Central bank deploys ‘regulatory sandbox’ to expand financial sector

National Bank of Ethiopia (NBE) announces that it is currently bridging the financial gap by facilitating a regulatory sandbox for interest free banking (IFB) players to expand financing on the sector.
As per the latest report of the central bank, the financial sector regulatory body, the deposit mobilization from IFB is growing in stride. However, the sector is yet to fully capitalize on the potential presented by the mobilization.
As Solomon Desta, Vice Governor at NBE, indicates, 15.6 million depositors are currently banking through IFB, with a cumulative savings of 171 billion birr.
But when this figure is channeled to disbursement, the amount is particularly low, the Vice Governor cited, “So far 68.6 billion birr is being provided through different lending instruments under the IFB scheme and the number of borrowers is at 39,962.”
“The number of IFB users is growing significantly but in terms of financing we need further developments,” he emphasized.
According to the Vice Governor, about 60 percent of the fund mobilized through IFB remains idle, which in best case scenario ought to be channeled to the economy to boost the IFB sector and the economy at general.
“In accordance with the financial knowledge, customers’ protection and regulatory framework, we need to do more in our undertakings, and financing alternatives should be studied and applied,” he sensitized during the inauguration of Rammis Bank’s operation, which opened its doors a week ago.
According to Solomon, there are some issues raised with regards to the regulatory framework on monetary policy instruments for financing, which the regulatory body needs to address, “NBE has begun its role to bridge the gap raised by stakeholders.”
“We are taking an initiative to pilot some of the products, until the framework becomes effective. It is a regulatory sandbox that allows actors to come up with their proposal to pilot it until the regulatory framework is issued,” he added whilst calling upon financial institutions to come with their studies and products that can be seamlessly applied on the IFB business.
Currently, there are four full-fledged interest free banks and two micro finance institutions (MFI). Those who have an IFB business in a separate window are 21, and of that, 12 are banks while the remaining are MFIs and insurers.