Financial Institutions Delving into the Surge in Trainings

In the current dynamic business environment where technology changes quickly and customer demand escalates, staff training plays a crucial role to increase productivity, improve efficiency and meet customer expectations. This is especially true for financial institutions operating in Ethiopia under dynamic and volatile business environment. To facilitate this, the National Bank of Ethiopia (NBE) in 2016 instructed banks and other financial institutions to spend two percent of their expenses, excluding capital expenditure, on human resource development. However, financial institutions failed to live up to expectations initially. In the 2017/18 fiscal year, seven banks failed to invest two percent of their expenditure that totally amounts close to ETB40 million on staff training. Through time, financial institutions began to realize the importance of training and started to give their employees frequent trainings. However, some still have doubts on the quality and efficiency of the training. EBR’s Kiya Ali reports. 

Rediet Melaku (name changed upon her request) is an employee of Enat Bank. She started working for the Bank three years ago. During that time, she has been able to participate in various technical, management and leadership related trainings. “I have benefited a lot from the trainings. The trainings have helped me adapt easily to the new working environment and the different technologies,” Rediet noted. She also pointed out that the trainings have allowed her identify her strengths and weaknesses.

In the 2018/19 fiscal year alone, Enat Bank provided 35 trainings for its employees at a cost of six million birr. “Our bank is a service providing profit oriented organization. Therefore, we set a trend in the provision of excellent and inclusive banking services mainly by focusing on women’s economic needs and taking advantage of state of the art technology, innovation and professional work force,” Abeba Yohanes, division manager of Enat Bank, explained.

In today’s dynamic and volatile business environment, staff training plays a significant role in increasing the efficiency and productivity of businesses. Studies indicate that staff training has a positive impact on the performance of businesses through increased productivity, reduced production costs, improved management skills, shared knowledge, curbing weak sides of employees’ performance and increased motivation, among other benefits. In fact, the long run success of any organization depends on the quality of its employees. This is particularly true for service oriented industries operating in Ethiopia such as banks and insurance companies where the competition is mainly based on service quality which in turn depends on the quality of human resources.

The primary rationale behind providing staff training is filling the skill and knowledge gap of either fresh graduates or experienced employees. Graduates of accounting, economics or business administration make up the work force in banks and insurance companies. These disciplines provide only a glimpse of knowledge about the financial industry. On top of this, the quality of education provided by higher education institutions has been declining in recent years.
“The problem of education quality is very deep and critical; it involves almost the whole generation,” Andualem Admasu, CEO of Higher Education Relevance and Quality Assurance Authority, noted. While underscoring the importance of trainings in augmenting problems of educational quality, Andualem pointed out “trainings would play a vital role as a quick remedial action to fill the huge knowledge gap.”

“In addition, employees are human; so, most of them will have weaknesses or gaps in their professional skill,” Abeba stated. She noted that staff trainings help to fill these gaps.

Addisu Haba, former President of Ethiopian Bankers’ Association (EBA), stated that financial institutions operate in a dynamic and very competitive market environment in Ethiopia. He analyzed that skilled labor force is needed to survive in such a situation and meet the necessary standards. He noted that workforce training is an indispensable tool to reach to this optimal level.

This is why the National Bank of Ethiopia (NBE) instructed banks and other financial institutions in 2016 to spend two percent of their expenses, excluding capital expenditure, on human resource development. “NBE made training compulsory for financial institutions with the main objective of reducing lack of skilled manpower and staff turnover, which is a critical issue among banks,” Addisu remarked.

Massive branch expansion, which is a primary mechanism used by existing banks to maintain and expand market share, is the other reason for the increased demand for skilled labor by banks. To staff the increasing number of branches with skilled labour, it is imperative that banks invest on staff training,” Addisu stressed. He went on to say: “staff training will benefit the sector as a whole by helping to have capable and competent professionals. “

Despite the benefits, some banks failed to take NBE’s instruction seriously and invest two percent of their expenses on human capital development. In the 2017/18 fiscal year, seven banks failed to invest a combined sum of close to ETB40 million.

“After a serious discussion on the matter with our members, we decided to let the seven banks take the responsibility and invest the money on human resources development in their respective organizations,” Addisu noted.

“Subsequently, the NBE ordered the EBA to open and announce a bank account where the money will be deposited for later staff training by all, 18, members of the Association,” Addisu recalled.
Andualem Hailu, a financial expert with almost two decades of experience, stated that even smaller banks have started to provide trainings in house and externally after NBE’s measure. He conceded, however, that there are still areas that need improvement.

Deribie Asfaw, President of Cooperative Bank of Oromia (CBO), is adamant that the training they are providing their employees has brought tremendous benefits. “So far, we have observed and experienced the benefits of training. Among private banks, we stand tall in terms of our large number of customers,” he said. CBO was crowned best interest free banking provider this year by the award committee of African Interest Free Banking and Finance Award. “The primary factor for our success is our human resources who have the required quality developed through trainings,” Deribie added.

For Asseged Gebremedhin, deputy CEO of Global Insurance, the trainings are not efficient as financial institutions don’t consider and evaluate the performance of their employees before organizing the trainings. He argued: “most of the trainings financial institutions provide to their employees didn’t help them deal with emerging risks as they lack innovation and creativity.” Asseged cited climate change, terrorism and political instability as some of the new risks for Ethiopia. However, he observed, they have not become the focus area of trainings for many insurance companies. He then concluded that the fact indicates that only a few organizations consider training as a strategic weapon and the impacts of many trainings remain insignificant.

Since banks and insurances sell intangible products, Asseged went on to argue, trainings should be well articulated towards selected products that a specific financial institution has competitive advantage over others. He believes that the usual trend would not make significant difference, further noting that trainings should be institutionalized.

Frezer Ayalew, director of banks supervision directorate at NBE, agrees. Frezer stated that trainings to financial institutions would be institutionalized when the Ethiopian Institution of Financial Studies, which is now under the supervision of NBE, starts operation.

Addisu, former President of EBA, believes that banks and insurance companies could have minimized their cost without minimizing the number of trainings, had there been training centers that work on human capital development. He remarked that such a center would enable the companies conduct more trainings with same cost. “It is also very important to develop a curriculum after conducting a research. This will help address the right areas of knowledge and skill gaps of the workforce who are involved in the financial industry,” Addisu added.

To increase the efficiency of human capital development endeavors, Asseged recommended their alignment with reward mechanisms like promotion and salary increment based on the performance of staff members after the training. Frezer, on the other hand, called for impact analysis of the trainings insisting financial institutions have to make sure that their training is result oriented.

For the trainings to meet their intended objectives and increase the efficiency of the organization, noted Andualem, every institution has to conduct performance analysis at department level and it should align with the vision, mission and growth strategy of the institutions. He also argued that the training should add value both to the individual and the organization. Andualem also believes that various training packages have to be prepared to make the training more efficient.

Learning from other successful countries will also help. Financial institutions operating in countries like Nigeria have E-learning portals that allow their employees take trainings voluntarily, on their own pace, and based on self assessment of skill gap. It is also correlated with key performance indicators of every employee. Taking two or more online courses is also used as a prerequisite for promotion. Andualem calls up on Ethiopian financial institutions to follow the same strategy by investing in technology and boosting the efficiency level of trainings provided for their employees.EBR

9th Year • Apr.16 – May.15 2020 • No. 85