By Metasebia Teshome
Ethiopia Postal Service Enterprise shifts its plan to open its own postal bank to mobile money as its financial status is not enough to dive into the banking sector.
For the last two years, the only postal service provider in the country, Ethiopian Postal Service Enterprise (Ethiopost), has been in a process to establish its own bank with expectations to have all kinds of banking services. The Ethiopost was gearing to provide customers with access to banking service, including direct deposit, cards, and online bill payments.
Despite the enterprise starting its process to engage in the sector, in accordance with the National Bank of Ethiopia’s regulation and guidelines, as Asmare Yigezu, deputy CEO of the enterprise explained, there is no promising situation with regards to the opening of a postal bank. This was attributed to the National Bank’s changing requirements which have proved to be elusive for the enterprise.
“It is now difficult to establish a bank based on our potential and financial status since the service has been in a series of fall downs in the past. For the last two years, it has been approaching to a good condition and even breaking even,” the deputy CEO explains.
As sources indicate, Ethiopost has been through a series of losses over the past years as a result of low staff motive and capability, poor customer service, weak marketing and traditional and outdated processes and services. This has rendered the enterprise to become uncompetitive in service provision as well as hindered its financial standing.
Starting from May 2020, Ethiopost has been under reform, that aims to modernize its work as well as optimize its operation and quality of service which is the right step in terms of moving the enterprise forward to secure a firm financial standing in order to engage in new services including E-commerce and logistical financial services that offer competitive services as well as enhance the image of the service provider. Currently, the enterprise is focusing on updating itself by providing a wide range of E-commerce and various financial services.
“We are looking at certain options to expand our service including our plans to engage in the mobile money sector,” said Asmare, indicating that the enterprise is conducting its assessment on getting into the mobile money sector. “International partners are also showing their interest to work with us on the mobile money sector. We are also viewing the options of doing it independently,” he added.
In 2020, in order to blossom digital finance and to boost non-cash payments in the country, Ethiopia’s Central Bank regulations allow non-banks to offer basic financial services, potentially opening the door for companies mulling a play in the wireless market by adding mobile money to their portfolios. Following this, the state-owned telecom operator, Ethio Telecom launched Telebirr, the country’s first telecom mobile money service and if it is to push through, the postal service would have been the second governmental mobile money provider.
Given the rich history of the service provider that spans 128 years with close to 900 branches throughout the country, the foundation was and is still said to be ripe for business.
Ethiopia’s financial services sector is currently dominated by bank-led financial services. According to the National Bank directive No SBB/78/2021 the minimum paid up capital required to obtain a banking business license is 5 billion birr which shall be fully paid in cash and deposited in a bank in the name. Owning a business in Ethiopia as a non-citizen is hard, and until recently, even foreigners of Ethiopian descent were not allowed to invest in the country’s banking system.
Ethiopost stamps priority to mobile money
Tweaking construction industry policy proves vital for progress
Revising a decade old construction industry policy is pin pointed as pivotal to stabilize the market in the right direction for a transformative sector development.
At a panel discussion hosted by the Addis Chamber under the title ‘construction sector’s contribution for national economy: challenges and opportunities’, Wondimu Seta, State Minister of Urban and Infrastructure (MoUI), said that the government is working to revise the construction policy that was ratified in 2013.
“The policy needs to be timely, up to date and renewed to encompass stakeholders like actors in the private sector to have inputs unlike past experiences,” he said.
The State Minister pointed out that the construction sector was booming in the past but the failure to match that with support on the supply end has led it to face a myriad of challenges at the current stage.
He opined that the revision of the policy which was last ratified about a decade ago ought to be tweaked in order to propel the development sector forward.
“Lack of a transformative policy has back peddled development, while other challenges such the global pandemic, hard currency shortage and local conflict have also backtracked the construction industry,” Wondimu explained.
Now MoUI has set short, medium and long term solutions to tackle the problem, “Of course the entire actors, including; contractors, consultants, material suppliers, financers, relevant offices and project owners have to come to the table to provide a holistic solution.”
“To do that we are working to establish a construction industry federation that will include professional associations, contractors and consultants, manufacturers and suppliers and other construction industry actors who will create cooperation, and discuss the issues plaguing the sector in order to come up with solutions to mitigate the same,” elaborated the State Minister.
Previously, there was a construction industry council which had only periodic meetings rather than identifying problems and providing solutions.
The platform was noted to have discussions about the sector as opposed to having a dedicated and detailed studies and solutions in order to come up with policy alternatives for the betterment of the construction industry. “It was not working towards solving the sector problems. Thus we now need a strong and institutionalized entity that shall transform the sector,” Wondimu underlined.
According to the State Minister, like other pillars in the economy, the construction sector needs adequate finance like; bridge financing, project finance, working capital, and others including facilitating a fund for those who demand to invest in the sector without having an alternative to get a required finance, “As a result the government has given attention to the construction sector with regards to access to the required finance.”
The opening up of the financial sector for foreign actors in this regard is expected to come up with huge capacity mainly for the housing finance, which is believed to transform the construction sector in general.
Expanding the sector manufacturing sector is also the other pillar that the government is looking to strengthen in the construction sector.
“As we give attention for the production of household consumers’ commodities, the construction sector needs similar focus. Unless otherwise we shall invest on the manufacturing sector for construction input production so as not to be import dependant, that may derail our transformation in the sector,” he said.
Using modern technology and human capital development in the construction sector have also been stated as crucial to improve productivity.
Regarding equipped contractors with modern technology machinery, a lease financing scheme is said to be introduced.
Championing for a vaccinated Africa
There is a need to continue campaigns for Africa leaders to address bottlenecks and encourage the population to get vaccinated as Africa is experiencing low daily vaccination, a pan African initiative stresses.
On Friday September 16, 2022 international NGOs in partnership with African Union Commission held an event at Radisson Blue hotel Addis Ababa to build momentum around and enhance youth ownership of the Bingwa Initiative and discuss the broader economic crises.
Though the number of new cases of Covid-19 has drastically dropped across the continent, the virus still has significant risk to people’s lives. As of the end of August 2022, only 28 percent of the African population received the first dose of Covid-19 vaccine and about 22 percent are fully vaccinated while the global rate is 62 percent. From the total 623.6 million vaccine doses Africa CDC has received only 68 percent have been utilized across the continent.
The event aimed to raise awareness about the importance of getting vaccinated, increase vaccination coverage in the continent, build momentum and coalition of young people championing the vaccination campaign and also increase the drumbeat of voices of global health leaders CSOs and citizens to have stronger voices in the pandemic response.
As researches suggested that barriers to vaccination uptake include; storage and distribution challenge, pandemic apathy, vaccine hesitancy, lack of awareness or accessibility issues in the rural areas and diminished sense of urgency around vaccination where fatality rate are low
As indicated on the event, in addition to the pandemic, the Russia invasion of Ukraine is adding to the aftershocks of the pandemic as economic growth has slowed down globally while inflation has soared, sparking fears of imminent stagflation.
Motivated by President Cyril Ramaphosa, who called for innovative ways to scale up vaccinations across the continent, an African Union public-private-youth initiative co-led by Africa CDC and the Women, Gender and Youth Directorate through the Youth Division has been conceptualized under the name “AU COVID-19 Vaccination Bingwa Initiative”. The initiative seeks to establish a network of COVID-19 vaccination youth champions across the continent to accelerate the uptake of COVID-19 vaccination in Africa.
The initiative is co-sponsored and jointly implemented by the Africa Centres for Disease Control and Prevention (Africa CDC) and the Youth Division (YD) of the African Union Commission, and seeks to leverage the comparative advantage of two key AU initiatives: Saving Lives and Livelihood (SLL) and 1 Million Next Level initiatives of the African Union Commission.
Participants from AU, INGOs, youth residing in Ethiopia, government authorities, attended the event.
NBE awaits gov’t signal on a much anticipated insurance Fund
The National Bank of Ethiopia (NBE) is awaiting the decision of central government to breathe life on the much anticipated Ethiopian Deposit Insurance Fund.
It can be recalled that the Council of Ministers ratified the ‘Establishment and Operation of Ethiopian Deposit Insurance Fund’ regulation which was published in February 2021 in the Negarit Gazette, although it is yet to be established.
The Fund will be a guarantee for depositors at financial institutions, who will be members of the Fund.
According to Solomon Desta, Vice Governor of NBE, central bank has filed its proposal for the government to form the Fund.
“As per the regulation, the government is the right entity to give the green light in establishing the fund,” he told Capital.
He added that it is difficult to say it will be established in the current fiscal year since it is on the hand of the government, “We are waiting for the decision of the government. It may be that the government is waiting for a suitable time or assessing experienced leaders on the sector.”
“We have developed the timeline that needs the assignment of the board of directors who are the responsible persons to give life to the Fund,” Solomon added.
According to the regulation, the board of the Fund shall be composed of seven members; Governor of NBE, Minister of Finance, Vice Governor, Banking Supervision Director and the Microfinance Institutions Supervision Director at NBE who shall be permanent ex-official members of the board. The remaining two members of the Board with knowledge in the area shall be appointed by the government based on recommendations from bankers and microfinance institutions associations.
According to the regulation 482/2021 article 4.2, the Fund shall be accountable to the National Bank.
Article 13 stated that a CEO and Deputy CEO of the Fund shall be appointed by the government as recommended by NBE.
According to the regulation that was ratified 19 months ago, the Fund will be closely working with the central bank in different forms. For instance article 33, which stated about assistance to the Fund from the National Bank, said that the National Bank may assist the Fund, during its establishment and initial stage of operation, in procuring materials and providing resources needed to run the Fund’s business.
For the formation of the Fund on its preamble of the regulation for the ongoing economic development of Ethiopia it is essential to strengthen the country´s financial system by ensuring its safety, soundness and stability; the protection of depositors contributes to the stability of the financial system; it is essential to introduce deposit insurance fund as an additional element of the country´s financial safety net.
It added that it is necessary to establish and operate a Fund to enable payment to the member financial institution’s depositors with insured deposits in case of the insurance event; and it is vitally important to collaborate with the National Bank, member financial institutions and other stakeholders to mitigate risk and contribute to stability of the financial system that the fund is formed of.
According to the regulation, all member financial institutions have to pay the Fund’s account an initial premium to be determined by the Fund within 30 days as of the Fund becomes operational.
The initial premium contributed by member financial institutions shall be considered as initial capital of the Fund, while the government shall contribute 200 million birr to the initial capital of the Fund.
Article 16.5 stated that all member financial institutions that signed membership contract shall pay to the Fund annual premiums of 0.3 percent of their average deposits. Sub article six of the same article added that the Fund may determine by a directive a special initial premium to be paid by a financial institution with poor financial soundness.
The Fund shall also be involved in investment activities with the resource it accumulates on the aim to generate income.
Article 19.3 stated that investment in government securities issued or securities guaranteed by the government; or any other investment mode will be as approved by the Fund.
According to the regulation article 23.1, the total amount of the insurable deposits of a depositor shall be determined by a financial institution by adding up all the insurable deposits of that depositor maintained in the different accounts, including the accrued interest on those deposits up to the date of the occurrence of the insurance event.
Article 23.8 stated that the coverage limit of the Fund shall be set by the board; however, it may not be less than 100,000 birr.
Experts said that besides giving a guarantee for depositors and insuring the security of financial firms whether bank or microfinance institutions, it would be an alternative source of finance for the government when it is in need rather than accessing direct advances from NBE.
