Hijra Bank, which entered Ethiopia’s financial landscape nearly five years ago as a fully interest-free banking institution, has attributed its remarkable success in the 2025/2026 fiscal year to the National Bank of Ethiopia’s (NBE) decision to lift its restrictive lending cap.
According to executive leadership, the bank shattered previous records across all Key Performance Indicators (KPIs), registering robust growth between 100% and 200% across critical operational segments.
Management underscored that the primary catalyst for this year’s historic performance was the dismantling of the central bank’s credit ceiling. The regulatory constraint had previously disproportionately impacted value-oriented, interest-free banking models.
The policy shift, which accelerated Hijra Bank’s growth trajectory, addressed structural challenges that have long stifled the full potential of interest-free financial institutions in the country.
Originally introduced by the NBE to curb inflation and manage credit expansion, the credit cap restricted the volume of financing banks could deploy relative to their deposit mobilization. While aimed at stabilizing macroeconomic inflationary pressures, the macroprudential tool inadvertently penalized the interest-free sector.
Unlike conventional banks, which optimize excess liquidity by investing in interest-bearing government securities, treasury bills, and interbank placements, Sharia-compliant institutions are strictly prohibited by Islamic principles from participating in interest-based assets.
In an interview with Capital, Abdusalam Kemal, Chairperson of the Board of Directors of Hijra Bank, emphasized that because fully interest-free Islamic banks operate under stringent Sharia guidelines, they cannot extend interest-bearing credit or hold standard sovereign bonds.
Furthermore, the absence of a national framework for Sukuk severely limited the bank’s alternative investment channels under the credit cap. “We do not offer traditional cash loans; our operational model is entirely built on asset-backed financing,” Abdusalam explained.
This structural rigidity meant that while conventional institutions mitigated the credit cap’s impact through alternative interest-yielding instruments, interest-free banks faced severe operational constraints in mobilizing liquidity and supporting their clientele.
The credit growth limit—which was initially capped at 14% before being adjusted to 24%—stifled the bank’s capacity to effectively deploy deposits, expand financing to Small and Medium Enterprises (SMEs), and fund the digital and branch network expansions vital for financial inclusion.
Recognizing these systemic bottlenecks, Hijra Bank’s executive leadership engaged in extensive, high-level consultations with the Governor, Vice Governors, and regulatory departments of the NBE over recent months.
The Board Chairperson noted that by benchmarking global best practices and demonstrating how the credit limit constrained liquidity velocity within the interest-free ecosystem, Hijra Bank successfully advocated for a complete exemption from the cap for fully interest-free institutions.
This regulatory relief revitalized the bank’s financing capacity, directly driving its historic fiscal performance.
Following this strategic regulatory adjustment, Hijra Bank recorded an annual revenue of 3.55 billion Birr, representing a phenomenal 97% year-on-year growth. Notably, the revenue generated in this single fiscal year surpassed the bank’s cumulative gross revenue over the preceding four years combined (2.965 billion Birr).
The bank’s gross profit before tax surged to 1.9 billion Birr, while total assets expanded by 115% within the 12-month period, climbing from 14.61 billion Birr to 31.45 billion Birr. Similarly, customer deposits registered a 101% upswing, rising from 11.94 billion Birr to 24 billion Birr.
