Opened a few weeks ago, the Birmaji branch of the Cooperative Bank of Oromia (CBO), on Africa Avenue (Bole Road), was quiet and empty around lunchtime on Thursday. Two staff, an accountant and a customer service officer, were set on their back-office duties while a teller at the front desk waited for customers to walk in.

The branch has had a modest attraction to customers since its opening - up to 80 visitors a day - but, shockingly, only two people have showed up to cash out money remitted through international transfer services in that entire period of time.

Nebiyou Debele, the branch’s accountant, was bemused by the low amount of remittance coming into the branch. His experience in the current and other branches he worked at before does not give him much confidence about the country's remittance operations. Even among the few who drop by, none cash out remittances more than 1,000 dollars. The parallel market offers more than a 30pc margin to a dollar, a factor that drives customers away from the formal channels.

“People ask us if we’re awarding incentives, and leave when they learn we’re not,” Nebiyou told Fortune.

The branch where he is working now may be young, but the decline is evident in many of the Bank's 464 branches across the country. These branches generated a foreign currency inflow of 363.42 million dollars last year, 22pc of which was from private transfers and remittances.

However, a marked decline in the number of people going through the banks for remittance is a trend many in the industry find deeply worrying.

The size of the Ethiopian diaspora community is estimated to reach three million, mainly concentrated in the United States, the Middle East and Europe. It has made Ethiopia one of the main destinations for remittance globally. It was one of the top 10 remittance-receiving countries in Sub-Saharan Africa along with Nigeria, Ghana, Senegal, Kenya, and South Africa, according to the World Bank’s Migration & Remittances Factbook, released in 2015.

Remittance is a major source of foreign currency to low and middle-income countries. Migrants’ remittance inflows to developing countries have consistently surpassed official development aid over the last two decades and can even exceed the value of foreign direct investments. Two years ago, it had reached an all-time high of over half a trillion dollars.

This is consistent with what Ethiopia has witnessed over the years. For the decade since 2011, revenues from foreign direct investment were short of 15.5 billion dollars, less than half of the 37 billion dollars the country received through remittance, as data from the National Bank of Ethiopia (NBE) shows. Neither were revenues from export earnings any match to it. The figures for two decades show remarkable growth in remittance, from 233 million dollars in 2003 to 5.6 billion dollars in 2019, the year when revenues from exports were below three billion dollars.

The significance of remittance to the balance of payments is not to be understated.

The trend in remittance, commonly understood as money transfers made from migrants to friends and families in their place of origin, ran into a hitch in the past fiscal year, registering a one-billion-dollar drop. Although the severity differs among banks, most, including the state-owned Commercial Bank of Ethiopia (CBE), where the largest share comes through, have reported a decline in their respective foreign currency earnings.

CBE had an inflow of 1.8 billion dollars (only 139m dollars was from exports) in the first half of the last fiscal year, which made up 36pc of the national total during that period. Ordinarily, the Bank's earnings make up to 70pc of the national amount, which has dropped significantly to 1.4 billion dollars in the current fiscal year, almost a quarter lower.

The Cooperative Bank of Oromia, where Nebiyou works, had a relatively similar experience. The flow of foreign currency through remittance declined by 7.76pc in the last fiscal year, from 55.7 million dollars.

The significant drop in the amount of remittance last year could have been caused by the shift of the parallel market to utilising diaspora accounts, in addition to the economic strain of the COVID-19 pandemic, says Kiflu Degefe (PhD), a researcher at the Policy Studies Institute.

The outbreak of the COVID-19 pandemic, which brought economic recession across the world, may have contributed to the decline. Nonetheless, the rapid rise of the informal transfer has a significant impact, observed Deribe Asfaw, president of the Cooperative Bank of Oromia.

His bank may have seen a two-million-dollar rise in foreign currency mobilisation in the past nine months of the current fiscal year, compared to the same period last year, but the President is unsatisfied; two million dollars is "nothing" for a bank of its size.

"People still think that money sent through Western Union can only be withdrawn from the CBE," Deribe told Fortune.

Alongside MoneyGram, Ria, Dehabshill, and WorldRemit, Western Union is one of the main money transfer companies active in the Ethiopian market.

The slight increase of inflow in this fiscal year might seem like a glimpse of hope for the banks, but the sustenance of the parallel market through a global pandemic proves otherwise. The global remittance market is characterised by high transaction costs and limited competition among service providers. This encourages widespread use of informal transfers, presenting the toughest challenge for bankers and policymakers. This is especially true in places where the exchange market is closed, such as in Ethiopia, and rates from the formal market are far lower than what the markets on the street offer.

There is little known about the scale of informal remittance in Ethiopia. Data from the central bank shows that it has grown exponentially from 756 million dollars in 2010 to 2.3 billion dollars a decade later, making up 49pc of the total amount of inward remittance registered last year.