May 18 , 2019
By FASIKA TADESSE ( FORTUNE STAFF WRITER )
Gedaa Bank, still under formation, has started selling shares after getting approval from the National Bank of Ethiopia (NBE).
Gedaa offered the shares for a public subscription three weeks ago and has sold 50 million Br worth of shares as of last weekend. Gedaa, which aims to raise half a billion Birr in the next six to nine months, has a subscription capital of two billion Birr.
The bank set 20 shares as the minimum amount of shares a buyer can purchase and 100,000 Br as the maximum subscription value. The shares have a par value of 1,000 Br.
Initiated last February by 17 promoters with different backgrounds in banking, university lecturers, lawyers, business persons, investment consultants, representatives from the Geda system and farmers, the Bank has opened an office inside Oromia Building in front of Bole Medhanialem Church.
It has also opened accounts at the Commercial Bank of Ethiopia, Awash International Bank, Cooperative Bank of Oromia and Oromia International Bank, where interested buyers can deposit their purchase amounts.
While buying shares, the shareholders have to deposit 25pc of the total value they bought and pay the balance within a year after the bank becomes operational. The shareholders are also supposed to pay five percent in advance as a promoters' fee.
One of the priorities of the Bank is allocating share to farmers, according to Wasihun Amenu, board chairperson of the bank, which is named after the traditional social stratification system of people from Oromia Regional State.
"Displaced farmers have not been able to use their compensation wisely and have failed to provide for their families after their relocation," Wasihun said.
NBE has provided the company with a pre-establishment license following Gedaa's application, which included depositing the fully subscribed share minimum of 75 million Br from founding shareholders, minutes from the founding shareholders' general meeting, a list of the elected board of directors and the approved articles and memorandum of association.
Once the Bank reaches the initial paid-up capital, half a billion Birr, the bank will secure a license and will get a commencement letter from NBE. The regulatory bank will then conduct a field inspection and proclaim that the new bank is ready for operation.
If it gets an approval from the central bank, Gedaa will be the 19th bank in the country and the 17th private commercial bank.
The Bank is attempting to join an industry that has seen a 23.6pc spike in deposit mobilisation in the last fiscal year and disbursement of 115.4 billion Br in new loans, which is a 5.9pc growth from the preceding year.
Currently, there are 35 microfinance institutions and 17 commercial banks that are operational and regulated by the central bank. Another bank that was in the process of formation, Dallol Bank, appears to be stuck for different reasons.
The banking sector in Ethiopia is a highly profitable area with a good return on investment, according to Wasihun.
"Our feasibility study shows that there is a huge service demand gap," Wasihun said.
The banking industry has shown massive growth over the past decade. Deposit mobilisation alone showed a 50-fold upsurge compared to the rate registered in 2008.
The new bank will join an industry that is expanding, struggling with liquidity and competitiveness, with increasing costs and declining returns to shareholders in a time of political and economic uncertainty, according to Abdulmenan Mohammed, a financial expert with a wide range of experience.
"No doubt, the entrance of a new bank into the industry coupled with these situations will not only increase the competition and reduce the returns of the industry, but it also might take time for newcomers to set foot in the industry," commented Abdulmenan.
Enat Bank was the last to join the banking industry. Commencing operations with a paid-up capital of 123.6 million Br, Enat netted 158.8 million Br in profit last year, a 42pc increase from the previous year.
Its predecessor, Debub Global, also registered a positive profit for four consecutive years after recording a loss of 14.3 million Br during its first year of operation. In the past fiscal year, the Bank amassed a net profit of 106.6 million Br - showing a 153pc spike from the previous year.
Within a year of commencing operations, the management of Gedaa Bank plans to pay the subscribed capital [two billion Birr] fully, according to Wasihun.
Raising capital of two billion Birr is not only unrealistic but also an unwise financial decision, according to Abdulmenan.
"In the early years of operation, banks operate either at a loss or break-even or with low profits," he said. "The profit increases gradually."
So having a considerable capital when commencing operations would considerably extend the time needed for a decent level of return to shareholders, according to the expert.
The expert also recommends incremental capitalisation as the wisest way in the banking industry to maximise returns to shareholders.
PUBLISHED ON May 18,2019 [ VOL 20 , NO 994]
Fortune News | May 02,2020
Radar | Dec 25,2018
Fortune News | Jun 05,2021
Agenda | Mar 05,2022
Fortune News | Feb 23,2019
Fortune News | Nov 13,2021
Radar | Jun 20,2020
Fortune News | Jul 13,2019
Radar | Nov 23,2019
November 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
November 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
October 16 , 2021 . By HAWI DADHI
Residing in a country with no capital market, an organised marketplace for trading se...
August 28 , 2021 . By HAWI DADHI
The streets of Addis Abeba are as varied as they are many, although too many of them have yet to be named. From the narrow alleyways of the...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country’s most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or tw...
May 21 , 2022
There was a great deal of handshaking and patting each other on the back at the Hyatt...
May 14 , 2022
Diana Yohannes is one of those actively engaging in social media platforms with her T...
May 7 , 2022
The Ethiopian Economic Association (EEA) recently proposed the formation of a macroec...
April 30 , 2022
There is no ambiguity in the UNDP's assessment of Ethiopia’s economic performance a...
PM Abiy Ahmed (PhD) at a Gala Dinner Called for the Awarding of the Félix Houphouët-Boigny Peace Prize
May 6 , 2019
Adulteration is getting out of hand. Consumers in Ethiopia are being left to their ow...
Or see contact page