The Council of Minsters is going to forward a new regulation to parliament which allows a payee (person to whom money is paid or is to be paid) to withdraw cheque money from banks without waiting the time set by the person who wrote the cheque. Usually people will write a postdated cheque if they do not have the proper amount of money in their bank balance.
In the current working system the payee withdraws money from the banks starting from the day written on the cheque by the person who wrote it. However, the new rule which is drafted by the National Bank of Ethiopia and requires an endorsement from the parliament allow the person cashing the cheque to get the money from the bank immediately.
The new rule is expected to be operational before the end of this fiscal year.
Sources who are close to the issue told Capital that the new rule will minimize the power of informal money lenders that many people across the country use.
“As a country that requires modern banking system informal money lending is not what we need. The new system will diminish trust between borrowers and informal lenders. Because if the borrower knows that the lender can get money from the bank after the cheque is written they will be afraid of making a deal with informal lenders which ultimately will cause them to go to banks to follow the legal procedure.’’
The source added that the new rule also will discard the use of cheques as guarantee of loans.
“Some people use cheques as a guarantee of getting a loan to borrow money. For example if one thinks that they will get one million birr in the next three months they will write a cheque of 1.5 million birr for the lender that will be withdrawn after six months and then they will return the money to the lender before the effective day of the cheque. By these method cheque is not used as a means of transaction but if we discard timeline of cheque people may not use it as guarantee because the lender get their money out of the bank on the day they issued the cheque.’’
Bank professionals said that Ethiopian Revenue and Custom Authority (ERCA) which uses a bank statement for tax calculations is the other factor causing business people to use cheques as means of guaranteeing they will get their loans repaid.
Abey Zewde who is an economist told Capital “if somebody lends some money from someone and the money goes through the bank ERCA assumes that the money coming from a means of transaction which allows people to pay taxes on what they don’t sell. So to escape these kind of things they borrow money from people by writing a cheque and they pay it to the lenders before they withdraw the cheque money from the bank.’’
Last year the National Bank of Ethiopia (NBE) and the Ethiopian Bankers Association (EBA) introduced a system that would control fake cheques and provide a homogeneous bank cheque payment service.