The long awaited core banking project of the Ethiopian financial giant, Commercial Bank of Ethiopia (CBE), will finally begin operating at the end of this month connecting 35 of its branches, Capital learnt. Though it was the first bank to introduce Automated Teller Machine (ATM) in to the financial sector of the country, its growth has remained very slow.
Acquiring a technology known in the finance industry as core banking solutions has been an illusive target for the oldest and largest state owned commercial bank. Its rather younger competitors, such as Dashen, United Bank, Wegagen, Zemen, and Abyssinia have already been utilizing the system for a few years now.
In July last year, the National Bank of Ethiopia (NBE) instructed all commercial banks in the country to adopt core banking solutions. NBE wants every major bank to use this technology so that eventually there will be a nationwide electronic payment system.
The long overdue IT procurement by the largest and oldest bank in the country was signed with an international technology vendor based in Switzerland, Temenos Group AG. The bank paid nearly 70 million birr for the software.
“Our system will be a lot different from what [other] banks in the market are using. Ours is comprehensive and state-of-the-art,” Bekalu Zeleke, the president of the 68 year old bank said.
The new IT infrastructure will also enable the bank to strengthen and extend its relations with credit card providers such as Visa and MasterCard as well as roll out new mobile and Internet banking services. Thus the bank’s customers will enjoy reduced waiting time and a greater choice of banking channels and services.
The automation will be implemented in all the 219 branches of the bank within a year. At this time the bank has expanded into more than 480 branches throughout the country. This makes the financial giant one of the most accessible banks in the country by possessing more than 60 percent of the close to 800 total branch networks. The rest of the branches are owned by a dozen private and state owned banks.
In what seems an aggressive move to mobilize deposit, the bank has opened 160 branches in the past budget year alone. These 160 new branches have been able to collect 2.9 billion birr just last year. The total deposit of the bank has reached well over 86.5 billion birr while the total collection of credit from bond and term loans amounted to more than 17.6 billion birr in the last budget year. The outstanding loans of the bank stand at 74.4 billion birr including treasure bond purchase as of last August.
On July 1, 2011, CBE also awarded International Business Machines Corp. IBM a three million dollar contract to modernize the bank’s core banking systems.
According to the agreement, IBM will provide hardware, software and IT services to support the bank in its fast business growth and shift from manual financial processes to real-time financial services.
CBE plans to raise its number of accounts by 25 percent per year, launch 100 new ATMs per year and open 400 additional branches over the next five years with the new IT infrastructure. As of August 2011, it has 58 ATM machines functioning.
Speaking at the signing ceremony back in July the President of the bank said that the bank is undergoing a major and rapid program of modernization.
CBE has cashed in more than 4.2 billion birr as gross profit, which is almost double of its 2009/10 budget year profit. It has more than 2.5 million depositors.
The bank’s non performing loans (NPL) dropped significantly from double digits three years ago to less than one percent last year. Though the industry average for NPL is five percent, CBE’s NPL was of 0.9 percent of the total credit.
With a total asset of 114.2 billion birr, 6.2 billion birr capital and reserve, 10,753 staff members, CBE continues to remain the financial giant of the country not only in terms of financial assets but also in terms of job creation.
The vendor it selected, Temenos, is solely engaged in providing core banking systems. Its system is used by over 500 clients in over 100 countries. The Geneva based company has 34 offices in 29 countries. It is represented in Ethiopia by its local partner, United Systems Integrators (USI).
Temenos had to beat other major contenders to bag CBE’s multimillion dollar contract. The Indian based Infosys was one of the 10 vendors sought for a bid and was shortlisted together with Temenos for the final evaluation. Three local companies, Transnational Computer Technology (TCT), Oratech, and Global Computing Solutions (GCS), competed in partnership with FLEXCUBE, an IT company recently acquired by Oracle, which installed the core banking systems for Dashen and United banks.