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Second Interest-Free Bank Gets Closer to Joining Industry


July 13 , 2020
By SEBLE WONDEMAGEGN ( FORTUNE STAFF WRITER )


Hijra Bank S.C., a new full-fledged, interest-free bank (IFP), has reached the final stage of under-formation status with an initial paid-up capital close to 700 million Br.

The under-formation bank stands one step away from joining the industry, only awaiting a green light from the National Bank of Ethiopia (NBE), which lately posted the list of shareholders in the state-owned Ethiopian Herald newspaper without objection. Hijra raised the paid-up capital, which is 200 million Br higher than the minimum requirement set by the governing bank, from over 9,000 shareholders.

Hijra, which now has 13 promoters from the fields of academia, law, ICT, finance and business, officially started selling shares on July 22, 2019, after getting pre-formation licenses from the NBE on June 20, 2019. With a par value of 1,000 Br, the Bank has sold 1.2 million shares, 500 million Br of which is designated as subscribed but not paid-up capital at the present time. The promoters filed all the necessary documents to the central bank last month.

Incepted by nine promoters, the Bank has been selling shares through 12 banks in the country, all except Enat Bank, Debub Global, Zemen and Berhan banks. Hijra limited buyers to a maximum of 20,000 shares worth 20 million Br and a minimum number of 30 shares with a value of 30,000 Br.


“We're now at the final stage,” said Mukemil Bedru, chairperson of the under-formation Hijra Bank. Mukemil has been a lecturer at Addis Abeba University’s College of Business & Economics for more than a decade. He has also served in a managerial position at Deloitte, a global consulting firm.

The promoters expect to get the full licenses from NBE within three weeks and plan to place the head office of the Bank in the capital, according to Mukemil.


Upon completion of the under-formation process, Hijira will be the second full-fledged, interest-free bank to join the industry along with ZemZem Bank, which is expected to commence operations soon as well. A couple more banks, including Zad, Nejashi Kush and Huda, have also initiated a process to organise full-fledged, interest-free banks.

Currently, there're close to a dozen different kinds of banks that are in the process of formation and currently availing shares for public subscription including Goh Mortgage, Selam, Sheger, Ahadu and Medre Geez.




“We expect to be operational starting from the coming Ethiopian New Year,” said Mukemil.

The Bank has so far hired 10 permanent and up to 60 temporary employees. It plans to push the number to 500 employees when it becomes fully operational.

Currently, there are 18 operational banks in the country with over 5,564 branches as of the end of last year. During the year the banks increased their deposit mobilisation by 23.2pc, loan collection by 18.1pc and loan disbursement by 42.5 percent.

Habib Mohammed, an expert in the banking sector, believes that nowadays full-fledged, interest-free banks are fully emerging by introducing customers to new risk-sharing products that previously were not common in the market.


“Hijra should be creative in terms of mobilising deposits,” said Habib. “If it comes out with a new product, it can easily attract the Muslim community, as well as the whole country at a larger level."

Habib recommends the Bank offer businesses new technological core banking solutions. By avoiding the contamination of funds, the Bank can entice the community that is in need of IFB services, according to him.



PUBLISHED ON Jul 13,2020 [ VOL 21 , NO 1055]






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