Radar | Apr 30,2021
Amhara Bank, one of the under-formation banks, held its first general assembly in preparation to join the industry with the largest paid-up capital of any yet. The Bank held the general assembly on February 28, 2021, a major step toward operationalisation.
Since it started sales in August 2019, the Bank has managed to sell 188,000 shares, obtaining a little over 5.9 billion Birr in paid-up capital in the process. Half of these shares were sold in Addis Abeba, 20pc in Amhara Regional State, and 30pc in other areas across the rest of the country. Sales were concluded on November 30, 2020.
Amhara Bank holds a staggering amount of paid-up capital, surpassing the paid-up capital of Awash Bank, which has 5.85 billion Br in paid-up capital accumulated in 26 years of operations. Dashen Bank, the second oldest private bank, registered 3.5 billion Br in paid-up capital last fiscal year.
Subscribed capital receivable stands at a little over two billion Br. During the share sale period, the under-formation bank has gained about 396.5 million Br in service charges and over nine million Birr in interest. In comparison, it has spent 16.3 million Br on expenditures such as salaries, advertisements and rent.
The inception of the Bank was not a sudden decision but rather part of a plan to contribute to the development of society at large, according to Melaku Fenta, the chairperson of the Bank's organising committee and former director at the then Ethiopian Revenue & Customs Authority (ERA).
The next steps in realising this goal, according to guidelines from the central bank, are getting approval of nominees for its board of directors, appointing a CEO, and carrying out operational activities such as drafting policies and acquiring banking solutions.
During its inaugural gathering, the general assembly nominated members for its board of directors, and the names will be submitted to the National Bank of Ethiopia (NBE) for approval.
When the Bank goes operational, it will be among the few newcomers to join the banking sector since 2012, a year when two private banks were established – Debub Global and Enat.
So far, three under-formation banks, Hijira, Tsehay and Ahadu, have already held their first general assembly. In contrast, ZamZam Bank has already received an operational license from the central bank. Several more are expected to follow, including Jano, Afro, Goh, Damota, Wolaita and Gadaa Bank.
This expansion in the banking industry is anticipated by industry insiders to create fierce competition among the private banks who are already vying to expand their piece of the pie.
Melaku also stated that the Bank is determined to collaborate with other banks, even to the extent of being willing to merge.
Dawit Tadesse, associate professor of accounting and finance and managing partner of Lead Plus Consultancy, appreciates the Bank's willingness to merge to strengthen competition if and when foreign banks are allowed to operate in Ethiopia.
Dawit also believes that the amount of paid-up capital the banks have garnered is advantageous in utilising loan services.
"Most banks are selective when awarding loans, especially as the amount of deposits decline," he said.
In Amhara Bank's case, because it can finance comfortably, it might open up opportunities for less-financed sectors. Besides, Dawit anticipates that the Bank might benefit from investing in treasury bills.
The macroeconomic instability of the country might hinder business activities, which might in turn discourage people from taking out loans, according to him.
"For the Bank to become competitive," said Dawit, "it will need a skilled workforce, which is a challenge in the country."
Dawit further remarked that the amount of paid-up capital is not as large compared to other East African banks, such as those found in Kenya.
PUBLISHED ON Mar 06,2021 [ VOL 21 , NO 1088]
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