Expanding high-tech financial resources mobilization
By Bilal Derso
Praising the rapid expansion of bank branches and improved penetration of modern services including electronic banking, mobile banking, ATM and Point-of-Sale machines, experts in the field say that the sector is looking for multiple approach to enhance domestic saving and bank’s continental competitiveness.
Ethiopia’s banking industry has shown a tremendous progress during the past two decades and both the state-owned Commercial Bank of Ethiopia (CBE) and private banks have been engaged in massive expansion of branches. As a result of this, the number of bank branches and agent banks in the country has reached over 4,300 and 10,480 respectively.
For a business lecturer at Addis Ababa University, Mukemil Bedru, the National Bank of Ethiopia (NBE) has played a huge role in the expansion of bank branches through putting in place a decree, which according to Mukemil, the intervention has been fruitful to access the huge unbanked section of the society by opening branches in nearby areas and through agent banks.
The move has also increased money deposited in commercial banks, thereby enhancing banks’ loan disbursing capacity. During the end of 2017, the total amount of money deposited in commercial banks has reached over 568 billion birr whereas the banks have disbursed over 560 billion birr loans for public and private clients, according to NBE.
The expert further states that Ethiopia’s sustainable economic growth has been bringing remarkable improvement in the level of citizens’ per capita income and increases domestic saving, an instrument to finance business and investment projects. Ethiopia’s economic success has also a significant role in enabling the banks to become much profitable compared to other financial institutions and offer better services whilst corruption in the industry is less prevalent, he adds.
Noting substantial progress has been witnessed in improving internet connectivity and increasing number of mobile subscribers in Ethiopia, Mukemil says that the banks should realize this changing environment and opt to technological options to access more customers in big cities and urban centers. Sharing the above, Business and Economics College Dean at Wollega University, Dr. Zelalem Ejigu says that Ethiopian commercial banks lag behind in introducing electronic payment systems and the launching of CBE Birr and Dashen Amole are recent phenomena.
The expert notes that the banks should pay attention to enable customers get banking services in electronic devices and capitalize modern verification technologies and systems to deter the existing widespread frauds, security breaches and hacking thereby making sure secured transaction. Electronic and mobile banking are primary tools to access the youth, the principal portion of the society, Dr. Zelalem says, adding that Ethio-telecom’s over 65 million subscribers are assets to the commercial banks transform the cell phones to bank accounts.
The technology also ensures convenience and improves productivity by enabling people shift the time they spent to get bank services to more productive activities and enhance capital flow. By the same token, another expert and business consultant, Dr. Shiferaw Mitiku says that technological outputs are viable options to access more customers in Addis Ababa and other state capitals where opening of new branches and rental expenses significantly increased the banks’ operational cost.
He indicates that the technology has also an advantage in easing financial transactions and building the institutional capabilities of banks as well as reducing frauds and illegal activities associated with money holdings either in Ethiopian birr or foreign currencies. Dr. Shiferaw states that consolidated effort of the government organs is crucial to address power and internet disruptions and to develop information technology infrastructure that provides dependable banking services.
Expanding the availability of electronic and mobile banking and introducing new services are also worth consideration to mobilize more financial resources. All experts, however, express conviction that the banks cannot fully quit opening of new branches as some section of the society particularly senior citizens and rural communities tend to traditional modes of banking and have limited experience in using electronic and mobile banking.
According to Mukemil, the distribution of bank branches is still limited in Addis Ababa and other state capitals and the existing 4,000 branches in Africa’s second populous country and fourth largest economy is far from supplementing the level of domestic saving. Smart intervention is crucial to adjust the existing uneven distribution of bank branches in rural Ethiopia.
The banks should consider the language and other barriers the society could encounter while using modern banking technologies, he says, adding that branch expansion has also advantage to offer loans and other banking services besides money transfers. The experts highlight that the branch and technological options are not mutually exclusive and opening of new branches and introducing agent banks is vital to ensure accessibility for rural population.
The development of electronic and mobile banking is on its part equally crucial to satisfy the urban and younger generation’s desire to technology. Ethiopian banks have advantage over their African counterparts due to the huge customer base and vast network of branches, they say, adding that equipping this potential with world-class products, services and technologies will enable domestic banks to become major players in Africa’s financial industry.