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Remittances have proven to be a viable way to earn foreign currency. Last fiscal year Ethiopia earned USD3.8 billion this way, which is 27Pct more than export earnings. By some estimates, the country could earn nearly USD21 billion from remittances in five years. This can help fund financing gaps that emerge due to poor export performance, decreased bilateral funding as a result of recessions in developed countries, and meagre foreign direct investment (FDI). Experts note that remittances have the added benefit of exposing more people to formal financial systems. To that end, a number of banks are working to improve their services to bring in more foreign currency. Some people, however, feel that the ambitions of the banks and the government may be premature. EBR’s Fasika Tadesse researched the nuances of the issue to gain greater insight into the potential of remittances as a means of financing Ethiopia’s ever-expanding development.


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Rising Lease Costs, Regulations Push Private Banks to Construct Acquire Buildings

Though Ethiopia’s private banking sector is still young, competition within the industry is getting stiffer – with companies vying to increase performance vis-à-vis increased capital regulation. This, in tandem with National Bank of Ethiopia (NBE) rules that require annual branch expansion, creates an environment in which financial institutions are scrambling to acquire or construct buildings in prime locations to house their headquarters and ever-growing number of branches. Bank executives say this is good for business, since the cost of rent in major cities is quickly skyrocketing. It also presents the option to lease spare office space and generate revenue. Others, however, think that the rush to buy and develop properties diverts the banks from their primary function as financial institutions, quelling growth in the nascent private banking sector. EBR’s Fasika Tadesse spoke with bank executives and economists to gain insight into the increasing drive for banks to obtain properties and if that is good for the country.


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High-end restaurants serve foods in fancy, often luxurious dining areas. The ambiance and quality of the food, service and silverware mean that they charge higher prices. As the spending power of Ethiopians increases, so does their desire to eat quality foods. Such restaurants tend to do well even during times of recession. Despite the promising environment for high-end restaurants, managers say they face hurdles, including difficulties importing goods. EBR’s Fasika Tadesse spoke with restaurateurs to learn more about what is likely to be a growing trend in Ethiopia’s service sector.


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Addis Ababa, while well know for its numerous construction projects, is also home to many plots that remain undeveloped, despite their intended use for construction. This comes at a time when there’s a massive land grab in the city, due to its scarcity and importance for commercial purposes, especially in prime locations. To help mitigate the problem, the city’s government is working to regulate the management of these plots to ensure they’re being developed in a timely manner. However, as EBR’s Fasika Tadesse reports, that task has proven to be difficult in the face of the logistical and legal hurdles that confront investors.


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Will Capital Regulation Weed out Ethiopia’s Young Banks?

In the business world, a merger refers to the joining of two companies into one entity. The concept has made headlines recently because the two state-owned banks – the Commercial Bank of Ethiopia and the Construction and Business Bank – ‘merged’ in December 2015. Advocates of mergers say they provide a number of benefits to the financial sector, not least of which is weeding out young banks, thereby strengthening the overall sector. Others, however, think that the concept may be too cumbersome for Ethiopia’s nascent private banking industry, which they say needs more time to mature. EBR’s Fasika Tadesse spoke with banking leaders and experts to get a better grasp of the concept and its potential role in Ethiopia’s fledging but promising private banking sector.


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Why do foreign trade missions target Ethiopia?

Business investment forums provide an opportunity for foreign investors to visit Ethiopia in order to get a better sense of the potential economic opportunities in the country. Since the 2011/12 fiscal year alone, the country has hosted hundreds of delegations from countries like China, Turkey and India. Despite the promise of these forums in bringing investments to Ethiopia’s fledgling manufacturing sector, an ulterior motive exists for some companies: to use the events merely as an opportunity to market their goods. Still, the government thinks these forums prove fruitful, as even the marketing of goods can potentially lead to investment relations. EBR’s Fasika Tadesse spoke to government representatives and foreign investors to learn more about these forums and whether they are achieving their intended goals.


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Awash International And Dashen Banks’ Stiff Competition, the Defining Factors for this Year

Despite the fact that private banks are still a relatively new concept in Ethiopia, two stand tall among the nation’s 16 private banks: Awash International Bank and Dashen Bank. Both enjoy larger after-tax profits than their competitors do. According to the National Bank of Ethiopia (NBE), in the 2013/14 fiscal year alone, both banks’ collective net profits exceeded ETB1.37 billion, accounting for roughly 40Pct of the entire private banks’ after-tax profits that year. While the nature of their competition isn’t necessarily adversarial, both banks have been in stiff competition with one another in certain indicators – such as paid-up capital, total assets, and loan disbursements – in which each bank has enjoyed supremacy over the other in different years. However, the overall success of each bank obscures the reality behind the scenes: both have had their performance – and assets – adversely affected by foreign currency shortages, surging expenditures and liquidity challenges. EBR’s Fasika Tadesse explored each bank’s 2014/15 fiscal year performance – analysing the nuances of each company’s overall figures – in order to shed light on the two financial titans that have dominated Ethiopia’s private banking sector.


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For years Dashen Bank has been a leader among private banks – and last year is no exception: it registered the highest after-tax profit of all private Banks, ETB729 million.
The Bank’s president, Asfaw Alemu, has only been at the helm since May 2015, but already has plans to help the Bank to further growth. Under his guidance, the Bank is in the process of reworking its organisational structure, including opening eight district offices. He says this will decentralise power and strengthen employees’ decision-making capacity.
Prior to becoming President, Asfaw served the Bank in various positions, most recently as Vice President for Operations. His rich portfolio includes services at the Development Bank of Ethiopia, Wegagen Bank and at an academic institution where he served for three years as a vice president for business and development at Unity University.


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Tsehay Shiferaw, President of Awash International Bank, leads the fastest growing private bank in the country. Last fiscal year, the Bank’s after-tax profit was ETB645 million, a 4.4Pct growth from the previous fiscal year net profit.
Having taken the helm in June 2011, Tsehay has set his eyes on global excellence. He hopes that Awash will become one of the top ten banks in East Africa by 2025. To that end, he is leading the Bank through the development of a succession plan that will also help the company grow, especially as it pertains to its technological capacity, overall structuring and human resource development.


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Party rental companies are those that rent items like decorations, utensils and cookware to individuals who are planning events like weddings, funerals, and meetings. Although a relatively new concept in Ethiopia, data demonstrates that the presence of these companies is growing rapidly. According to data from the Addis Ababa Trade Bureau, 208 rental companies were issued to business licenses within the last four years, generating ETB373 million in investment capital. Despite the growth potential in the sector, industry insiders say that difficulties accessing investment capital is hindering their growth prospects. EBR’s Fasika Tadesse spoke with those involved in the sector to learn more about this nascent industry.




Ethiopian Business Review | EBR is a first-class and high-quality monthly business magazine offering enlightenment to readers and a platform for partners.



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