Association has requested banks to give 2.5pc of net profit for city projects

Mar 30 , 2019

Leaders in the Ethiopian financial industry are in sharp disagreement on how to raise fund to pay for Prime Minister Abiy Ahmed’s (PhD) pet projects in Addis Abeba.

Leaders in the Ethiopian financial industry are in sharp disagreement on how to raise fund to pay for Prime Minister Abiy Ahmed’s (PhD) pet projects in Addis Abeba. At the core of the dispute is whether bank presidents have the mandate to decide to give money expected of them.

Board directors of banks and leaders of the Ethiopian Bankers’ Association are at loggerheads over a 400 million Br contribution the banks are demanded to provide for riverside development, Ambo Stadium construction and internally displaced people.

The Association, led by Addisu Haba. sent letters three weeks ago to the banks requesting they provide 2.5pc of their net profit from last fiscal year as a contribution for the three projects, of which 1.5pc of the profit contribution is to be dedicated for the riverside revitalisation project, which Prime Minister Abiy Ahmed (PhD) has appeared to have developed a keen interest in.

The Association has also requested that the banks dedicate one percent of their net profit to assist internally displaced people as well as the construction of Ambo Stadium. Before sending the letters to the banks, the association had a meeting with bank presidents to discuss the issue.

At the beginning of last week, Solomon Desta, director of banking supervision at the National Bank of Ethiopia (NBE), followed it up with subsquent letters to the banks requesting that they deposit their contributions in a dedicated account that was opened for the purpose. The banks were also prodded by the central bank through phone calls.

The year-old Ethiopian Banks Board Directors Consultative Forum, which was formed by the board of directors of 12 banks and operates with 40 members,  strongly opposed the decision of the Association, stating that the Association is not the one that can make decisions about shareholders’ money.

The Forum also argues that the Association has to communicate with the board of directors before making the decision.

At the end of last week, the six-member executive board of the Forum held a meeting and decided to approach the Bankers Association to discuss the issue. A letter is expected to be sent this week, according to Eyesuswork Zafu, chairperson of the Forum.

The idea of contributing for the projects should have been tabled to the shareholders by calling an extraordinary meeting, according to Eyesuswork.

“Only shareholders can decide about their money,” Eyesuswork, who is also a board chairperson of United Bank, said.

However, Addisu, who is also the president Debub Global Bank, argues that the Association made no decision but rather forwarded a recommendation.

“The Association came up with a suggestion of the contribution and forwarded that to the president of the banks to table it for their board of directors’ approval,” Addisu told Fortune.

Established in 2002 by nine banks, the Association has as members all private and state banks. The Association provides training and lobbying on behalf of the banking industry.

The commercial banks, excluding the Development Bank of Ethiopia, earned over 16 billion Br in net profits during the last financial year.

In mid-January, Prime Minister Abiy Ahmed (PhD) called a meeting with the board directors and executives of the banking and insurance industries to discuss the financing of the 29-billion-Br riverside development project. During the meeting, no consensus was reached how the banks and insurance companies will make the contributions.

The president and board chairpersons of the banks are also invited to take part in a mid-May fundraising gala dinner, ‘Dine for Sheger,’ planned for the Riverside project. The event is hosted by the Prime Minister and costs five million Birr a plate.

PUBLISHED ON Mar 30,2019 [ VOL 19 , NO 987]

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