In just 23 years, Ethiopia’s private banks have mobilized substantial resources, enhanced the savings culture of the society, and financed both private businesses as well as the government’s priority sectors. Wegagen Bank President Araya G. Egziabher looks at this dynamic sector and discusses how private banks will be catalysts in attracting foreign investment.
Ethiopia is the fastest growing economy in the world and the Growth and Transformation Plan is transforming Ethiopia’s economic landscape. How is the banking sector taking advantage of this great momentum?
The banking sector in Ethiopia, especially the private sector, is a recent phenomenon. It is about 23 years old. It used to be a controlled economy with no private banks. It is a young sector but it is progressing fast. The private sector has benefitted in terms of opportunities due to this fast economic growth. In as much as their fast growth across most parameters, such as capital and profit, the contribution of private banks in monetizing the economy through reaching out to the unbanked areas of the country has been significant. Even though much has yet to be done, private banks have mobilized substantial resources, enhanced the savings culture of the society, and financed both private businesses as well as government’s priority sectors. Needless to say, banks have benefited from many opportunities created due to the country’s Growth and transformation Program.
Of course, there is work to be done and the banking sector has to build its capacity and its human resources. The future of this sector is bright. The unbanked population is still very high and there are many opportunities for banks to grow.
How would you describe Ethiopia’s finance sector to a foreigner?
I think private banks are not strong enough to support big investments but they are getting stronger and will eventually make it. This aspect is emerging and big investments will follow. However, banks are well aware of several partnership modalities, such as co-financing, in order to be able to entertain sizable investment opportunities. Private banks will be the catalyst in attracting foreign investment.
What moments or milestones would you highlight in Wegagen Bank’s almost two decades of activity?
Since our establishment, we have been growing at a good pace. Our deposits have been growing at the rate of 25% and credit at about 18%. The number of branches has increased by 15% and profit has grown by 23%. A highly professional and trained workforce established Wegagen Bank.
We were the first bank to introduce a core banking system in this country. All of our branches focus on service excellence for our customers. We were the pioneers to introduce this 15-16 years ago. Our core banking service, in a technological aspect, was a step forward. We are planning to introduce more technologies that can assist our operations and give efficient services to our customers. This makes us the preferred bank.
Now we have many projects, such as a mobile wallet account and agency banking. We are rebranding our bank. We have introduced co-branding technologies and are discussing possible collaborations with Arsenal F.C. in order to promote our bank.
Our strategic plan for the next five years has a vision to become the most distinguished Bank in Ethiopia. In the next 10 years we aim to see our name and brand among the top 10 most distinguished banks in entire East Africa. We have done a lot of service and organizational restructuring works also with the help of international consultants like Deloitte, which has helped us in introducing a contemporary HR management framework.
With these and other capacity building initiatives, we assure ourselves and all stakeholders alike that we are moving in the right direction.
The bank earned a profit of 452.4 million birr ($21.4 million) in fiscal year 2014/15, which means an increase of 11%. What are your expectations for this fiscal year?
We are reforming the bank and many new policies will be implemented in the next year. We are occupied with this but we forecast that profit will grow at least by about the same rate as last year’s.
Wegagen Bank provides comprehensive international banking services and registered 6.3% growth of income from international banking operations. In what sectors/operations have you been focusing your international business?
Last year, Wegagen was successfully financing the export sector. It was the leading private bank in financing this sector. Foreign currency we were generating due to this was very high compared to other banks. Wegagen was also the leading bank in generating foreign currency through the remittance companies.
Now this has started to decline due to a lot of competition. The main areas that we are working on to generate foreign currencies are exports, remittances and e-banking payment platforms. Additionally, there are cash purchases that will improve our performance in the international banking area.
Speaking about competition, what would you say is your competitive advantage?
Service excellence. Our relationship with our customers is intimate and gets stronger by the day as we go hand in hand and work together. We aspire each day to create an environment whereby our customers feel that they are really kings and are in safe hands.
There is a huge unbanked population in Ethiopia of about 80%. How are you striving to make the people aware of the benefits of being covered by financial services?
The government’s policy helps deposit mobilization and our objective is to reach the unbanked community. We are opening 40 branches this year and even more the coming year. We will grow at 25% ever year in terms of branch expansion. This will help us reach the rural community and provide awareness about savings and credit.
As I have mentioned earlier, we have introduced mobile as well as internet banking. We are also investing in m-wallet technology and agent banking operations in order to get closer and closer to our community at all levels. As branch opening is becoming an expensive way of reaching out to people and that the future of banking is changing with the taste and preference of the ‘online’ youth, we are now already on course dealing with our expansion strategically.
How are you boosting Ethiopia’s SMEs?
We are open for everyone whether it is small, medium or big enterprises. We are financing SMEs. There are international organizations that work together with banks in risk sharing. We are participating in this as well. We are eager to assist small and medium enterprises as this benefits development of the country and creates job opportunities.
What is the CSR program you personally feel the most proud of?
We have a policy to assist our society in education and health. We are helping disabled people. Our policy is to support and assist the community.
What is your assessment on the current diplomatic and commercial relations between Ethiopia and the UK?
The UK is supporting Ethiopia in many aspects. The relationship has been smooth and strong for a very long time.
What services do you offer the UK diaspora and how are you communicating these to them?
The direction of our government is to attract diaspora population. In this regard we try to attract the diaspora who is interested in building houses and engaging in one of the many profitable businesses in Ethiopia. We offer support and services in order to remit money to their families through our bank. We are planning to open branches in areas occupied by diaspora. We are providing loans to those interested to invest here and build houses.
What is the moment that brought you most satisfaction leading Wegagen Bank?
It makes me happy that Wegagen Bank is growing. I want to see it grow even further. I want to see all of our projects on hand completed – this will drive the bank to a yet again better position.
How do you view the prominence Africa is gaining as a top investment destination?
Back in the 70s and 80s there were a lot of internal conflicts and Africa was considered as a dark continent. Currently things are changing for the better. The conflicts are minimizing among countries and within countries. The governance is improving. The era of dictatorship is over and power is left to the will of people. We cannot deny the world’s contribution to Africa either. Another crucial factor is Africa being rich in natural resources, both exploited and unexploited.
Speaking about resources, how should Africa make best use of its youthful workforce?
The majority of our population is young and productive. We have to invest in the education of this population and in capacity-building training. We are also already on course to creating an economy that embraces this massive upcoming youth population of about 44% by providing adequate employment opportunities, among other things. This will contribute to the development of our country. Human capital is the driving force. By developing our human capital we can achieve our vision.