Telecoms will lead the Charge, Can Banks Keep Up?

Although commercial banks in Ethiopia introduced a digital payment system some time ago, it has made considerable strides over the past few years as telecom operators with far more customer base than banks were allowed to provide the services. The expansion of the digital payment system has been challenging banks at the trial level, as it involves payment services and small credits. Commercial banks have come to a common understanding that they have already lost the retail aspect of their operations to telecoms.

The Evolution of Corporate Governance in Ethiopian Banks

Recently, the National Bank of Ethiopia (NBE) has issued a series of directives about the banking industry. These include directives such as “Requirements for Persons with Significant Influence in a Bank” and “Bank Corporate Governance.” One area that gained attention for reform is bank corporate governance. Deficient corporate governance practices in the banking industry have required repeated NBE interventions. In the past year alone, the controversies around Nib Bank and Amhara Bank and the subsequent NBE interventions indicate the situation.

Ethiopian Banks Brace for New Era of Monetary Policy, Competition

Many Ethiopian banks have enjoyed profit bonanzas for years due to very expansionary monetary policy, which increased the demand for cheap credit loans and advances. However, this has carried negative real lending rates for over a decade. Furthermore, they have been operating in a protected and relatively predictable environment, giving them the easy means to grow and expand.

How Interest Free Banking Fosters Transparency, Strengthens the Economy

In Ethiopia, following the legal framework for interest-free banking products established a decade ago, the banking industry has introduced a range of Sharia-compliant saving and investment products under window services. The revised banking proclamation passed in 2019 ushered in a new era of full-fledged interest-free banking services. Currently, we have four full-fledged interest-free banks and more than a dozen conventional banks that provide interest-free banking services under window arrangements.

A Market Neither Logic nor Theory Explains

The most bizarre aspect of the Ethiopian economy is the constant surge in the prices of properties, particularly in Addis Ababa and other major towns. The fast price growth trajectory, which started almost two decades ago, has increased momentum in recent years.

In a properly functioning property market, housing price trends are anchored to some economic fundamentals such as real income and rental value. Defying these economic fundamentals, the price of houses, particularly in the capital, has been soaring to an alarming level, though there is a recent change in the dynamics. Surprisingly, the rent increase is far behind the growth in property value, considerably squeezing the yield (rent/property value). This situation indicates that something serious has gone wrong in the market that calls for policy intervention.