Commercial banks in Ethiopia have performed well
Governor of the National Bank of Ethiopia, however, warns of impending strong competition from expatriate banks
The National Bank of Ethiopia said on Tuesday that Ethiopian commercial banks had shown better performance over the past four years despite the external and internal challenges Ethiopia was facing.
It was during a meeting with bank representatives that the Governor of the National Bank affirmed that there has been growth in the financial sector.
Yinager Dessie attributed the growth to government reforms in the financial sector.
Interest-free banking, the authorization of movable assets as collateral, the regulations that allowed Ethiopians in the diaspora to invest in the financial sector and the regulations that allowed the capital market and microfinance to develop at the level of a bank are some of the reform measures. he cites as an example.
He also weighed their growth by the difference in market share between government and private banks. He said he is in good condition as the disparity in the share is minimal.
Banks have also demonstrated efficient performance in terms of deposit volume and loan repayment management.
The digital bank reportedly recorded an increase in transactions. The introduction of Telebirr, a mobile money transfer service from state-owned Ethiopia Telecom, has helped, according to Yinagar Dessie. He added that electronic transactions will help achieve the plan for 2025.
In addition, Ethiopian commercial banks have performed very well in terms of corporate social responsibility compliance under circumstances of multiple challenges that Ethiopia has faced over the past four years.
Half of the contributions to Gebeta Lehager, a mega project initiated by Prime Minister Abiy Ahmed, came from banks, according to the governor of the National Bank of Ethiopia.
While describing the growth of commercial banks in Ethiopia over the past four years as good, Mr. Yinager Dessie advised the banks that they need to do more in view of the future challenges.
One of the recommendations he made is to make loans accessible to rural communities and small businesses, as well as to the lower strata of society.
Mobile and digital banking is another area for improvement – something banks need to work on in order to reach rural communities as well – he recommended.
Furthermore, the Governor spoke about the imminent strong competition from expatriate banks, when they will start operating in the country and told the banks to prepare strategies for this.
Mr. Yinager sees additional roles for banks in terms of illegal practices and fraud in the system. He advised banks to cooperate with security forces to retrieve money that is out of the banking system and put it into circulation in the banking system.
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