Ethiopian banks consolidate efforts to save economy

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Ethiopian bankers have welcomed efforts by the central bank to put stringent curbs on foreign currency reserves and pledged to continually share information on lenders to stem cases of bankruptcies in Ethiopia.

Ethiopian bankers, meeting on Thursday for the signing of a landmark agreement on the sharing of Automated Teller Machines (ATM) points amongst their respective banks, said that the sharing of customer information would help to curb cases of defaults on loans.

The apex National Bank of Ethiopia (NBE) continues to stringently monitor the activities of the commercial banks, and the stringent monitoring has seen the NBE increase the liquidity requirements by the banks to boost their foreign reserves. “This is from a prudence view point. The banks have to take care of the depositors money,” Ethiopia’s veteran banker, Amerga Kassa, President of the Nib International Bank, said.

According to Leikun Berhanu, the President of the Awash International Bank, the banks have agreed to share information among themselves on customer risk profiles. “The NBE is supervising the activities of all the banks. The banks are supervised to ensure the borrowers do not endanger the system. We will not allow one borrower to get credit from any other banks if they have any defaults anywhere,” he said.

Ethiopian bankers said shared technologies for banking and cash machines were common in most parts of the world. The country is on the brink of a major financial crisis, with the foreign currency reserves dwindling as a result of the global financial crisis and increased demand for imports locally, partly worsened by the rise in oil prices in most parts of 2008.

NBE has introduced a number of measures to stem the crisis, among them, putting curbs on the amount of loans disbursed by the commercial banks. This has been done by asking the commercial banks to ensure their reserves are triple the amount they have previously been allowed before, which means lending to the private sector should be limited while the government commits to zero domestic borrowing.

The commercial banks said the strict monitoring and sharing of customer information, relating to the loans and other credit references, would help to stabilise the banks. “We do not feel constrained by these requirements. These measures are okay for us, we do not feel we are particularly under any pressure,” Kassa said.

Three Ethiopian banks, NIB, Awash International and United Bank, have joined forces to create a network of interlinked ATMs across the country to allow Ethiopians easy access to non-cash-based transactions in line with new trends across Africa.

The three banks hope to launch the new ATM system, with an initial number of 140 ATMs and some 340 points of sale, where customers with credit and debit cards issued by any of the three banks can get services across the country. The deal is meant to offer ATM services across all the airports, domestic and the international airports, shopping malls and supermarkets. The three banks are to spend US$4 million to rollout the joint ATM networks over the next six months.

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