BY DANIEL ALEMAYEHU
In recent few years, the financial sector has become the central point in order to achieve better results. As of the emergence of the banking system, people have developed higher interest to invest their capital on the sector. Due to various results, putting the sector in the right direction can bring tremendous benefits.
In the Ethiopian context, the banking sector has been one of the much potential that the nation can be profited from. It is the fact that both the government and the private sector have been involved in investing billions on the sector. In the 2022 report, Director of Banking Supervision of the National Bank of Ethiopia (NBE), Ferezer Ayalew said, “The number of banks has increased from 18 to 30, and their branches reached to 8,944, as of June 30, 2022, from 5,564 four years ago. With the expansion of bank branches, the ratio of branch per population reached to 1: 11, 516 (one bank branch serves 11, 516 people).”
Besides, as to Frezer, the number of deposit accounts in the banks has increased from 40.04 billion Birr to 83.3 billion Birr. Hence, the total deposits, over the last four years, have increased from 899 billion in 2019, to 1.7 trillion Birr in 2022. The total capital of the banks has been boosted from 98.9 billion in 2019 to 199.1 billion Birr in 2022. Such reports depicted that the banking sector is the major economic pillar in the Ethiopia’s economy and overall development.
Recently, the National Bank of Ethiopia presented the six-month performance of the institution at the presence of leaders of commercial banks and other relevant stakeholders. The newly-appointed Governor of the National Bank of Ethiopia (NBE) Mamo Mihretu and NBE’s Deputy Governor Solomon Desta have presented the report and raised the major points about the institution and highlighted the next steps.
The governors have highlighted the major achievements in the past six months and also raised the challenges that the institution will act on in the coming months. According to the deputy governor, financial institution of the country has generated an asset worth 2.9 trillion Birr. This figure depicted that it has a 30 percent increase of which, banks and insurance companies share 2.8 trillion and 0.04 trillion Birr respectively. The share of financial institutions is 0.05 trillion, and other institutions shared 0.02 trillion Birr.
Solomon added that around 71 financial institutions are under formation. From those under formation financial institutions, 8 of them are banks, 54 of them are small financial institutions, and the remaining 9 are system operators. On the other hand, the number of borrowers has decreased by 7.8 percent.
In addition, the deputy governor noted that the deposit of financial institutions hit 2 trillion Birr of which 1.98 trillion is banks’ deposit, and the remaining 0.02 trillion Birr belongs to small financial institutions.
As to the report, the number of financial institutions has reached one hundred nine. The figure also shows 27 percent increment. From the 109 financial institutions, 31 of them are banks, 18 insurance companies, and 44 of them are small financial institutions. The remaining 16 institutions are bodies that are working in the financial sector, Solomon disclosed.
The newly- appointed Governor of the National Bank of Ethiopia (NBE), Mamo Mihretu, on his part, said that the financial sector has registered better performance in the past six months of the fiscal year. Banks deposited and collected assets have been increased by 30 percent on average which is 159 billion Birr.
Likely, Mamo revealed that his focus is on fighting back the existing price hike in the country that the price of goods and services are skyrocketing, and actions will be taken to stabilize the market.
The governor has explained about the inflation in detail. As to him, inflation has become one of the most pressing challenges to the national macro-economy in recent years. To reduce the challenges, the central bank plans to deal with the problem systematically. Regarding inflation, Ethiopia manages to reduce the inflation in the price of food items by five to six percent compared to last June, but unfortunately, the price of non-food items is increased by six percent in the reported period.
The governor further added, “Accordingly, arresting the soaring increase in the price of commodities and services will remain our most important concern in the future. In conclusion, we will take viable financial measures to stabilize the market and ease the challenge of inflation that severely affected the low-income communities.”
In addition to that, creating a healthy financial sector and curbing the alarming parallel market challenge will remain priorities of the regulatory bank. “This time, creating stable prices and stabilizing foreign currency exchange as well as enhancing financial institutions’ performance are undeniable; I join NBE to act based on this mission,” Mamo elucidated.
The governor also suggested financial institutions including non-bank entities to contribute to the success of the NBE directive that has been set to contain the staggering inflation. Mamo stated that all financial institutions coupled with responsible stakeholders should act on all the measures and tasks that enable the country to halt the progress of the inflation. “The loan service, for instance, shall be to support the development of the country. If not, the national bank will take possible legal measures.”
According to the governor, parallel with the support from the institution regarding the financial development of institutions, they have planned to add some force to supervision works, and they will supervise all financial institutions in the country to assess whether they are working based on the international principles and values or not.
In the meantime, Mamo emphasized that financial institutions have played their part in accordance with the overall development of economy of the nation. He further mentioned that the Treasury bill contributed by banks hit over 157 billion Birr in the past six months. Indeed, the contribution of the financial sector to fix the national budget deficit is growing immensely.
According to the report from Deputy Governor of the National Bank of Ethiopia, despite some glitches, both government-owned and private financial institutions have registered healthy growth.
THE ETHIOPIAN HERALD FRIDAY 10 FEBRUARY 2023
