Fineline | Oct 03,2020
It was a show of an official endorsement ZamZam Bank had been denied just a decade ago when Yinager Dessie (PhD) (left), governor of the National Bank of Ethiopia (NBE), was asked to open an account last week. It was during the official launch of the bank, and the gesture was a demonstration of the inclusivity of ZamZam, which exclusively offers interest-free banking services, a practice more in demand with communities adhering to the Islamic faith.
The Governor signed up to become a customer, as did many of the guests present, at ZamZam's headquarters perched on the first floor of the nearly completed Garad City Centre on Africa Avenue, in the Wello Sefer area. Yinager was joined by Finance Minister Ahmed Shide (centre-left) to a tour of the headquarters, given by Melika Bedri (centre-right), ZamZam’s founding president, and Nasir Dino (PhD) (right), board chairperson.
The site also serves as a branch to the Bank that hopes to become “the leading Sharia’h compliant and all-inclusive bank in Africa by the year 2030.”
Entering the market with a subscribed capital of 1.6 billion Br, equity mobilised from over 11,000 shareholders, this first fully-fledged interest-free bank has come a long way to get the authorities' positive nod. It started its journey a decade ago when such banking services were an unfamiliar terrain and promoters were estranged with the authorities at the time; but, it began a formation process raising 337 million Br in subscribed capital.
The efforts were nipped in the bud as the authorities at the central bank decided to limit interest-free banking to a window service in the existing commercial banks. The central bank loosened this restriction in 2019. ZamZam - name of the spring water in Mecca - did not waste getting back on track, as did Hijira Bank, which has already raised 1.2 billion Br in subscribed shares but has yet to start services.
ZamZam faces immense competition, nonetheless. It is not the same market its founders had hoped to enter a decade ago, as most major commercial banks provide interest-free banking. It is also looking at seven years of continuous capital growth from its current paid-up of 876 million Br to meet the central bank’s minimum paid-up capital requirement of five billion Birr, which will eat into shareholders` returns. Given under-banking and the enormous market share enjoyed by the Commercial Bank of Ethiopia (CBE), there is still much space for growth. This is not to mention the dearth of specialised banks – such as mortgage – as well as inadequacies in services in internet and mobile banking.
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