Hibret Exhibits Growing Balance Sheet, Thinner Margins, a Precarious Credit Surge

Posted on February 9, 2025February 9, 2025 by Yeabkal

Hibret Bank ended its 2023/24 financial year with a strong performance, reporting total assets of 96.58 billion Br, an increase of 16.95pc from the previous year. However, for analysts following the industry, this pace fell below the private banking industry’s average growth of around 28pc, a gap that displayed the Bank’s stable position and the intense competition shaping the expanding industry.

Lenders across the board have been racing to expand through new branches, digital innovations, and intensified lending, while also focusing on capital buffers and diverse revenue sources. Against this backdrop, Hibret Bank stood out for its asset gains and resource mobilisation, although it has also faced higher costs and industry-wide constraints.

The Bank’s deposit base grew to 74.65 billion Br, growing by 15.66pc from the previous year, demonstrating its ability to attract funds. However, it was short of the average 30pc surge seen among private banks, yet still a sizable gain. Savings comprised 45.48pc of total deposits, with demand and time deposits accounting for 33.13pc and 21.39pc, respectively.

Management’s willingness to accept greater lending risks while pushing deposit growth represented a manifold strategy, mixing expansion with caution.

Aminu Nuru, a finance analyst based in Doha, argued that Hibret Bank’s performance should be viewed in the context of the National Bank of Ethiopia’s (NBE) ongoing monetary tightening. The Central Bank’s push to curb inflation by restricting credit growth and increasing emergency lending rates has limited private banks’ capacity to expand. Mandatory investments in Treasury (T-bill) and Development Bank of Ethiopia (DBE) bonds further squeezed liquidity, reducing the scope for credit growth and affecting trade finance activities.

Though Hibret Bank generated 203.61 million dollars in foreign exchange earnings, the analysts observed that the hard currency shortage and falling export and remittance inflows presented a major hurdle for the industry.

Hibret Bank recorded a total revenue of 13.23 billion Br, a 28.11pc increase, largely driven by higher interest income. However, expenses jumped 39.63pc, with interest costs alone growing 37.81pc. Wage and staff benefit expenses also climbed, expanding the Bank’s workforce to 9,440. Although these measures build the Bank’s capabilities for long-term growth, they pressured margins in the short run. Pre-tax profit edged up only 0.74pc to 3.08 billion Br, when most private banks enjoyed 32pc growth, revealing a tension between expansion and cost control.

Yet, the net profit margin of 23.29pc displayed that the Bank can convert almost a quarter of its earnings into bottom-line returns, a sign of operational efficiency. The challenge lies in curbing operating costs, which accounted for around 41pc of all expenses. Its asset turnover ratio of 13.7pc could reveal an unutilised potential. Much of this gap might result from a labour-intensive operating model in which personnel and administrative costs absorb a large chunk of total expenses.

The coming period will likely test whether Hibret can translate its bigger balance sheet into stronger earnings without exposing itself to undue risk, especially if inflationary pressures and foreign exchange constraints persist. Analysts caution that unchecked wage increases, staff benefits, and administrative outlay could weigh down future earnings if revenue does not keep pace.

“Narrowing profit margins may persist if operating expenses keep rising at a faster pace than revenues,” said Aminu.

Vice President Sisay Molla was concerned about the higher workforce costs. According to him, earlier branch expansions, along with the regulatory mandate for broader reach, required hiring and investments in employee development.

“These steps control costs while maintaining high service standards and supporting staff growth,” he told Fortune.

During the reporting year, it opened 26 new outlets — eight in Addis Abeba and 18 in regional towns — bringing the Bank’s total branch count to 499.

According to Sisay, optimising staff allocation, introducing more automation, and providing performance-based incentives could moderate expense growth over time. Analysts believe continued vigilance will be needed to balance investments in service quality with the bottom line.

Hibret Bank’s return on equity (RoE) stood at 24.4pc; shareholders earned roughly 24 cents on each Birr invested.

Long-time shareholder Minas Takele, who has held a stake in the Bank for over a decade, praised Hibret Bank’s performance given the year’s economic realities.

“They should embrace efficient workflow,” he told Fortune, urging executives to focus on loan management, a key indicator of a Bank’s health.

Hibret Bank introduced the Prepaid Hibir MasterCard service with MasterCard, an initiative that executives hope will improve foreign currency access from international travellers. Mobile banking transactions hit 44.07 billion Br, signalling a rising preference for digital banking channels.

The Bank remains focused on technological fronts. According to Sisay, digital transformation is essential for streamlining processes, cutting operating expenses, and attracting customers, especially as the industry embraces digitalisation. He attributed Hibret Bank’s strong in-house IT team to a competitive edge that allows it to develop solutions quickly, implement new banking technologies, and stay ahead of market trends.

“By ramping up digital services, Hibret Bank strengthened customer engagement and enhanced profitability through lower overhead,” said Sisay.

While some observers worry about credit risk and liquidity, the Bank reinforced its capital by issuing two billion Birr in fresh shares, lifting paid-up capital to seven billion Birr. Total equity reached 12.65 billion Br, mirroring a trend among private lenders to enlarge their paid-up capital, with some estimates placing the industry-wide jump at around 30pc. An asset-to-equity ratio of 7.64 times unveiled an assertive strategy of funding asset expansion through borrowing, though analysts do not see an immediate cause for alarm at that level. They view this as a sign of growing confidence in the Bank’s performance, as well as a safeguard against the volatility of changing times.

The change was also seen in the composition of the senior managment team.

Following the departure of Melaku Kebede, who served for nearly four years as Hibret Bank’s president, where he spent two decades, the Board has nominated a new president. Under Chairperson Samrwit Getamesay, the Board submitted the nomination of Tsigereda Tesfaye, a senior vice president for business and operations, to the National Bank of Ethiopia (NBE) last month. If approved, Tsigereda would become the third woman to head a bank currently, and Hibret Bank would be the only Bank led by a female board chairperson and president.

Tsigereda has 30 years of banking experience, having previously worked for the now-defunct Construction & Business Bank (CBB) and Dashen Bank before joining Hibret Bank in 2004. She advanced through credit and risk management roles, becoming senior vice president. Since August 2024, she has served as acting president, ensuring continuity as the board formalised its choice.

As operations manager, she is credited for pushing the Bank to diversify revenue streams, including interest-free banking (IFB). It released a separate financial statement for IFB operations, a rare approach in the industry. Sisay credited a knowledgeable Sharia advisory committee for ensuring these services meet faith-based requirements, attracting a dedicated clientele. Partnerships with other financial institutions and Islamic organisations further expanded its IFB offerings.

Loans and advances grew from 58.8 billion Br to 67.4 billion Br, a 14.5pc increase that stayed within regulatory caps. However, analysts say this lifted Hibret Bank’s loan-to-deposit ratio to 92.28pc, surpassing the 85pc norm many banks target. A higher ratio can boost interest income, which accounts for around 83pc of Hibret Bank’s -about credit quality if economic conditions worsen. Observers say carefully monitoring macroeconomic shifts is essential for safeguarding the bank’s loan portfolio.

Net operating income rose from 7.075 billion Br to 8.026 billion Br, a growth Sisay characterised as evidence of solid revenue generation.

Despite this progress, net income after tax dropped by two hundred million Birr to 2.3 billion Br, mainly because of higher impairment charges, which soared from 103 million Br to 496 million Br. According to Sisay, Hibret Bank will tighten its follow-up on borrowers to ensure they remain in business and repay their loans. While it has sustained year-on-year (YoY) growth in net operating profit, Sisay attributed the slight dip to strategic outlays meant to boost the Bank’s long-term competitiveness.

“We acquired assets with high depreciation values and invested in our employees,” he told Fortune. “These measures would position Hibret to keep pace with industry demands.”

Sisay disclosed that boosting fee-based services and diversifying sources of revenue are top priorities. Improving digital banking to reduce costs and expand the customer base is also on the agenda, as is streamlining loan reviews to lower non-performing loans (NPLs). Analysts say the surge in impairment charges implies the Bank should remain cautious, but Sisay argued that the NPL ratio of 2.8pc is a level well below regulatory thresholds.

“We continue to aim for levels below the National Bank’s standards and implement various strategies, which have consistently demonstrated the strong capability of our Bank,” he said.

Concerns emerged around the loan-to-deposit ratio (LDR), which was 92pc, far higher than the industry’s average of less than 85pc.

“Addressing these will require a strategic shift in liquidity management and funding sources,” Aminu.

Sisay, placing Hibret Bank’s LDR closer to 88pc, argued that the managment followed a conservative approach where deposits surpass loans, ensuring a healthy liquidity level and avoiding frequent external borrowing. He disclosed that the Bank’s Asset Liability Management Committee closely tracks liquidity and focuses on meeting mandatory reserve levels set by the central bank.

“We’ve got a contingency management plan in place, outlining strategies for accessing additional liquidity during periods of stress,” he told Fortune. “Effective liquidity management underpins client trust and ensures obligations are met promptly.”

The Banker, The Apparatchik, The Maverick, Bulcha Demeksa Dies at 94

Posted on February 9, 2025February 9, 2025 by Yeabkal

Bulcha Demeksa was a figure whose influence resonated across generations. Stepping into his home in the gated community of Ropak in the Legatafo area, it was clear that he, too, was shaped by the wisdom and support of others.

Beyond the familiar smiles of his family members, three particular portraits stood out: Emperor Haile Selassie I, Yilma Deressa, and Robert McNamara, the former president of the World Bank, who once served as secretary of defence during America’s war in Vietnam. These individuals shaped Bulcha’s worldview, guided his principles, and supported his unfolding ambition. Whether Yilma’s, a finance minister under Emperor Hailesellasie, trust placed in him to modernise Ethiopia’s budgetary system, the recognition from the Emperor for his groundbreaking work on the national budget, or the backing of McNamara at the World Bank, which helped him garner international acclaim, each of these towering figures contributed something unique to his life.

In displaying these three portraits, Bulcha sought to acknowledge their role in shaping his character, demeanour, and commitment to service. From his earliest years, he knew that one should seize every opportunity to learn, shoulder responsibility, and contribute to the public good. Even though he came from humble beginnings in Boji Dirmeji town, in the Wellega zone of Oromia Regional State, he recognised education as his way out.

From an early age, he understood that knowledge was a gateway to broadened horizons, so he diligently pursued his education. He completed primary school in Gimbi, then moved on to Kuyera Seventh-day Adventist Mission School, which placed particular emphasis on discipline and scholarly rigour. That foundation would propel him to Addis Abeba University College, where he graduated with a degree in economics after four years of focused work.

The Imperial government recognised his promise and sponsored him to continue his studies in the United States. He enrolled at Cornell University, an Ivy League college, but since there were no other Ethiopian students there at the time, he transferred to Syracuse University. That choice allowed him to earn a post graduate degree in economics in an environment where he would meet people from diverse backgrounds and refine his economic thinking.

Returning to Ethiopia, Bulcha’s advanced knowledge of economics and global perspective made his skills highly sought after. He chose to work at the Ministry of Finance in the Budget Department, a decision that placed him at the heart of fiscal planning. His diligence and intellect quickly set him apart.

At the time, Yilma, a prominent figure in the economic policy circle, saw in Bulcha a young professional brimming with potential. He entrusted him with the monumental task of overseeing and modernising Ethiopia’s budgetary system, a responsibility that carried national importance. Bulcha’s meticulous work ushered in a structured approach to managing the country’s finances.

The Emperor recognised the value of this accomplishment by formally endorsing Bulcha’s new budget presentation. This was a remarkable move, acknowledging that a young economist had helped reshape how the government managed public funds. The Emperor’s acceptance was a defining moment in Bulcha’s career, for it validated his contribution and established a direct line of communication between him and the Emperor.

In time, Bulcha rose to the position of Deputy Minister of Finance, cementing his reputation as a person of competence and integrity in government circles.

Around this time, Bulcha learned of an opening for a board director position at the World Bank, representing 17 English-speaking African member countries, along with Trinidad and Tobago. He recognised the invaluable experience such international exposure would bring. He sought the Emperor’s blessing, explaining that this was more than a personal milestone. It would give Ethiopia a voice on a global stage. Emperor Haile Selassie, appreciative of the potential diplomatic and developmental benefits, offered his permission.

Bulcha secured the position and made history as the first Ethiopian to sit on the executive board of the World Bank, headquartered in Washington, D.C.

He formed a close working relationship with McNamara during his tenure, who often relied on Bulcha’s insights to shape policy decisions affecting African countries. At a time when the Bank’s leadership lacked deep familiarity with African economic issues, Bulcha became a valuable advisor. He helped steer funds towards meaningful development projects, encouraged a broader understanding of domestic conditions, and built bridges between the World Bank and various African countries hungry for resources and expertise.

His efforts were well received, paving the way for more nuanced lending and assistance programmes across the continent.

Yet, Ethiopia’s political life was far from stable. Events soon demanded Bulcha’s consideration. During a transition in government, he was nominated to become Minister of Agriculture. Instead, he extended his tenure at the World Bank by another year, believing he could serve his country’s broader interests more effectively by remaining abroad. His return to Ethiopia eventually became complicated when the military Marxist regime, a.k.a the Derg, rose to power, making it unsafe for him to resume his duties there.

He was hired by the United Nations Development Programme (UNDP) and took high-level roles in countries such as Gambia, Nigeria, and Tanzania. These postings allowed him to remain active in Africa while avoiding the troubles unfolding in his home country.

After decades of serving various international organisations, he retired in 1991 and finally returned home, guided by a profound wish to invest in Ethiopia’s future. He applied himself to private enterprise and was instrumental in founding Awash Bank, the first private bank post-Derg. His broad expertise, grounded in domestic matters and international finance, helped establish the Bank on solid footing. Initially, he served as chairman of the Board, supervising operations and hiring top talent. Later, he assumed the presidency until a well-qualified banker could be appointed to fill that role.

Politics beckoned once more, and he responded by running for a parliamentary seat representing a constituency in Boji Dirmeji District. Victorious, he spent five years in Parliament, where he made a statement of cultural pride by being the first member to address the assembly in Afaan Oromo. For Bulcha, this choice was more than a symbolic gesture; it reflected his long-held belief in linguistic representation, ensuring his constituents felt heard at the highest levels of governance. He went on to co-found the Oromo Federalist Democratic Movement (OFDM). He served as its Chairman for many years, permitting him to lobby for policies he believed would empower local communities and promote federalism.

Though public service and organisational leadership often consumed his time, Bulcha made a point of preserving his life story in writing. He penned an autobiography, published in English, which has since been translated into Amharic and Afaan Oromo and is nearing final publication in those languages. In sharing his journey, he hoped to stress the opportunities and trials of serving at national and international levels.

The family was a cornerstone in Bulcha’s life. He had six children, nine grandchildren, and five great-grandchildren, a growing clan he cherished dearly. Even as his career took him around the globe, he made every effort to instil in his descendants a passion for education, a love for their country, and a sense of responsibility towards others. Beyond his immediate family, he also contributed to the well-being of the community that had nurtured him.

He renovated the primary school he had once attended, ensuring that future generations in Boji Dirmeji would benefit from better facilities. He played a key role in building a Seventh-day Adventist Church in his hometown, recognising the importance of having a stable spiritual and educational infrastructure.

Bulcha’s pursuit of knowledge did not end with his work in economics. At one point, he undertook and completed a Law degree (LL.B) from Haile Selassie University, demonstrating that his thirst for learning was unquenchable. His extensive work on Ethiopia’s budget system remains part of the archival record, studied by economics students who wish to understand how such frameworks evolved in the country’s modern economic history. His enduring generosity, kindness, and commitment to improving life, whether through official service or personal outreach, left a mark on all who crossed his path.

Throughout his long international career, Bulcha was known for helping fellow Ethiopians in any way he could, offering them guidance, and sometimes even shelter, whenever they found themselves in difficult circumstances abroad. Despite numerous opportunities to remain elsewhere, he kept his Ethiopian identity at the forefront, returning home to apply his knowledge and resources for the country’s betterment whenever possible.

In December 2024, at the age of 94, Bulcha passed away after an extended period of illness. His departure marked the end of a life dedicated to public service, economic policy reform, and community uplift. It was a poignant loss for his family, friends, colleagues and a country that benefited from his expertise and commitment.

Hijira’s Premium, Zemen’s Bold Bet Enticing Forex Market

Posted on February 9, 2025February 9, 2025 by Yeabkal

Last week, Hijira Bank posted a buying rate of 126.5 Br to the dollar, marking what industry observers described as a historic milestone. In an even more striking move, the Bank also offered the most expensive Dollar exchange at 129 Br, signalling its increasingly aggressive posturing in capturing foreign currency inflows. The state-owned Commercial Bank of Ethiopia (CBE) posted the lowest buying rate at 124 Br and the lowest selling rate at 126.48 Br, cementing its continued role as a market stabiliser.

According to observers familiar with the latest shifts, CBE’s comparatively conservative approach showed an effort to rein in market volatility when the gap between the highest and lowest rates appears to be widening.

Zemen Bank, widely regarded as one of the top-tier private financial institutions, joined the band of fourth-generation lenders pushing beyond the long-standing psychological threshold of 125 Br. Smaller fourth-generation banks such as Tsehay, Gadaa, and Goh Betoch led the market with bold forex pricing, consistently offering the highest rates for over six weeks. According to analysts, their strategy reflects a growing urgency to secure forex liquidity by appealing to forex holders with premium bids.

However, smaller lenders continue to lead the charge.

Tsehay, Gadaa, and Goh Betoch have consistently staked out the most aggressive positions, hoping to attract the limited flows of hard currency passing through official channels. First-generation private banks, from Dashen to Abyssinia to Wegagen, may avoid similar moves, preferring steadiness or, as some industry insiders assert, adhering to tacit directives preventing runaway depreciation.

In a market where the Birr (Brewed Buck) faces persistent downward pressures against the U.S. Dollar (Green Buck), these newer and smaller banks appear more inclined to take on risk to meet their liquidity needs.

The largest private banks, including Dashen, Awash, Abyssinia, and Wegagen, remain relatively reserved. For weeks, their rates were below 125 Br, signalling a cautious position designed to maintain stability rather than chase short-term gains. Market observers believe these established banks, wielding larger capital bases, can afford to be less aggressive in pricing. Others point to the “invisible hands of policy” behind their conservative posturing, a sign of regulatory pressures in tempering how far they are willing to push rates.

Between February 3 and 8, 2025, the Brewed Buck continued its gradual descent against the Green Buck, with industry-wide average buying rates inching upward and surpassing the 126 Br mark for the first time. This consistent climb has raised new concerns over the declining value of Brewed Buck. Observers caution that the depreciation resulted not only from competitive bank strategies, but also a symptom of broader macroeconomic stressors, including the persistent forex shortages, the burden of servicing external debt, and inflationary pressures eroding real incomes.

Although CBE executives remain steadfast in their attempts to moderate the market by offering lower rates, the overall trend shows that the Brewed Buck will further weaken in the weeks and months to come.

Recent indicators show that even the Central Bank’s rates have moved past the 125 Br level, aligning official figures more closely with the higher levels posted by private banks. Analysts interpret this as a sign that monetary authorities are increasingly willing to adjust policy mechanisms to mirror market realities, or at least to narrow the gap between the official and parallel market rates.

Regardless of the underlying motivations, Birr’s slide shows no immediate signs of reversing course. Unless decisive policy interventions alleviate structural imbalances, such as boosting foreign reserves or inflationary fiscal policies, the Brewed Buck is likely to continue its downward path, testing the financial sector’s resilience.

Publishing Industry Contends with Soaring Costs, Shifts Digital

Posted on February 9, 2025February 9, 2025 by Yeabkal

Walelgn Ayele, an aspiring young author, faced a harsh reality when he attempted to publish his first book. Printing 1,000 copies of a 450-page book would cost nearly half a million Birr. He quickly realised that paper size and weight were just the beginning of a complex and costly process.

“To publish a book nowadays, you either have to be a government official or extremely rich,” he said. “It’s impossible at these prices.”

The publishing industry is struggling with soaring paper costs, compounded by a 15pc value-added tax (VAT) on paper and printing services. Import duties on sheet paper jumped to 15pc in October, up from five percent, while the duty on roll paper remains at five percent. The depreciation of the Birr has further inflated prices, creating a crisis for publishers, authors, and bookstores alike.

Haimanot Asmerew, owner of Haimanot & Family Print House, has witnessed the toll of rising costs firsthand. Printers now require full upfront payment, making it even harder for authors to publish their work.

“The market is struggling,” he said. “Authors can’t afford to get their books to the public in the numbers they want.”

Many printing companies, bookstores, and writers are now unsure whether they can continue operating.

Desalegn Masre, managing editor of the ebook and audiobook platform AfroRead, confirmed the trend.

“Paper prices have been rising for years,” he said. “You can’t expect book prices to stay the same.”

Abere Adamu, president of the Ethiopian Authors Association (EAA), says that soaring publishing costs, especially with the addition of VAT, could hurt the country’s reading culture and increase illiteracy.

“The first victim is society at large,” he said.

Mohammed Osman, head of the Tax Policy Research Monitoring Division at the Ministry of Finance (MoF), defended the move, explaining that the duty hike was meant to protect local manufacturers and consumers.

Faced with these financial burdens, many authors are turning to digital platforms. The digital book market, comprising electronic books (ebook) and audiobooks, offers a more affordable, accessible, and portable alternative. Ebooks cost less than printed books and can be instantly downloaded onto digital devices. Audiobooks further enhance accessibility, offering features like searchability and device syncing.

The audiobook market is growing fast, with platforms like Teraki, Semu Audiobook, AfroRead, and Tuba leading the way.

Nahom Tsegaye, founder and CEO of Teraki, claims his platform is Ethiopia’s first application to compile audiobooks and podcasts in collaboration with producers. Teraki has attracted 230,000 listeners and records between 140,000 to 150,000 monthly users. It also partners with NGOs and the Ethiopian National Association of the Blind (ENAB) to expand access. The platform offers audiobooks in Afaan Oromo, Amharic, English, and Tigrinya.

Semu Audiobook, established in 2020, provides a growing library of audiobooks and podcasts in multiple languages in Ethiopia and East Africa. According to Ruth Habtemariam, the platform’s production manager, the application has been downloaded 34,000 times, with 2,000 active subscribers. It features content in Afaan Oromo, Amharic, English, French, Guragigna, and Tigrinya.

Tuba, another major ebook and audiobook platform, launched in March 2022, focusing on local literature. Co-founder Leykun Yilma said the platform boasts 200,000 subscribers and a catalog of 180 books, working with 100 authors.

These digital platforms provide new opportunities for authors and reshape how people consume books. As digital reading becomes more accessible, many are integrating books into their daily routines.

Eleni Tsegay, a marketing professional who reads 15 to 20 books a month, relies primarily on ebooks and audiobooks.

“Reading is my life,” she said.

She listens to audiobooks while commuting and doing household chores, calling them a time-saver. Compared to physical books, which take longer to finish, she can complete an audiobook in a single day.

However, the digital shift comes with consequences, especially for authors struggling to protect their royalties. Tesfa Gashaneh, an author and translator, recounted how one of his religious books was narrated on YouTube without his consent. The video amassed a million views, yet he received no payment. His attempts to report the issue to YouTube were unsuccessful.

Tesfa believes local ebook platforms offer better protection for authors and welcomes their growth.

“The market is still in its infancy, but the business is promising,” he said. “At least we save on printing costs.”

Dessalegn Masre, managing editor of AfroRead, said his platform, which has 200,000 verified users, does not charge authors upfront fees.

Yet, while digital formats gain traction, traditional bookstores continue to struggle. Fantahun Abe, owner of Hahu Books, has spent a decade in the sector. Despite offering discounts, he has seen a steady decline in customers.

“Books aren’t that expensive, in my opinion,” he said, noting that bookstores frequently offer promotions to attract buyers.

He said that religious books have seen increased sales since the COVID-19 pandemic, as more people turn to spiritual reading.

Still, many of his colleagues, publishers, booksellers, and writers, have been forced to switch careers due to the decline of the print market.

The shift from print to digital publishing is becoming undeniable. Abere Adamu, president of the EAA, noted that authors are now struggling to sell more than a few hundred or thousand copies.

“We used to print up to 40,000 copies in the past,” he said.

Despite recognising the global shift, Abere remains sceptical.

“Even world-class newspapers are struggling with this change,” he said. “I don’t think reading on screens is good, but the trend is irreversible.”

Ebooks on AfroRead range from 10 Br to 175 Br, while audiobooks sell for 110 Br to 175 Br. Dessalegn says the platform was initially designed for foreigners who lack access to local books and for authors unable to afford traditional publishing costs.

Veteran author Teshome Birhanu has witnessed the industry’s transformation firsthand. He believes the soaring costs of publishing today are incomparable to the past, citing the paper shortage as one of the main problems for the industry.

“We have to adapt,” he said. “Technology-based publishing companies can generate more income for authors.”

Mustefa Abdella, a consultant, sees the rise of ebooks and audiobooks as a game-changer as digital formats can lower costs, break geographical barriers, and improve literacy rates.

He cited the United States, where digital books now account for over 20pc of the market, as well as India and Kenya, where adoption is rising rapidly.

“The electronic formats allow publishers to operate more efficiently and profitably compared to traditional hard book publishing,” he said.

45502

Posted on February 9, 2025February 16, 2025 by Yeabkal

The daily passangers count for the Addis Abeba Light Rail Transport (AALRT) in 2023, dropped by 61pc from the highest recorded daily passenger count in 2017. A public transit system experiencing such a sharp ridership decline in a growing city is unusual. Major operational inefficiencies or external factors, such as frequent train cancellations, shortages of spare parts, security concerns and power outages, are affecting train operations.

“It’s a destruction.”

Posted on February 9, 2025 by Yeabkal

Atul Gawande (PhD), the former head of global health at USAID, described the unfolding of the United States Agency for International Trade (USAID) following President Donald Trump’s decision to close it.

PROSPERITY’S PROMISES, ETHIOPIA’S RECKONING

Posted on February 2, 2025February 2, 2025 by Yeabkal

The incumbent Prosperity Party (PP) rallied 1,200 of its ranks amid a turbulent political and economic environment, convening its second convention five years after its establishment. Mustered for two days at a time when the country has been gripped by protracted armed conflicts, including the contentious war in Tigray, strife in Oromia and Amhara regional states, and severe economic headwinds, the convention was notable for the attendance of influential figures such as former President Mulatu Teshome and former Deputy Prime Minister Demeke Mekonnen. Delegates representing ruling parties from 15 countries – from Djibouti to South Africa and Turkey, Russia and China – attended when it opened on January 31, 2025, in Addis Abeba.

The party, born in December 2019, emerged following the dissolution of the EPRDF, merging three of its coalition members but TPLF. Its victory in the 2021 national elections, however, was shadowed by persistent questions over electoral inclusiveness and credibility as it was held before its first general assembly. Its leader, Abiy Ahmed (PhD), whose administration has embarked on a sweeping economic liberalisation agenda, including the recent abandonment of the fixed exchange rate regime, defended his leadership record. Abiy emphasised the transformative ambition of his government, pledging to fast-track major national projects such as achieving food security in wheat farming and finalising the Grand Ethiopian Renaissance Dam (GERD). He also revealed plans for an extensive expansion of corridor development projects, stating that these initiatives were crucial as the country approached its next national election in a year.

Abiy called for a peaceful resolution to the deep-rooted conflicts, a plea resonating amid the broader challenges of national division and diplomatic strains with neighbouring countries like Somalia and Eritrea.

Addis Abeba’s Costly Pursuit of Prosperity Bulldozes Dreams on Bargain Prices

Posted on February 2, 2025February 2, 2025 by Yeabkal

Urban renewal is seldom gentle to those on the receiving end of redevelopment. Take several neighbourhoods of Addis Abeba where bustling life once thrived. Silence now reigns on them, bar the bulldozers flattening not only the land tens of thousands once lived on. The livelihoods of thousands of families have been displaced in the name of “prosperity.”

Federal and city officials continue to tout these mass evictions as part of a grand urban renewal scheme, yet for many residents, it marks the end of a stable life and the beginning of exile within their own city. The recent evictions and relocations have yet to be documented. But, in the six years beginning in 2009, over 20,000 households — some 100,000 people — were evicted from central Addis Abeba. According to one survey, 41.3pc of businesses forced to relocate did not survive in their new zones, and 29.1pc of evicted households found no income opportunities at all.

The administration of Prime Minister Abiy Ahmed (PhD) has unveiled multi-billion-dollar developments, a commercial and residential complex on the site of “old “Addis Ababa neighbourhoods. Officials insist evicted families are provided “affordable” housing in the outskirts, with reasonable compensation for those who own properties. Experience suggests otherwise.

The land lease system, introduced under the EPRDF regime and amended in 2011, fundamentally altered the market by auctioning off what was once “public land” to the highest bidder. The massive constructions that followed led to the sector’s share of GDP growing to 16pc, but a 2017 UN-Habitat report showed that housing costs in the city jumped up to 274pc in the mid-2000s and early 2010s. Condominium housing has become another financial trap where 52pc of those relocated to government-sponsored buildings have defaulted on their mortgages.

Developers have reaped rewards from generous land allocations and murky bidding procedures. Politically connected business elites, along with foreign-owned firms, particularly Chinese and Gulf-based companies, have snapped up plots for luxury towers and malls. Although land lease payments ostensibly fund public infrastructure and affordable housing, revenues often vanish into bureaucratic inefficiencies or politically motivated projects such as the “Beautifying Sheger” initiative, which appeals to aesthetics rather than social welfare.

Addis Abeba’s predicament, caused by the state’s unrestrained use of the “eminent domain” concept, should not be considered unique. Nor is it confined to African capitals.

In the United States, a Supreme Court case of Kelo v. City of New London ignited a debate about whether private property can be seized for economic development. Susette Kelo’s home in Fort Trumbull, Connecticut, was bulldozed to make way for what was supposed to be an expansion for the drug manufacturer, Pfizer, and other commercial ventures. The Court ruled five to four that economic growth qualified as a “public use.”

Yet, grand promises soon collapsed. Pfizer left town, and the land remains vacant. The fiasco cost New London millions in legal fees and lost property tax revenues. A 2020 National Bureau of Economic Research report revealed that under 40pc of such projects achieved the forecasted employment levels, while nearly a quarter never materialized. Homeowners, however, still had lost their properties.

Some public projects may truly depend on expropriation. Highways, ports, and airports that benefit entire regions can stall if a handful of property owners refuse to sell. The power of governments to consolidate land efficiently, especially when coupled with a fair compensation regime, could provide vital infrastructure for wider public use. The problem comes when fairness and transparency are often lacking, which leaves poorer communities vulnerable.

In her dissent over the Kelo case, Justice Sandra D. O’Connor warned that lower-income neighbourhoods would suffer the brunt of such takings, a concern borne out by studies showing poor areas are disproportionately targeted.

Ethiopia embodies similar tensions but on a far larger scale. Its constitution declares land the property of the “state and peoples,” and the current expropriation framework, updated in 2019 and again amended in 2024, mandates compensation for improvements on the land but not for the land itself. This arrangement distorts decision-making by undervaluing land’s intrinsic worth. It also incentivises authorities to seize parcels cheaply for public — or ostensibly public — projects whose economic and social merits go untested.

Critics have merit in their argument that if the law recognised land value in the compensation formula, local communities and developers would have stronger incentives to use land sustainably. There would also be fewer motives for successive regimes to exploit murky redevelopment deals under the banner of “development, renewal and prosperity.”

The appetite for development stretches back generations. In the early 1930s, Emperor Haile Selassie and a group of foreign-educated modernists fantasised about forging “the Japan of Africa.” Multinational corporations were beckoned, and swathes of land were leased to foreign ventures. In the decades since, the Revolutionary Democrats shifted from Soviet-inspired collectivism under the Derg to a developmental state model, with farm expropriations and factory expansions at the core.

New roads and factories promise jobs and prosperity within Addis Abeba’s orbit, but older residents often lack the skills to transition from farming to factory work. Official figures in some industrial parks reveal monthly wages of around 26 dollars, a pittance compared with prior earnings from harvests. In the worst cases, bulldozers arrive before locals even learn their land has been transferred to a new owner.

Compensation rarely covers the lasting costs of eviction, leaving residents to spend any payout within months. They move to cramped city fringes or attempt precarious work as day labourers.

Economic growth, once double-digit for successive years, has slowed but did not diminish official faith in big projects. However, the frustration for many Ethiopians lies not in the ambition but in the top-down manner of implementation and enforcement, which underestimates the social disruptions that follow mass expropriation. A fairer compensation mechanism that counts the land as a valuable asset could limit abuses and address the damage to those uprooted.

It would leave the state’s ownership of land intact, since the government retains the right to expropriate for public purposes, but it would force a deeper reckoning with whether a given project truly warrants the upheaval it brings.

Such a shift could meet international standards, where expropriation laws recognise that land value should factor into any credible compensation scheme. It could also spur local authorities to consult communities more openly, encouraging inclusive planning and creating labour programs that help displaced families adapt. Elsewhere, cities like Bogota, in Colombia, and Sao Paulo, in Brazil, have managed urban growth without mass expulsions by encouraging participatory planning, community land trusts, and zoning that balances economic expansion with social equity.

Whether Ethiopia’s contemporary leaders are prepared to rewrite the constitutional framework is unclear. Yet, the question of how much “creative destruction” is necessary before the gains of development trickle down to the very people who are making way for it looms large. If the authorities keep ignoring the intrinsic value of land, the bulldozers will continue to roll, displacing communities in pursuit of glitzy ambitions, they only wish to have a volcanic discontent.

A new expropriation policy, one that compensates the structure and the soil beneath it, could nudge the country and its people toward a future in which development is measured not by how many old homes are razed but by how many lives are improved. That, at least, would be progress worthy of its name.

Economic Slowdown, Instability, Tax Burden Bang Small Businesses

Posted on February 2, 2025February 2, 2025 by Yeabkal

Tesfaye Hora, a former Bajaj (three-wheeled vehicle) driver from Gebre Guracha in Oromia Regional State, once led a stable life. Earning between 700 Br and 900 Br daily, he provided comfortably for his wife and daughter. Determined to build a better future, he sold his Bajaj for 160,000 Br and borrowed 40,000 Br from his sister to move to Addis Abeba in July 2019, hoping to follow in her footsteps in the suit fabric trade.

At first, Tesfaye’s business flourished. For seven months, he navigated the trade successfully, building connections and securing decent profits. He dreamed of relocating his family to the capital city, seeing a future of stability and opportunity. But his ambitions were soon derailed by a series of crises.

The COVID-19 pandemic, followed by the armed conflict that broke out in November 2020 in the Tigray Regional State and escalating conflicts with armed groups, destabilised the country. His key customers could no longer travel to Addis Abeba, severely impacting his sales. The final blow came with the sharp devaluation of the Birr. The soaring cost of imported fabrics wiped out his profit margins, leaving him unable to sustain his business.

With his capital depleted and no options left, Tesfaye returned to Gebre Guracha. Today, he struggles to support his growing family, including his wife, two children, elderly mother, and cousin, by working at a bingo lottery.

An economic slowdown and galloping inflation have been severely affecting small businesses. Business registration across the country has steadily declined over the past five years, according to data from the Ministry of Trade and Regional Integration (MoTRI). In 2021, there were 3,898,081 registered businesses, but by 2023, this number had dropped to 3,166,513. This reflects the growing hurdles businesses face.

Esmael Zeynu, a 28-year-old entrepreneur, embodies the struggles of small business owners. His journey, which began in 2021, has been marked by repeated failures.

He first launched an employment agency, successfully placing over 600 people in jobs within a year. However, high taxes and a mismatch between job seekers’ skills and employers’ needs crippled the business, forcing its closure.

Determined to succeed, Esmael pivoted to a shoe retail shop in 2022. Despite aggressive discounts and promotions, he could not attract enough customers to cover expenses. The venture collapsed. In 2023, he tried again, opening a game zone. But high rent and operating costs outweighed earnings, leading to yet another failure.

In 2024, Esmael finally found what seemed like a winning formula: a betting house franchise. After ten months of profitability, the government abruptly banned betting houses without warning or consultation, shutting down his legally registered business. The sudden closure left him financially devastated.

“The system is not fair,” he said.

Now unemployed and relying on his family, Esmael’s entrepreneurial spirit has been crushed by unstable market conditions and sudden policy changes.

He feels disillusioned, believing that returning a business licence is as difficult as changing oneself. Esmael described the arduous process of returning his trade licence. He began by collecting the necessary form from the revenue office, but was directed to the customer service office to start the process.

He was sent to the audit office, which then referred him to the Woreda to confirm whether he was still operating his business. The Woreda, in turn, sent someone to inspect his old shop, and asked him to provide a rent agreement between the current tenant and the property owner to prove he was no longer operating at that location.

Esmael struggled to get the necessary documents. “These processes took more than two weeks,” he said. He had to pay 9,000 Br. “I didn’t agree with this amount,” he said, still frustrated by the unfair demand. He was told he could either pay immediately and provide proof of payment from the bank, or pay half and file a complaint. Exhausted, he stopped there. “I was tired of the process,” he said.

Esmael realised that the process would continue if the complaint was approved, as he would be sent back to the audit office for a new pricing decision.

Wondimu Filate, public relations and communication executive at the Ministry of Trade & Regional Integration (MoTRI), stated that the government has been pushing for digital trade processes to address bureaucratic hurdles and ease the processes.

According to Wondimu, over two million people have used digital platforms for registrations and licences in the first six months of the current fiscal year, matching the total from the previous year.

“We have doubled the number of people served through digital platforms,” he told Fortune. He added that cashless transactions have generated 14 million Br in revenue, a 16pc increase from the same period last year.

Elsabet Alehegn, an engineer who launched a contracting business in 2021 with 30 employees, echoed similar frustrations, citing systemic corruption and inefficiency.

Government tenders were rigged, and accessing allocated funds required bribes due to bureaucratic delays, according to Elsabet.

Unpredictable material price hikes made private contracts unviable, halting projects and pushing Elsabet into debt. The combined pressures including heavy tax burden forced her to shut down her business, and now she works at a print house.

Lack of demand has impacted the sales and incomes of many businesses, forcing them to close down doors or pivot to other areas. Netsanet Dawit had thrived in the cosmetics trade, running a small shop in the Rebeka building near Hayahulet for the past three years. On average, she earned 1,200 Br to 1,400 Br a day, sometimes even 3,000 Br to 4,000 Br. But now, her income has plummeted to just 400 Br, down by 300pc.

The shop was often empty, and customers who used to visit regularly now stayed away. Rent became a constant worry. After three months of inconsistent work, Netsanet made the difficult decision to close her shop and seek employment elsewhere.

The domestic business sector is experiencing a sharp slowdown, with recent data showing a sharp decline in economic activity.

The data reflects these hurdles. Business registration and licensing activities in Addis Abeba have declined between 2021 and 2024. New registrations dropped by 39pc, from 68,287 to 41,935. New licenses fell by 26pc, from 108,668 to 79,966. License renewals dipped by 28pc, from 459,927 to 331,571.

Fasikaw Sisay, former board member at the Addis Abeba Chamber of Commerce & Sectoral Associations (AACCSA), says that the government should support small businesses to withstand the economic instabilities. “Small businesses need a supportive environment, especially in their early stages,” he said. “They need breathing room to survive.”

Fasikaw says that there is an unfair power dynamic in the market, where small businesses compete with large enterprises that have superior resources and connections.

“Small businesses are competing with big enterprises that hold more power,” he said. “This is not fair.” He believes regulations should be in place to protect smaller businesses.

Fasikaw suggests a more collaborative approach, where SMEs act as raw material suppliers for larger enterprises. He also stresses the need for a strong and proactive Chamber of Commerce to advocate for small businesses.

“I don’t think the Chamber is doing enough to support the sector,” he told Fortune. He argues that the institution is failing in its role as an intermediary between the government and businesses.

Fasikaw urges the government to improve communication with business owners. “Policies and government actions should be communicated to traders ahead of time,” he said.

He also calls for reducing bureaucratic inefficiencies, which he sees as a major obstacle to progress. “The bureaucracy in government offices must be reduced,” he said.

Additionally, he states that Technical and Vocational Education and Training (TVET) institutions have a vital role in producing skilled graduates who can contribute to the business sector.

Sewenet Ayele, communication director for the Addis Abeba City Administration Bureau of Revenue, says the administration has been raising tax awareness. He claims efforts have been made to educate merchants on their tax obligations. Acknowledging corruption in the system, he states that action has been taken against 77 employees. He also notes that the bureau’s revenue has increased by 26 billion Br compared to the same period last year.

Million Kibret, managing partner at BDO Ethiopia, argues that limited access to credit is a major barrier for small businesses.

Credit is often directed to large businesses, leaving little opportunity for smaller ones. Access to finance is crucial for economic growth, allowing individuals to secure loans and start businesses. However, banks have traditionally focused their lending on a small, powerful segment of the population, leaving most without financial resources.

The National Bank of Ethiopia’s (NBE) Financial Stability Report, published on April 11, 2024, shows that loans and advances are increasingly concentrated in the hands of a few large borrowers. As of June 2023, the top ten borrowers alone controlled 23.5pc of the total loans, a sharp rise from 18.7pc the previous year. Despite making up just 0.5pc of all borrowers, those with loans over 10 million Br hold nearly 74pc of total loans issued by banks.

“It’s very difficult for these businesses to start or expand without financial resources,” Million said. He also criticised the unpredictability of the tax system.

“While tax is important, businessmen should not have to fear it. Taxes should be predictable, but in Ethiopia, they are not,” he added.

Million stresses that peace and stability are essential for business growth. “Businesses need peace, and these issues must be solved,” he said.

He also advocates for tax breaks to support small businesses in their early stages. “Tax breaks are crucial until businesses can stand on their own,” he argues.

While he supports major economic shifts, such as transitioning to a free market, he believes the government must address the resulting problems.

Million says that the few businesses that work legally are overburdened with high tax bills. He suggests that lowering tax rates would encourage more illegal traders to enter the formal economy.

Global Bank Races for Growth, But Rising Costs Cast a Long Shadow

Posted on February 2, 2025February 7, 2025 by Yeabkal

Global Bank (Ethiopia) ended its 2023/24 fiscal year by treading a narrow line between robust expansion and caution. It displayed a balance of deposit, asset, and lending growth while wrestling with mounting operational costs and heightened provisioning to guard against credit risk in a volatile economic environment. The Bank, formerly Debub Global Bank, also responded to regulatory demands, moving forward with an ambitious rebranding effort.

Private lenders expanded in the broader banking industry, where the state-owned Commercial Bank of Ethiopia (CBE) continues to dominate, posting a 48pc rise in assets and similar growth in deposits. Their total assets grew by 28pc and deposits by nearly 30pc to 18.2 billion Br. But Global Bank found itself somewhere in the middle, achieving a 28pc rise in total assets, matching the private sector average, yet it stood out by boosting profit before tax by 48pc.

The Bank’s net profit margin rose to 25pc from 23.13pc the previous year; about a quarter of each Birr earned goes straight to its bottom line. Management seems to have balanced higher operational costs against revenue gains, though an added note of caution comes from the Bank’s provision expenses, which surged 226pc, a potential marker of future concerns given the unpredictable economic backdrop.

However, senior executives proudly touted loans and advances, jumping to 15 billion Br, up by 15pc over the previous year. International trade accounted for 37.3pc of the total loan and advance portfolio, while domestic trade services captured 35pc. Construction followed with 9.6pc.

Yet, such progression is punctuated by reminders of inherent risk. The loan-to-deposit ratio declined from 95.88pc to 86.23pc, showing improved liquidity management but remaining above the industry mean of 60.2pc. Analysts note the National Bank of Ethiopia’s (NBE) view that ratios north of 85pc leave lenders vulnerable to liquidity shocks. Global Bank’s President, Tesfaye Boru (PhD), countered that the Bank has pulled back from the more difficult territory.

“A one percent jump from the recommended level is not that concerning when we have come a long way from previous years,” he told Fortune. “Liquidity is in a good position now. It’s visible in the trends.”

Over two billion Birr in loans were extended in the last fiscal year, an achievement that executives attributed to a customer-centric approach in retail and corporate banking. The Bank’s overall deposit base was reinforced by a 54pc jump in foreign currency mobilisation, reaching 98.7 million dollars. Total revenue expanded by 37pc, supported by net operating income that climbed from 1.8 billion Br to 2.4 billion Br, a 28.5pc improvement.

Return on Assets (ROA) was 2.01pc, while Return on Equity (ROE) was 13.62pc, demonstrating some measure of efficiency despite industry-wide profitability headwinds.

Yet, the Bank’s profit after tax retreated by 10pc to 499 million Br, an outcome that drew the attention of analysts who cite a 39pc uptick in expenses. The cost base soared to 3.08 billion Br, with interest payments consuming 53pc, wages and benefits 26pc, and other general expenses 21pc. Part of these higher operational costs was deployed to branch expansion — 73 new branches in one year — and a corresponding jump in staff headcount to accommodate the growth. The number of newly hired staff rose 39pc.

Tesfaye disclosed that the Bank recruited seven security personnel, among other staffers, for each branch, driving up personnel expenses. He is looking to cut costs by integrating technology into more operations.

“We’re exploring ways to substitute some duties with tech-driven solutions,” he said.

Tesfaye, who holds a doctorate in business leadership from the University of South Africa, said most senior management will be PhD holders in the coming years, a move he believes will enhance Global Bank’s competitive edge. After graduating from Addis Abeba University in economics, management, and business administration, Tesfaye began his career at Hibret Bank as a loan officer, eventually serving in various capacities at Abyssinia and Zemen banks. When he joined Global Bank as vice president, he took the helm in 2019 and ushered in a rebranding from Debub Global Bank to Global Bank (Ethiopia.)

He now should prove that Global Bank’s expansion strategy can deliver sustainable returns. Shareholders will watch whether the Bank can hold onto a 25pc net profit margin or if elevated operating costs weigh more heavily on future earnings. The growth spurt in staff numbers is intended to support branch expansion and customer service, but those costs quickly eat into profits unless revenue per employee keeps pace.

The rebranding initiative, including a name change and a visual overhaul, is designed to appeal to a broader customer base, including the diaspora. While it has arguably enhanced brand recognition, some market watchers wonder if it will be enough to stand out in an increasingly crowded marketplace.

The Bank’s growing network now includes four dedicated branches for Interest-Free Banking (IFB), which collectively mobilised 281 million Br in deposits. These operations remain small but meaningful, especially as there is considerable interest in the market for Sharia-compliant banking services. Analysts point out that the Bank’s financials do not break out specific IFB performance measures, making it hard to gauge its exact influence on the bottom line.

“We’re just starting,” Tesfaye said.

The Bank considers human capital investment essential to facing competition from an anticipated influx of foreign banks.

“Investing in our people is the best way to compete in today’s globalised banking environment,” he said. “Most of our senior management will hold PhDs in the coming years.”

For the finance analyst Aminu Nuru, who is based in Doha, the hiring spree weighed on the Bank’s profit.

“Operational costs, including opening new branches and depreciation of right-of-use assets, do not come cheap,” he told Fortune.

But, the President stated that deferred tax adjustments accounted for much of the decline.

“It’s due to tax, not operation,” he said, noting that profit before tax hit 757 million Br, which is considered a more accurate indicator of the Bank’s underlying performance. “It’s the true indicator of our performance,” Tesfaye said. “It’s better if we take that.”

Complications emerged in how earnings per share (EPS) were calculated. The Bank reported a 14pc increase in EPS to 332 Br, even though net profit fell, after using profit before tax for the computation instead of net profit.

“It’s the same as the net profit case,” Tesfaye said in his team’s defence. “There is no other justification. Last year’s tax has distortions.”

However, Aminu argued that an accurate calculation based on net profit should bring EPS down to 219 Br. According to Aminu and other analysts, shareholders may feel misled by the absence of explicit disclosures. Ayalew Asres, a partner at Tafesse, Shisema & Ayalew Certified Audit Partnership, Global Bank’s auditor, conceded that upon enquiry from Fortune, an oversight was detected after the financials were printed but communicated to management before the general assembly convened.

“We’ve sent out a correction letter,” he told Fortune. “The Bank was made aware of the discrepancy.”

Still, the lack of clarity has fueled concerns over transparency.

Global Bank is about halfway toward meeting the National Bank of Ethiopia’s (NBE) mandatory five-billion-Birr capital requirement, an effort Tesfaye feels confident in meeting. Global Bank’s capital adequacy ratio (CAR) was 16pc, double the regulatory threshold. Subscribed capital reached 3.5 billion Br, while its paid-up capital rose by 22pc, although lower than the industry’s 30pc average, as faster asset growth pulled its capital-to-asset ratio down from 15.67pc to 14.76pc.

Higher reliance on deposit funding can magnify returns but also expose the Bank to unexpected market shifts. The Central Bank has not wavered on raising capital requirements, compelling smaller banks to consolidate or take on strategic investors.

Tesfaye seems undeterred.

“We’re optimistic,” he said.

The President is counting on existing shareholders to raise contributions while welcoming new investors.

Shareholders attending Global Bank’s recent general assembly expressed guarded optimism. Some lauded management for balancing expansion with risk controls, pointing to the improved liquidity ratio and robust deposit growth as proof of solid planning.

A major shareholder, Tewodros Shiferaw, plans to reinvest dividends, drawing confidence from what they view as a sustainable growth path.

“Most of us are investing for our retirement,” Tewodros told Fortune, adding that innovative financial products to draw in new customers and shareholders are essential. “Banking is a dynamic ground. Management should be able to keep up.”

Others remain uneasy about the cost structure and the intense capital requirements lurking ahead.

The Bank’s technology push is designed to optimise efficiency and expand its reach, according to the Board Chairperson, Bikila Hurissa (PhD). He believes partnerships, such as one with Kacha Digital Finance, introduced micro-saving and lending products and promoted financial inclusion.

“We adopted technology and digital banking initiatives, incorporating international best practices to enhance our competitiveness,” he told shareholders, noting that the Bank is looking to engage in new financial activities driven by the capital market.

Last week, the Bank introduced a self-service digital banking centre, serving 72,346 cardholders and more than 616,000 card transactions worth 683.96 million Br. Global Bank also announced the rollout of a 24/7 Smart Banking Centre.

The Mexico Premium Branch provides one of the more distinctive anecdotes of Global Bank’s evolving strategy. Staffed entirely by women, it has exceeded its deposit targets and, through improved service, helped reactivate dormant customer accounts.

“It’s a pilot, and we showed that it worked,” said branch manager Yodit Getachew, who emphasises what she described a “win-win” for the Bank and customers. Despite the lukewarm broader economy, she remains enthusiastic.

“This year, we aim to further reactivate inactive customers through better customer service and tailored product offerings,” she told Fortune.

Liquidity constraints and credit risk have been recurring themes for the banking industry as authorities respond to inflationary pressures with shifts in monetary policy. Industry observers attributed the Central Bank’s loan growth cap of 18pc and a desire to maintain higher liquid reserves influencing the Bank’s executives’ choice to curb an overly aggressive lending agenda.

“The loan book is still growing, but it seems the Bank wants to maintain some breathing space,” said an analyst.

Their decision may, however, curb interest income if demand for loans picks up faster than anticipated.

Global Bank’s future also depends on macroeconomic forces largely beyond its executives’ control, including Birr’s volatility, double-digit inflation rate, and the overall pace of economic growth. The Bank’s higher provisioning for potential bad loans could be an early signal that management is bracing for more turbulence.

Yet, Tesfaye exudes confidence.

“Investing in people, technology, and market reach is not only a cost,” he said. “It’s the basis for long-term survival.”

Banks Hike Lending Rates as Liquidity Tightens, Leaving Borrowers in the Lurch

Posted on February 2, 2025February 2, 2025 by Yeabkal

A notable wave of lending rate increases is reshaping the financial sector, following major banks adjusting their rates upward, with some reaching as high as 22pc. Several banks, including Oromia, Cooperative Bank of Oromia (Coop Bank), Wegagen, Dashen, Awash, and Sidama Bank, as well as the state policy bank, the Development Bank of Ethiopia (DBE), have adjusted their lending rates beginning the past two weeks.

These adjustments come at a time of rising operational expenses, fiscal pressures, and tighter credit availability, which have stirred public anxiety and borrower concern. However, bank executives have blamed a surge in the cost of funds as a primary reason for the adjustments. According to Asfaw Alemu, president of Dashen Bank, a liquidity squeeze across sectors is a key reason for the adjustment.

The cost of funds has surged, forcing banks to reexamine their lending strategies. Fixed-time deposit rates have increased by an average of six percent in over a year, now around 19pc.

Intensified competition among banks has further pressured lenders to revise their strategies to maintain profitability.

The impact of rising costs has been equally pronounced for Sidama Bank. According to its President, Tadesse Hatiya, the Bank’s lending rate which was previously between seven and 19pc has now increased to eight to 21pc to balance income with escalating costs better.

“The credit cap is a major obstacle for emerging banks seeking expansion,” Tadesse told Fortune.

Fourth-generation banks rely heavily on lending and interest income to fund deposit mobilisation and branch expansion. The credit cap, which limits banks’ ability to extend loans not exceeding 18pc of the previous year’s advances, has forced them to generate more income from their existing portfolios, a strategy that comes with its own set of constraints.

“The increase has put additional pressure on banks to attract premium deposits,” he said.

However, the regulatory framework gives banks considerable leeway when setting interest rates. The National Bank of Ethiopia (NBE) permits commercial banks to determine their respective lending rates as long as they report to the regulator and secure board approval. Recent data from December 2024 shows that the highest lending rate among banks had reached 23pc, while the lowest was recorded at seven percent, yielding an average of around 15pc.

According to Belete Fola, a portfolio manager at NBE, banks have the right to make interest rate decisions.

“The National Bank has no right to intervene,” he told Fortune.

DBE has increased its rates for the agricultural sector by six percentage points to 13pc, and for the manufacturing sector by five percentage points to 18pc. The new rates, approved by DBE’s board of directors, have been in effect since January 1, 2025, and formal notices have been issued to borrowers. As of December 2024, DBE had 4,000 borrowers with an outstanding loan balance of 97 billion Br, with 60pc allocated to the manufacturing sector, disclosed Getachew Wake, DBE’s vice president.

Enawgaw Belachew, a commercial farmer, is one of these borrowers who farms pulses and oilseeds on 300hcts. He now faces uncertainty about how he will manage his financial burden, taking a 50 million Br loan from DBE two years ago to buy machinery. However, security issues have halted his operations, preventing him from repaying his debt.

“I wasn’t able to pay my debt on time,” he told Fortune, shocked at the sudden rise in interest rates.

Recent shifts in monetary policy further complicate the situation. The Central Bank has moved away from quantity-targeting toward an interest-based market model that relies on indirect policy instruments to achieve price stability. Under the new regime, the policy interest rate has been set at 15pc, and the Monetary Policy Committee, chaired by Governor Mamo Mihretu, has raised the allowable credit growth rate from 14pc. These measures are designed to manage inflationary pressures, yet they have also contributed to the rising cost of bank deposits and the tightening of liquidity across the sector.

The rising rates have immediately impacted borrowers, particularly those in the export trade sector.

The Oromia Coffee Farmers’ Cooperative Union, representing more than half a million farmers, has been hit hard by the new rate adjustments. The Union’s 1.5 billion Br term loan from Coop Bank saw its interest rate jump from 8.5pc in September to 14pc by December, a change that added an extra 82 million Br in costs. The Union’s difficulties did not end there; an overdraft facility of 200 million Br with Oromia Bank, which carried an interest rate of 8.5pc, was increased to 18pc.

“We’re under financial strain,” admitted General Manager Dejene Dadi.

Coop Bank’s board approved the new rates on December 21, 2024, and they were implemented on December 23, 2024. The changes were formalised in a directive signed by the Bank’s President, Deribe Asfaw, issued to management executives and branch offices.

Facing mounting financial strain, the Union has decided to withdraw the overdraft facility entirely and is now seeking a 600 million Br loan from the Commercial Bank of Ethiopia (CBE) at a lower anticipated rate of eight percent.

While these adjustments have raised concerns among borrowers, not all banks have opted to follow suit.

The country’s largest lender, the CBE, has maintained its current lending rates, seemingly resisting the broader trend of upward adjustments.

Other banks, such as Birhan Bank, have chosen a cautious approach. According to Dagmawi Kassahun, vice president for Business & Digital Banking, the Bank deliberately withheld from revising its rates this year.

“We held off adjustments to avoid rattling our customers,” Kassahun told Fortune.

Although economic conditions have undeniably pushed costs higher, Kassahun says that future rate changes might be postponed until the next financial year. Birhan Bank has 17,000 borrowers and an outstanding loan balance of 33 billion Br, demonstrating its moderate approach in the current economic climate.

Several banks’ simultaneous rate increases have sparked concerns about possible collusion. Yehualashet Tamiru, a trade lawyer, warned that seemingly coordinated rate hikes could trigger an anti-competitive probe.

“Consumers need protection,” Yehualashet said, arguing that such moves might be scrutinised under anti-competitive laws.

The potential for regulatory intervention adds another layer of uncertainty to an industry struggling with elevated costs and an increasingly challenging market environment.

Experts warn that the broader economic implications of the rate hikes are considerable beyond the immediate impact on borrowers and banks. The Central Bank’s Financial Stability Report from November uncovered the concentration of credit within the industry. The top 10 borrowers account for 23.5pc of the 1.9 trillion Br in loans and advances. In a striking illustration of loan concentration, a mere 0.5pc of borrowers, each with credit exposure exceeding 10 million Br, hold nearly three-quarters of all bank loans. Such a high concentration of credit, combined with rising rates, may have far-reaching consequences for the overall stability of the financial system.

Deposits across the banking industry have also been on the rise, reaching a total of 2.2 trillion Br. Despite this growth, banks have maintained a high loan-to-deposit ratio. Although this ratio has slightly declined to below eight percent, it remains elevated. As of June 2024, commercial banks had issued nearly 1.5 trillion Br in loans and advances, while the non-performing loans (NPL) ratio stayed at 3.6pc, comfortably below the regulatory threshold of five percent.

However, the delicate balance between attracting deposits and managing loan growth continues to present the industry with a considerable dilemma.

Shifts in banks’ lending focus further illustrated the changing dynamics within the industry. While export-oriented lending has declined noticeably, dropping by 1.6pc, banks have increasingly targeted domestically oriented sectors such as consumer loans and real estate. The manufacturing sector, in particular, remains the largest recipient of loans, accounting for 23pc of the total, followed closely by domestic trade and services at 20.1pc.

The reorientation signals a broader strategic move by banks to concentrate on sectors deemed more stable or profitable in the current economic environment.

Critics within the financial community have raised concerns about the lack of transparency in banks’ rate-setting processes. Finance expert Worku Lemma noted that lending rate revisions appear to be driven primarily by banks’ efforts to protect profit margins rather than by an objective assessment of market conditions. Worku argued that the stagnant savings deposit rate of seven percent is no longer sufficient to attract depositors.

He believes lending rates are determined by three key factors: the cost of money linked to the deposit rate, the lender’s risk premium, which accounts for borrowers and loans, and the bank’s profit margin, which covers operational costs.

“It needs careful scrutiny,” said Worku. “Without proper regulatory oversight, unchecked rate hikes could further fuel inflation.”

Authority’s Coffee Ban Roils Industry as Exporters Cheer, Farmers Reel

Posted on February 2, 2025February 2, 2025 by Yeabkal

The coffee industry is reeling after the Ethiopian Coffee & Tea Authority (ECTA) abruptly banned the export of grade-five coffee. The Authority is tightening regulations on vertical integration to maintain the country’s reputation in global markets.

The decision, announced on January 13 with little warning, confines coffee trade between suppliers and exporters to grades one through four. Federal authorities claim this move will reverse the slide in quality that has increasingly plagued coffee exports. According to Kassahun Geleta, the Authority’s marketing manager, the measure is part of a broader effort to prevent substandard coffee from entering the export market.

“We want to protect our country’s reputation as a leading coffee producer,” Kassahun told Fortune.

Yet, the decision has thrown the industry into disarray as the peak export season looms in the next three months, leaving many suppliers scrambling to respond to the fallout.

For suppliers like Hagos Gebreselassie, the sudden ban has created a financial quagmire. With 14 years of experience in the business, he now finds himself stuck with 210,000Kg of grade-five coffee intended for international markets.

“Bad climate conditions have resulted in low-grade production,” said Hagos, who works with 40 farmers in the Bench Sheko Zone of the South-West Ethiopia Regional State. “It’s not our fault the coffee is the way it is.”

Many suppliers, having bought coffee often using bank loans, now face the prospect of financial ruin.

“It feels like they want to push us out of business completely,” he said.

Another supplier, Engidaw Wudu, who also has 14 years in the business, faces similar distress, with 1,200Qtls of grade-five coffee now stranded. Managing 70hcts of land in Bench Sheko, Engidaw criticised the timing of the ban.

“The timing is not right,” he said, arguing that the ban came too late, after farmers had already harvested this year’s crop.

According to Engidaw, the impact of climate change on his land’s fertility to produce high-quality coffee is evident.

The latest export restrictions come when the coffee industry is wrestling with numerous challenges. The bulk of coffee is cultivated in Oromia Regional State, which accounts for 59pc of production, followed by the South-West Regional State at 15pc and Sidama Regional State at seven percent. The industry is a major employer, supporting approximately 5.8 million people nationwide. Despite strong global demand for speciality coffee, most forest coffee remains uncertified and unbranded, and only 15pc of export companies deal in speciality coffee.

Experts blame the structural shortfall for the current crisis, with regulatory loopholes in the vertical integration system, where exporters buy coffee directly from suppliers, allowing lower-quality coffee to flood the market.

Mesfin Hailemariam, market development head at the Authority’s branch in the South-West Regional State, acknowledged the multiple factors undermining quality.

“Financial shortages, climate change, and outdated farming practices are all major problems,” Mesfin said.

He observed many farmers reuse deteriorating coffee sacks for up to two years, further degrading the harvest quality.

“Achieving quality has become a difficult milestone,” he said.

The Authority plans to increase coffee production by 100,000tns from the current 760,000tns harvest. Mesfin also recommended greater use of organic inputs such as compost, which he believes could double output per hectare to 15Qtls.

The impact of the ban have been immediate. In the South-West Regional State, 40 trucks carrying over 20,000Kgs of grade-five and under-grade coffee remain stranded at dispatch sites. The Regional State, with over 100,000 farmers managing 552,000hcts of land, is a key production area, especially in Kaffa and Bench Sheko zones, contributing 90pc of the State’s coffee output. Last year, the area produced 540,000tns of coffee, though 60pc was graded as five or lower. In the past six months, only 26,000tns of coffee were cleared for export, uncovering the severe impact of declining quality.

“The goal of the decision to improve coffee quality is commendable,” Mesfin said. “But, it was rushed and failed to consider this season’s existing supply.”

Exporters have welcomed the Authority’s move, arguing that stricter quality controls could restore buyers’ confidence and secure better prices.

According to Desalegn Jena, president of the Ethiopian Coffee Association (ECA), the decision reinstates the core principles of the vertical integration system and enhances the credibility of coffee exports.

“The government should urgently address quality problems to protect Ethiopia’s position in the global coffee trade,” he said.

Desalegn’s caution carries extra weight given that key export markets — Germany, Japan, Belgium, and the United States — collectively account for 60pc of coffee exports form Ethiopia. Notably, Germany reduced its coffee imports by 36,000tns last year, while Japan’s purchases dropped by 17,400tns, with buyers blaming rising prices, declining quality, and shipping delays as major issues. Buyers from the three markets — Germany, Japan, and the United States — have lodged formal complaints about quality issues in the past year.

“These are buyers we can’t afford to lose,” Desalegn warned.

The Authority’s figures are alarming: 70pc of coffee exports in the past six months were grade-five or lower, resulting in a revenue shortfall estimated at nearly half a billion dollars. The Ethiopian Coffee Association (ECA) plans to generate over two billion dollars in coffee exports this fiscal year, affirming the high stakes involved. The financial implications of the quality crisis are evident.

According to official estimates, Ethiopia could have earned up to 1.4 billion dollars in the past six months had higher-quality coffee been exported. During the same period, coffee exports generated 908 million dollars, which pales compared to the 1.4 billion dollars earned from 300,000tns of coffee exports in the previous fiscal year. According to exporters higher-quality coffee could have commanded premium prices and boosted revenue. International buyers have grown increasingly hesitant, with poor-quality coffee undermining Ethiopia’s longstanding reputation.

Israel Degafa, general manager of Kerchanshe Trading Plc and a board member of the ECA, is among the exporters who supported the the Authority’s decision.

“This new rule will benefit exporters,” he said, noting that poor-quality coffee has caused substantial foreign exchange losses.

He stated the price disparity between grade-four and grade-five coffee, which was 1.10 dollar for a kilogram, a difference of 17.2pc.

Another exporter, Abdullah Bagersh, general manager of S. A. Bagersh, echoed similar sentiments. His company incurred a 40pc loss due to rejected low-grade coffee.

“We had to do the suppliers’ work to bring the coffee up to standard,” he told Fortune.

Coffee trade and its ecosystem have shifted dramatically in recent years, particularly with the rise of vertical integration. Traditionally, about 87pc of coffee exports passed through the Ethiopian Commodity Exchange (ECX). However, traders have increasingly turned to direct transactions, with over 60pc of exported coffee originating from the vertical marketing system.

Wondimagegnehu Negera, CEO of the ECX, attributed this trend to the price caps imposed by the Exchange, which he said made it less attractive to producers, exporters, and suppliers. The ECX, which facilitated 13 billion Br worth of commodity trades, including coffee exports, in the past six months, is now working to align its coffee prices with those on the New York Mercantile Exchange (NYMEX).

“We’re making price adjustments,” he Fortune. “We want boost traders’ profits and retain their business.”

Not everyone in the industry views the regulatory overhaul favourably. Dejene Hirpa, a coffee consultant, warned that Ethiopia’s coffee reputation suffers due to the ongoing quality decline. While he supports the intention behind the new regulations, Dejene criticised the abrupt manner in which they were implemented.

“The decision lacked sufficient consultation with stakeholders and could create further disruptions,” he warned.

Dejene urged authorities to concentrate on improving the quality of production rather than imposing blanket restrictions that primarily affect traders and farmers.

“Investment in farmers has been severely lacking,” he said.

According to Dejene, the distorted market structure means that smallholders, many of whom produce low-grade coffee out of necessity rather than choice, are not benefiting from the reforms. Some farmers, faced with the prospect of dwindling incomes, have even started shifting to more lucrative crops such as khat.

The experience of Mamush Esayas, a coffee farmer in the Gedeo Zone, vividly illustrates the problems small farmers face. Managing a modest three-hectare plot, Mamash produced 54Qtls of coffee this year under increasingly difficult conditions. Essential inputs, such as coffee sacks, have doubled in price to 600 Br, straining his already tight budget. He noted that the prices offered by suppliers are too low to cover production costs.

“My whole family depends on this harvest,” he said.

His plight illustrated a broader issue in the sector where many farmers who once experimented with other crops are now trapped in a cycle of low returns and minimum support. Mamush recalled that he sold his grade-one coffee for 7,000 Br a 17Kg bag, yet exporters were willing to pay nearly double that amount when buying directly from suppliers.

“The government should support farmers to sustain their business,” he pleaded. “I can only meet my daily needs at these prices.”

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Author: Yeabkal