Ethiopia Liberalised banks need to expand horizons

June 29th, 2009 | by addis portal |

By Addis MulugetaBanks have come a very long way since the Transitional Federal Government of Ethiopia liberalised the sector in 1994.

However, the contribution of both the public and private banks to national economic development has been insignificant, research papers indicated at an event organised by the Addis Ababa Chamber of Commerce and Sectoral Association (AACCSA) on June 25 at the Hilton Hotel.
Eshetu Fantay, Corporate Service Vice President of Awash Bank, indicated in his paper that the contribution of both private and public banks share distribution would not improve, even if it include the Commercial and Business Bank (CBB) and Development Bank of Ethiopia (DBE) in the calculations.
He argued that the banking sector in Ethiopia has loans significantly concentrated in the trade sector (52 percent), adding they are not ready to give finance to the agricultural sector. He said that they are using an old system of collateral and the regulations are ambiguous.
He further indicated that agriculture’s share of the banking sector’s business is minuscule. Geographically, financing is concentrated in Addis Ababa (70 percent), with only a few sectors outside Addis getting the remaining shares. Some regions, while they have significant natural resource potential, including Gambella and Benshangul Gumuz, are out of bank or formal financing radar. In this case, the micro finance institutions are playing a major role in these areas.


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