Fortune News | May 24,2021
There is a bank branch and representative in every nook and cranny in Addis Abeba these days, the latter of which accost any adult they can find to open an account. As another fiscal year faded away, executives of banks feel their efforts have paid off. They are in a jolly mood seeing the total stock of deposits in their safes grow to 1.3 trillion Br, well over double the federal government’s budget for the new fiscal year and a 25pc jump from the previous year.
The state-giant Commercial Bank of Ethiopia (CBE) accounts for over half of the total, with 140 billion Br deposits made last year. Awash Bank, a leader among private banks, mobilised another 33.8 billion Br, crossing 100 billion Br in aggregate deposit for the first time. No less impressive was the Bank of Abyssinia, which almost doubled its deposits.
Such performances were attributable to the demonetisation of the Birr in September 2020. The direct impacts of this were over 15 million bank accounts opened. The amount of money in circulation outside banks fell to 64.6 billion Br from almost double this value before the demonitisation.
The tricky part was keeping the money from circulating back out of banks – which it did, rising to 108.3 billion Br by the end of the second quarter of the fiscal year. Inflationary pressure in the economy, standing at 24.5pc last month and the relentless loss of ground by the Birr against major international currencies, gives little incentive for the public to keep cash with the banks. At an average savings rate of eight percent, a real interest rate of negative 16.5pc to depositors, it is a hard pitch.
Cash holding limits imposed by the authorities have not helped. Designed to disincentivise cash hoarding, individuals are limited to withdrawing a maximum of half a million Birr and businesses to a million Birr a month. Authorities at the central bank are optimistic, nonetheless. They believe the deployment of a national ID system, on the drawing board for over a decade, will streamline and improve the effectiveness of restrictions against hoarding. Individuals, in the meantime, keep opening accounts with as many banks as they want.
You can read the full story here
PUBLISHED ON Jul 18,2021 [ VOL 22 , NO 1107]
Fortune News | May 24,2021
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