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November 27 , 2018
By FASIKA TADESSE ( FORTUNE STAFF WRITER )
Dividend payments to shareholders of banks and insurance companies will be settled right after shareholder meetings, according to a new directive issued by the National Bank of Ethiopia (NBE).
The new directive was issued four weeks ago to rescind the former directive that mandates the approval of shareholders regular and extraordinary meeting minutes by the central bank, and registration of the minutes by the Document Authentication & Registration Agency (DARA).
“The process of approval and registration of the minutes of shareholder meetings sometimes proved time consuming,” reads the new directive signed by Yinager Dessie (PhD), governor of NBE. He continued that it “resulted in undue delay in dividend payments to shareholders of banks and insurance companies.”
The process of minutes approval and registration came on to the scene in 2015 following the issuance of a directive that required board chairpersons and secretaries of banks and insurance companies to deliver minutes of the general assembly to the central bank within 15 days of the assembly. Once the central bank approves the minutes, it will be sent to DARA for registration, according to the former directive.
The registration and approval processes took months, overlapping with the general assembly, and the extraordinary meetings of banks and insurance companies, according to Eyesuswork Zafu, a shareholder at United Insurance and board chairperson of United Bank.
“Besides, the minutes were being sent back and forth between the central bank and the financial institutions to correct simple and minor errors,” Eyesuswork told Fortune.
Whether the shareholders decided to reinvest their dividends or be paidout, they were supposed to wait until the process of approval and registration of the minutes was completed and the banks and the insurance firms received the blessing of the NBE.
The process took up to three months and remained a major source of disappointment for shareholders and the institutions.
Before the issuance of the rescinded directive, the financial institutions were paying dividends within seven days of the shareholders assembly.
“We have been calling for the lift,” said Adisu Habba, president of the Ethiopian Bankers Association.
“Since the enactment of the procedure, none of the minutes were rejected, nor any general assemblies annulled, yet the process has been creating inconveniences,” said Adisu.
Applauding the move by the central bank, Abdulmenan Mohammed, a financial expert with a decade and a half experience, states that the latest move by the NBE shows the Bank’s relaxation on some of the areas that have been stiffly regulated.
“It is the right decision by the NBE,” he told Fortune. “It cuts additional procedures that have no apparent benefits.”
“As long as the accounts are audited, and the amount of dividend to be paid out is approved by shareholders, it will be adequate,” he said.
Aggregate profits before taxes of the 16 private banks have soared by 33pc to almost eight billion Birr in the 2016/17 fiscal year. The gross profit also reached 10.25 billion Br during last fiscal year. In the 2016/17 financial year, the 16 private insurers in the country earned a gross profit of 1.3 billion Br. Last year’s shareholder returns increased by 31pc from the previous year.
Officials from the central bank were not immediately available for comments.
PUBLISHED ON Nov 27,2018 [ VOL 19 , NO 970]
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