Ethiopia’s financial sector in general and the banking industry in particular has shown a tremendous progress since the sector opened for private capital some two decades ago. Capitalizing on the conducive environment, both the state-owned Commercial Bank of Ethiopia (CBE) and private banks have been employed various mechanisms to win the stiff competition for better market share.
In recent years, the banks and insurance companies have shown a growing tendency of building their headquarters in a locality commonly known as ‘Senga Tera’ in the way they have been creating Addis Ababa’s financial district. While the twin headquarters of the Awash Bank and Awash Insurance Company widely regarded as the pioneers of Ethiopia’s Wall Street, other banks and insurance companies follow Awash’s suit in building their headquarters in the city center. As Dashen Bank inaugurated its one billion Birr state-of-the-art Headquarters in November 2017, the construction of the Hibret, Nib and Zemen banks HQs is also well underway.
Ethiopia’s largest bank, Commercial Bank of Ethiopia is also taking the leading in building the 53- story new headquarters around Gandhi Memorial Hospital and the structure is expected to become East Africa’s tallest building upon completion. The 23 story- Wegagan Bank’s headquarter is also available nearby the Addis Ababa Stadium and the HQs of Abyssinia and Oromia Cooperative Banks are in various levels of construction in the financial district.
A veteran businessman and Board Chairman of Hibert Bank Eyesuswork Zafu told The Ethiopian Herald that the concentration of financial institutions in city centers is a common practice in the developed world.
“Since financial institutions are the primary sources to back economic activities, the Wall Street of New York and London’s City Center were established to enhance the respective countries business and investment undertakings.”
According to him, the presence of the National Bank of Ethiopia in the city center is also key to enhance banks communication and foster the regulatory activities. The concentration of financial institutions headquarters in same place would not cause problem in deterring accessibility since customers primarily obtained banking services from branch offices.
Due to the rapid penetration of technologically advanced banking services such as Internet Banking, Mobile Banking, Automated Teller Machine (ATM), Point- of- Sale (PoS) and others in Ethiopia, there is an ongoing debate whether branches remain the primary means to access more customers.
Some argue that the rural population, the significant portion of Ethiopia’s society have limited access to electronic banking service and they have been encountering language and other barriers while using the technology. Furthermore, poor infrastructure and internet connection as well as frequent power interruptions made branch expansion the primary tool to enhance accessibility.
To Eyesuswork, however, the vastness of Ethiopia makes technological outputs more viable ways of ensuring accessibility since branch expansion has been becoming more expensive and reliant of availability of modern infrastructures. The technology is also a tool to offer seamless service and reduce the huge cost the financial institutions have been facing in expanding branches and recruiting new staff.
Stating Ethiopia has more than 60 million mobile phone subscribers; the businessman said that mobile banking is much more convenient for the banks to access the youth, the majority of the population.
He stated, however, the banks cannot fully abandoning opening of new branches since the elder generation tend to use more traditional modes of banking and has limited experience in using mobile and internet banking.
The other economist Dr. Teshome Adugna said that gaps in Ethiopia’s electronic banking services necessitates the multiplication of bank branches while opening new branches in the remote and less technologically-penetrated areas needed the utmost priority.
The physical presentation of bank branches is crucial in nurturing the society’s culture of saving and bolstering the banks loan disbursing capability for priority public and private businesses and investment projects, the scholar added.
Information obtained from NBE indicated that in the country of over 100 million only 4,227 bank branches and 10,481 agent banks are found. Most of the bank’s branches are concentrated in the capital Addis Ababa and other major cities due to market and infrastructure factors.
Stating the 4,227 bank branches are unsatisfactory even in African standards, Dr. Teshome called on multiple efforts to Ethiopia, the fourth largest economy in the continent, to balance the uneven distribution of banks to sustain its rapid economic progress in years to come.
To put in the nutshell, the branch- technology option is not mutually exclusive, and the services could be complimentary in the banks quest for accessing more customers. In this regard, the concentration of financial institutions headquarters is instrumental in fosterning business and investment activities and boosting the levels of domestic saving and investment besides its role in helping Addis Ababa to become a vibrant economic capital of East Africa.