Ethiopian Business Review

Ashenafi Endale

Ashenafi Endale

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Islamic Banks are not Religious Banks

Tuesday, 16 July 2019 00:00 Published in Interview

Nassir Dino (PhD), associate professor of software engineering, is chairman of the organizing committee of ‘Zamzam Bank’. He is also the cofounder and president of Higher Learning Center of Excellence (HiLCoE), a specialized centre of excellence in education, research and consultancy in the field of information and communication technology (ICT). The Centre was established in 1997 and has since graduated thousands of skilled professionals.

Thirteen years ago, Nassir started to establish Zamzam, the first Islamic bank in Ethiopia. However, his effort did not bore fruit because the National Bank of Ethiopia (NBE), the financial regulatory body, denied them license to start operations in the final hours.

After 13 years of patience, however, his effort got favorable response from the administration of Prime Minister Abiy Ahmed (PhD). During the holy month of Ramadan, on May 22, Yinager Dessie (PhD), the new governor of NBE, met the founders of Zamzam; and informed them the good news. After more than a decade of stall, the Governor told them to resurrect Zamzam. On the same day, the Premiere also reaffirmed his support for the realization of the bank. This was announced in a historic speech the PM made at the grand Iftar at the Millennium Hall. For Nassir, his team and the tens of millions of Ethiopian Muslims, the ecstasy the news created was unprecedented and is still afresh.

Zamzam has already started floating shares and is set to start operations in about a year. EBR’s Ashenafi Endale discusses with the professor who also studied Islamic Banking and Islamic Insurance in London, the UK, about the prospect of the bank.

Swelling Budget Deficit

Tuesday, 16 July 2019 00:00 Published in Focus

Brews Inflation, Exacerbates Balance  of Payment Problem

The budget deficit for 2019/20 fiscal year stood at ETB97.1 billion, twice the amount registered two years ago. Despite the escalating figure, the government claims it is under control since it accounts for only three percent of the gross domestic product (GDP).

Nevertheless, experts stress that the deficit goes as high as 17Pct of the GDP when the money borrowed by public institutions is included in the equation. As the budget deficit grows, there is a fear money supply would rise, which will ultimately lead to a rise in inflation, which has already reached 15.4Pct. The consequence will further exacerbate balance of payment problem, which is already at alarming stage. EBR’s Ashenafi Endale spoke with officials and experts to shed light on the matter.

Bad Loan Piles-up

Tuesday, 16 July 2019 00:00 Published in Focus

Even under normal banking operations, not all loans can be collected fully because loans are not free of risks. This affects the financial performance of any bank because it leads to an increase in non-performing loans (NPLs). This is exactly what is happening in Ethiopia at the moment. Due to macroeconomic and bank specific factors, borrowers are increasingly finding it difficult to pay back loans. Industry insiders say the average NPL figure has now reached eight percent. The National Bank of Ethiopia (NBE) has set five percent as the upper limit any bank’s NPLs may go. EBR’s Ashenafi Endale examines the causes.