City looking for partnership with private banks

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(Photo: Anteneh Aklilu)

The Addis Ababa City Administration commences working with private banks as optional financial service providers in its public service operation.
The city administration stated that it is interested to include the private financial firms as partners besides the public bank, which is the only option for the government related works with financial issues.
Currently the city administration is working on some municipality related fees like traffic penalties with selected banks as a beginning.
According to sources in the city administration, the city administration is working with Bank of Abyssinia, Dashen Bank, Awash Bank, Cooperative Bank of Oromia and one more bank as a pilot project and expected to expand its partnership with others.
Abe Sano, President of Oromia International Bank and head of Ethiopian Bankers Association (EBA), appreciated the initiative that the city administration embarks. But he said that it is late.
“There is a principle under the government that the government is working with public banks but it is a mistake and unusual anywhere in the world” Abe told Capital.
“These are public entities that work for the public but the government is not working with them,” experts on the financial sector, who criticized the government on its decision to exclude private financial firms without concrete reasons, told Capital.
Mid July last year in a meeting with Takele Uma, Deputy Mayor of Addis Ababa, representatives of the private banks raised the issue that the government shall consider private banks as partners and include them to its operation like the public bank.
That immediately got green light from the Mayor.
The Mayor said that the city administration wants to work with private banks on services like tax collection and other service payments under the city.
However he claimed that the Federal Finance Administration Proclamation is a barrier that should be considered for the city or to be revised or give a mandate for the city administration to work with private banks.
However the city administration lately understood that the proclamation is only applicable for the federal government.
The latest relation of the city administration with private banks is stated as public private partnership (PPP) by some experts, while the sector actors argued that it could be more than PPP and should not be related with partnership.
“It could not be associated with PPP but it is the issue of basic service for the society not partnership. We don’t need to have PPP for transaction of finance. The society shall operate on the facilities that it is comfortable with it since it is basic service,” Abe told Capital.
At the same time Dereje Zebene, President of Zemen Bank appreciated the initiative of the Mayor.
He told Capital that it is initial for partnership but it should not be related with PPP since it is crucial and more than that.
Both financial sector leaders agreed that the government would include other payment system besides the current initiative that the city administration commenced.
“The source of payment system is the government problem that it only wanted and forces to work with the government banks that should be changed,” Abe added.
Collection tax via financial firms is considered one of the ways to improve doing business in a given country and Ethiopia is expected to expand it and use a direct system in the settlement of the tax at the bank account instead of coming with a receipt or CPO.
In related development, on Thursday January 16 the Mayor and members of the Ethiopian bankers Association met at Hyatt Regency Hotel the discus on issues that both sides want to be improved.
One of the main topics the bankers raised is the land issue that the city administration provided for them to erect high rise buildings at the heart of the city but that they are facing some challenges to secure plots that are mainly located around National Bank Ethiopia.
Sources told Capital that the problems might differ from one bank to another. For instance some of the plots has their own disputes or not relocated properly and other plots might not be ample as per the deal, according to sources.
Meanwhile Abe confirmed that the main purpose of the meeting is to talk about the problems regarding plots he did not explain further.
At the same meeting Takele has also expressed his administration’s interest that he wants the private banks to facilitate finance for the administration employees to access their own houses. Experts stated that this would be the second step of partnership between private banks and public institution.