Radar | Apr 08,2023
Ethiopia’s second interest-free bank has debuted service in a building it acquired for 130 million Br, located in the Olympia neighbourhood.
Hijra Bank is the first-ever financial institution to buy a property to use as its principal office while under formation.
The nine-storey building was acquired in March this year after negotiations took two months, according to people knowledgeable of the deal. The Bank's management decided to the property after conducting a market assessment and concluding that it was a better option than renting office space. The property lies on 3,000sqm of land and was expected to cost up to two million Birr in rent a month, according to the market study.
“Considering the current market, we would have paid more than 40 or 50 million for two or three years of rent,” said Mukemil Bedru, board chairperson of Hijra.
Rental expenses, and assets in general, are appreciating in the market, making buying the building a good decision, according to Habib Mohammed, a financial expert with over a decade of experience. Although buying the property would save the Bank a considerable amount in the long run and shield it from the headache of sudden rent increases, he urged banks under formation to be cautious when it comes to significant investments.
"They shouldn't forget that they are not real state developers,” he told Fortune. “Buying and constructing buildings might hinder them from focusing on their core business.”
Hijra Bank plans to occupy three storeys of the building where renovation and remodelling work is set to begin soon, expected to cost up to five million Birr, Mukemil disclosed.
The space that is not to be used for the bank’s purpose is available for rent, with executives hoping to generate half a million Birr in monthly income.
The Bank considered customer accessibility and proximity to the head office of the National Bank of Ethiopia (NBE) when deciding on the location of its headquarters. The management had also looked at other buildings in the Lideta, Wello Sefer, and Sarbet areas before making the final move, according to Mukemil.
The property was built five years ago by Yesuf Mohammed, a major shareholder of Justice Construction Plc, and incorporates offices, a parking lot, and a backup generator. It houses a branch of the Bank of Abyssinia (BoA), and stores. Hijra Bank plans to open its first branch on the ground floor in two months, pending the procurement of a core banking system; five international suppliers are shortlisted, and under review, the Board Chairperson disclosed.
Although it depends on a bank's plan, those under formation are encouraged to mobilise, promote, and attract customers before acquiring assets, especially with the new tight and commanding directive issued by the National Bank of Ethiopia (NBE), according to Habib.
Hijra Bank announced the purchase a few weeks after the central bank issued a directive that requires all commercial banks in business to increase their paid-up capital to five billion Birr within five years; and, seven years for those under formation but having already raised equity of over half a billion Birr. Hijra falls under the second category, for its 9,000 founding shareholders have raised 700 million Br in paid-up capital from subscribed shares of 1.2 billion Br.
Mukemil believes that seven years is more than enough time, hoping to comply with the requirements in five years.
The main challenges for banks under formation, according to Mukemil, are the many entrants joining the market, making the industry very competitive. The shortage of qualified and skilled professionals in the industry remains a headache for founders. Hijra's founders had struggled to hire a president that fulfills the requirements set by the central bank, which requires the prospective candidate to have 12 years of experience in banking and have served for five years as a vice president for credit.
Dawit Keno, who worked for the state-owned Commercial Bank of Ethiopia (CBE) for 28 years, was brought on board last year as the founding president of Hijra Bank. He had served the CBE as a Vice President for three years.
Currently commanding a 12-staff team, including five vice presidents, Dawit will soon hire over 200 people, with plans to scale up 1,000 by the end of this year. Hijra Bank plans to open 40 branches within a year, Mukemil told Fortune.
PUBLISHED ON
Apr 30,2021 [ VOL
22 , NO
1096]
Radar | Apr 08,2023
Fortune News | Nov 27,2018
Fortune News | Jan 07,2022
Radar | Apr 01,2024
Fortune News | May 06,2023
Fortune News | Nov 13,2021
Radar | Jul 09,2022
Radar | Aug 17,2019
Radar | Dec 24,2022
Radar | Dec 10,2018
Feb 24 , 2024 . By MUNIR SHEMSU
Abel Yeshitila, a real estate developer with a 12-year track record, finds himself unable to sell homes in his latest venture. Despite slash...
Feb 10 , 2024 . By MUNIR SHEMSU
In his last week's address to Parliament, Prime Minister Abiy Ahmed (PhD) painted a picture of an economy...
Jan 7 , 2024
In the realm of international finance and diplomacy, few cities hold the distinction that Addis Abeba doe...
Sep 30 , 2023 . By AKSAH ITALO
On a chilly morning outside Ke'Geberew Market, Yeshi Chane, a 35-year-old mother cradling her seven-month-old baby, stands amidst the throng...
Apr 13 , 2024
In the hushed corridors of the legislative house on Lorenzo Te'azaz Road (Arat Kilo)...
Apr 6 , 2024
In a rather unsettling turn of events, the state-owned Commercial Bank of Ethiopia (C...
Mar 30 , 2024
Ethiopian authorities find themselves at a crossroads in the shadow of a global econo...
Mar 23 , 2024
Addis Abeba has been experiencing rapid expansion over the past two decades. While se...
Loading your updates...