Oct 15 , 2022

Sidama Bank, a third-generation financial firm, is hiring a technology company to acquire CORE banking solutions, an automated financial management system in the banking industry.

It initiated the bidding process to acquire the system four months ago.

Initially registered as Sidama Microfinance Institution S.C., regulators at the central bank have granted its executives a commercial banking permit for it to transition into Sidama Bank. It is among several microfinance institutions that have made the evolution. Oromia Credit & Savings S.C. became Siinqee Bank, and Amhara Credit & Savings was established as Tsedey Bank.

Somali Microfinance, now Shebelle Bank, Omo Microfinance, and Addis Credit & Savings institutions have jumped into the banking business as fully-fledged commercial banks. Absent Amhara, Oromia and Somali microfinance institutions, the size of this segment of the finance sector has drastically declined. Their number dropped to 37, savings deposits by 44.6pc and total assets by 43.1pc by the third quarter of the past financial year.

Established 25 years ago with a registered capital of 200,000 Br, Sidama Microfinance Institution started as the Sidama Rural Women's Credit & Saving Scheme in 1994 before becoming a full-fledged microfinance institution (MFI) four years later. It has raised 1.45 billion Br in subscribed capital from 2,000 shareholders, 575 million Br of which is paid up. It will have six years to raise its paid-up capital to five billion Birr to meet the central bank's minimum capital threshold.

The Bank has applied for operational licenses for which appointing a chief executive officer is among the requirements. It has nominated Tadesse Hatiya, a former board member of Debo Microfinance Institution, as the founding president. Tadesse has served as a vice president for operations at the Berhan Bank. Serving in the banking industry for over a decade, Tadesse graduated from the Addis Abeba University in economics and shortly joined the Comercial Bank of Ethiopia (CBE) as a junior marketing officer.

Tadesse's first tasks will be seeing through the procurement of information technology infrastructures such as core banking systems and recruiting vice presidents. His board of directors will have to ensure shares owned by the Southern Regional State drop to 70pc to comply with the banking law. The bank has nominated one vice president so far.

While awaiting a formal nod from regulators to resume operations, Tadesse is expected to get his board's approval to award the contract in two weeks. Close to eight international companies are vying for the bid. Tadesse declined to disclose the identities of the bidders, citing confidentiality.

"We might extend the bidding process," Tadesse told Fortune.

The bank has expanded branches to 30, mobilising deposits from 100,000 customers.

Microfinance institutions will begin to search for space and expand their customer bases, according to Dawit Tadesse, an assistant professor specialising in finance and Lead Plus Management's managing partner. However, he urged that these institutions' ability to meet the demands of the microfinancing sector while transforming into banks needs to be addressed.

"Small businesses are still short of finances," said Dawit.

PUBLISHED ON Oct 15,2022 [ VOL 23 , NO 1172]

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