Substitutions areas…costs advantages and quality advantages
**High Demand Goods and Services areas
???????????????????????? vi.??????????? Remittances Efficiency and Effective service
***Establishing IMO subsidiaries with Diasporas abroad especial working in financial sectors and consulting services in particular and others as well as businesspersons abroad in general like where first- and second-generation diasporas found (USA, Europe, South Africa and Middle East and elsewhere) Eg Marathon International Bank.
3.? Challenges of Financial Institutions in Ethiopia:
a)????? High Human Resource Costs
b)???? High Rent Costs
c)????? High Equipment and Furniture Costs
d)???? High Software and Hardware Costs
e)????? Highly Dried Deposits and Savings due to Competition Wars and Inflations
f)?????? Competitions Wars with ambitious and unrealistic objectives without accompanied needs and wants identification that is important for new products and services
g)????? Lack of Products and Services varieties or Existing Homogenous Products and Services i.e. Lack of Heterogeneous products and services
h)???? Awkward or unsuitable Marketing Strategies and practices
i)????? Weaknesses
*Poor Human Resource Management and Successions
*Poor Organization and Staffing
*Poor Product Development
*Concentration to Corporate Markets…etc
4.??? PROSPECTUSUS OF Banking Industry in Ethiopia
*Relatively Branch Networks Progress
*Market Experiences or Customer Networks
*Branding Advantages and Long Positions by Advertising
*Existing Infrastructures
5.??? Conclusions and Recommendations
Without considering the regulatory incapacity and poor service, liberalizing the financial sector may bring inevitable financial crises and messy. Taking into account macroeconomic instabilities, strong foreign banks may not come, and weak foreign banks may come as well as may abuse the financial institutions and financial sector.
I recommend strong risk management and capacity building both at central bank as well commercial banks. Eventually, delay the liberalization. Otherwise, time will judge us!