The financial sector regulatory authority, National Bank of Ethiopia (NBE), urge banks to coalesce together multiple accounts owned by a single entity or individual.
It is to be recalled that the regulator gave banks set directives on knowing your customers (KYC) and customer due diligence (CDD), to which banks were in a rush to comply following the timeframe of six months which was set to authenticate customers’ accounts with required information and data, for the directive issued on August 27.
The operation has since then been concluded as per the given time frame and as Capital has learned banks have now got a new order from the regulatory body to harmonize duplicated bank accounts under one and single account as per the preference of their customers.
This now means that a bank customer who has multiple accounts in a single bank for instance the Bank of Abyssinia will have to merge all his/her accounts to one as per preference. “All the saving amounts will be included under a single account according to the preference of the account holder,” explained a bank clerk that Capital spoke to.
Currently, there are over 72.3 million bank accounts but it is common for a single customer to have more than one account in a similar bank which duplicates the number of accounts.
As was the norm, bank branches used to insist customers to open account in their branches without double checking whether they had similar accounts on other branches of the same bank.
Now as per the decision of NBE, bank branches have started approaching their customers to merge their accounts under a single account. This has also resulted in branches to compete for customers to settle in their account branch as opposed to the other.
One bank customer told Capital that unusually he has got a call from one of the bank branches where he is a depositor. “In this particular bank, I have more than one account in different branches. Early this week, one of the branches reached out to me in order for me to stay at their branch. However, I explained to them that the branch closer to my office and business activity was far more convenient for me,” he explained.
Experts stated that such move by NBE mainly targets to strength the illegal act on the financial and related issues.
The KYC and CDD directive, ‘requirements for undertaking account based transactions and ensuring of regulatory limits directive No. FIS/04/2021’ stated that KYC and CDD practices are critical to ensure proper identification of customers, appropriate assessment and monitoring of transactions including ensuring of proper compliance to regulatory transaction limits set by NBE.
It added that the implementation of KYC and CDD will combat illegal and unauthorized transactions. Thus the directive ordered banks or microfinance institutions and payment instrument issuers to have relevant information of their customers. Article five, sub article 5.1 for instance stated that in opening a deposit account, a financial institution will at a minimum record comprehensive customer profile that allows it to acquire adequate knowledge of the customer and identify suspicious transactions in a relatively easy and swift manner. “To this end a financial institution will use annex I which is part of a directive as a sample on how financial firms register customers profile, of the directive as a minimum standard for account opening at all time in a manner that ensures consistency across the financial industry,” it added.
Under the direction of NBE financial firms were in rush to know their customers ahead of the deadline in February 2022. Accounts that were found to not have the required profile were to be transferred to the regulatory body, as per the issued directive.
To this end, in the past few weeks, banks have been approaching their customers through different communication tools like text message (SMS), phone call or media announcements, for customers to appear at their branches for rechecks in their accounts information.
Bank clerks that reside in different banks’ branches told Capital that the new scheme has become an additional workload for them since the number of account holders who are visiting their branches are growing by the day.
“The new scheme has imposed further burden on our day to day activity,” a clerk said.
The clerk explained that despite being in a branch that is not regarded as a big branch with regards to the number of account holders, the numbers of visitors have continued to increase in the past few weeks.
“Our bank has already called all its customers to visit their branches. We will also give a call for customers if they do not appear in the coming weeks,” another bank clerk that works at a branch located around Bole Medhanialem told Capital.
She said that the bank called all of its accountholders regardless of customers having the required document like photo and ID with the bank, for a thorough check.
One customer that Capital interviewed for instance said that he received an SMS from the bank that he has a deposit account with, and went on to visit his branch. “However I have learnt that all the required profile was already filled when I opened the account years back and I have proved that on my latest visit to my branch,” he explained his case.
The work load mainly on big banks is very huge according to bankers since their bank account holders are in millions, while the story of Commercial Bank of Ethiopia (CBE) is different owing to its large customer base.
One of the clerks that Capital talked to at one of the state giant CBE branches said that the number of customers visiting in relation with the latest announcement has an unprecedented flocking of customers at their doorstep.
CBE has over 34 million accountholders. Recently Yinager Dessie, Governor of NBE, said that in relation with last year’s currency change an additional 7.2 million bank accounts have been opened. It is estimated about 60 million accounts are opened across all banks.
The new rush is followed by the NBE directive of knowing your customers (KYC) and customer due diligence (CDD) that issued in August 27 which became effective the same day.
Experts stated that such move by NBE is mainly targeted to strength the illegal act on the financial and relate issued.
The KYC and CDD directive, ‘requirements for undertaking account based transactions and ensuring of regulatory limits directive No. FIS/04/2021’ stated that KYC and CDD practices are critical to ensure proper identification of customers, appropriate assessment and monitoring of transactions including ensuring of proper compliance to regulatory transaction limits set by NBE.
NBE had given six months starting from August 27 as a transition period for financial firms to capture required customer profile from its long time and new customers so as to issue a unique customers ID and introduce a centralized account opening approval. The transitional period included loading of the information to the financial institution’s system. For those who failed to comply with the requirements of this directive the penalty incurred would be from 20,000 to 100,000 birr which differs as per the britches, while other administration measures were to be applied.
According to the information obtained from bankers, the account of those who do not have the required profile will be transferred to the regulatory body.
Multi-bank account holders to merge accounts
Stock of external debt decreases
The country’s external debt is continuing to lower in the second quarter of the fiscal year, similar to the first quarter. During the last two quarters, the net external debt resource flow recorded negatives.
According to the public sector debt statistical bulletin published by the Debt Management Directorate (DMD) at the Ministry of Finance, the strength of the dollar and out-performing of principal settlement against fresh disbursement are the reasons for the reduction of the country’s debt stock for the second quarter that ended in December 31, 2021.
It indicated that during the last two quarters, only three loan agreements have been signed with partners, one for a central government project and the other two for Ethiopian Airlines aircraft purchase, totaling USD 290.74 million.
The majority amount of the loan agreement was being borrowed by Ethiopian Airlines, which is USD 279.52 million, and the remaining USD 11.22 million by the central government.
As of December 31, 2021, the total public sector debt stock that included domestic debt was about USD 56.15 billion, compared to USD 55.6 billion as of June 30, 2021.
External debt makes up around 51.5 percent of overall government debt, with domestic debt accounting for the remaining 48.5 percent.
The central government owes almost USD 34.9 billion (62 percent) of the total public sector debt outstanding that includes domestic debt, while state owned enterprises (SOEs) owe close to USD 21.3 billion.
The DMD quarterly review bulletin stated that over the past year, the central government’s portion of total public debt stock has climbed by 5 percent, while SOEs’ share has declined by 4 percent, “this can be explained in part by zero non-concessional borrowing limit from external creditors, as well as SOE’s lower borrowing from domestic sources and less disbursement from already committed old SOEs external loans.”
As of December 31, 2021, total public sector external debt was USD 28.92 billion, compared to USD 29.49 billion as of June 30, 2021. Between the two periods, the stock of external debt has decreased.
The decrease in external total public debt is approximately USD 571.04 million, or by 2 percent, “one reason for this decrease in the stock of debt can be explained by USD exchange rate variation, which is a relatively stronger USD during December 2021 compared to June 2021, which resulted in reducing the debt stock in terms of USD, which is approximately USD 319.46 million.”
It added that another reason for the debt stock’s decline is that principal payments were higher than new disbursements, resulting in a negative net flow of USD 251.58 million.
The central government is responsible for 67 percent of the entire external debt, while SOEs with government guarantees and without government guarantees are responsible for 22 percent and 11 percent, respectively.
Over the last six months, July 1, 2021 – December 31, 2021, the total external public debt disbursement was USD 595.06 million, with about 52 percent going to central government projects from various creditors, the majority of which came from IDA, and the remaining 48 percent going to SOEs.
According to the DMD, in comparison to the previous four years, the total amount of external funding disbursed in the last one and a half years was significantly lower.
“One of the reasons for the decrease in disbursement is that SOEs have not borrowed in the last three years and are disbursing less and less for their older projects as they near completion and as a result their undisbursed balance decreases,” it added.
The total external public sector debt service (principal plus interest and charges) during the last six months was USD 1.1 billion.
Of the total debt service USD 846.63 million is principal and USD 259.8 million interests.
From the total debt service in the stated period the SOEs share took the biggest chunk by settling USD 856.53 million payments.
The DMD review indicated that during the last two quarters, the net external debt resource flows were negative, which was USD -251.58 million, implying that the amount of disbursement from external sources (inflow) is less than the total external principal payments to creditors (outflow), “and the net resource transfer, which is disbursement (inflow) minus principal payments minus interest payments, is USD -511.37 million.”
The half year debt review revealed that the Treasury bills (Tbills) has mushroomed more; while it has shown progress since the government put in place new approaches on the market.
In the stated period, net issuance of Tbills with various maturities was about 132.54 billion in the first two quarters of 2021/22 budget year, and the stock of Tbills as of December 31, 2021, was about 253.5 billion, “a 110 percent increase over the June 30, 2021 balance.”
It elaborated that in comparison to June 2021, 364-day Tbills accounted for the majority of the increase, followed by 182 days, while the participation of government and private owned commercial banks on the Tbills market showed an improvement.
Transport Ministry targets higher logistics performance ranking
By its own self-assessment, the Ministry of Transport and Logistics (MoTL) projects that the logistics efficiency of Ethiopia will stand at 114th position in the logistics performance index with slight improvements.
On the first general assembly of Ethio Logistics Sectoral Association (ELSA) held on March 4 at Sheraton Addis, Dagmawit Moges, Minister of MoTL, said that despite the sector’s existing challenges, improvements have been recorded.
In the World Bank’s 2016 logistics performance index (LPI), where Ethiopia was last included, saw the country being ranked 126 out of 167 countries, with an average score of 2.38.
With a strategy that pushes for continuous improvement, Ethiopia in its ten year plan targets to become the 40th in rank in the international logistics performance index.
“As a result of what we have accomplished in the previous years, we are expecting ranking improvements,” said the Minister.
It is to be recalled that the Logistic Transformation Office which is regulated by MoTL disclosed that the country logistics sector has shown some improvements by citing its internal assessment.
LPI which is an interactive benchmarking tool was created to help countries identify the challenges and opportunities and thus gives scores from six key dimensions, such as: customs performance, infrastructure quality, ease of arranging shipments, logistics services quality, consignments tracking and tracing and timeliness of shipments.
The LPI, which is published every other year, saw Ethiopia missing from the rankings in the 2018 index and in 2020 the report was not published by the World Bank. However, this year Ethiopia is said to be included. “We expect changes in the upcoming publication,” said Dagmawit expressing her hope.
The government is working aggressively to change the bottleneck through different instruments, and it has applied policy changes, besides hardware developments.
The formation of institutions in the logistics sector in combination of the private sector representatives is part of the new initiatives.
ELSA, which was established about three years ago with the guideline of Ethiopian Maritime Authority (EMA) and 176 founding members under public private partnership joint mission, is part of the new interventions on the sector development.
ELSA that is already engaged on various activities to support the sector has designed a five year strategy that will be implemented until 2025.
At the general assembly, Elizabeth Getahun, Board Chairperson of ELSA, said that the association has been tirelessly working with the support of partners to strength ELSA since the organization is on its initial stage. As a result the association is conducting different activities with stakeholders.
Abenet Belay, Project Manager of ELSA, said that the association has designed five key strategy areas that will be done i
n the coming period. Advocacy and intervention of the sector, research documentation and information dissemination, institutional strengthening, partnership and networking, and making ELSA active in the National Logistics Strategy, are the pillars stated on the key strategies.
Abenet said that the association has contributed its part in different areas for the sector development including sharing its part for new policies and strategies of the government besides solving challenges.
At the general assembly, six new board members were elected, while three existing members have continued to serve in the board of directors.
The logistics guru and founding Director General of EMA, Mekonnen Abera, CEO of Ethiopian Shipping and Logistics Services Enterprise, Roba Megersa, Robel Tesfaye of Ethiopian Electronic Single Window, were included on the new board, while Elizabeth, Elias Geneti and Matiwos Ensermu are serving as members re-elected to continue for the coming three years.
Ethio-Djibouti logistics giants ink deals to launch ‘sea-air’ logistics
The four cemented their agreements on a ceremony held on Thursday March 3 in Djibouti to harness the multimodal operation, ‘sea-air’ logistics.
Djibouti Ports and Free Zones Authority (DPFZA) stated that the signing agreements will implement fully operational ‘sea-air’ logistics following various pilot operations. “This will include Djibouti as not only a business hub but also as a major actor in regional integration through an innovative multimodal transport system.”
During the ceremony International Djibouti Industrial Park Operation (IDIPO) which is the managing company of Djibouti International Free Trade Zone (DIFTZ), and SGTD signed on sea-air freight cooperation, while IDIPO, Ethiopian Airlines and Air Djibouti penned tripartite service level agreements. In addition, IDIPO and Ethiopian Airlines further inked on air freight service agreements.
Aboubaker Omar Hadi, Chairman of DPFZA, appreciated the four companies’ success during the trial period. He expressed that this achievement constitutes the ultimate step towards the implementation of a fully geared sea-air logistics model and should be noted as another milestone to bolster regional integration.
He reminded that over the past few years, Djibouti has built new infrastructures and upgraded the existing facilities to improve the connectivity whilst promoting a fully functioning multimodal system. “Today, we are witnessing the signing of a project that will complete the missing link in the multimodal transport system and will further consolidate Djibouti’s position as a hub,” remarked Aboubaker.
He added that sea-air logistics model is a game changer for the trade between Africa and the rest of the world in general, and Africa and Asia in particular. Djibouti’s geographical location gives her a key competitive advantage to become an efficient sea-air logistics center.
According to the Chairman, the advantage of the sea-air logistics is that it allows customers to manage their supply chains more cost-effectively and efficiently, offering a 50 percent faster service comparing to sea freight and 50 percent cheaper when compared to standard airfreight.
“For Ethiopia Airlines and Air Djibouti, this new approach has the potential to double the cargo volume and offers new solutions to the traders. As for DIFTZ, this service can work with the newly launched E-commerce platform Djimart.com, to meet customer’s evolving expectations, while for SGTD, this signifies more cargo flow,” he said.
“We are convinced that with our well performing infrastructures combined with the extensive networks of Ethiopian Airlines; this win-win cooperation will certainly unleash the economic potential of Africa,” he concluded his remark at the signing ceremony.
DIFTZ, SGTD, Djibouti and Ethiopian airlines which are the parties that signed the agreement bring a wealth of logistical expertise to the table. For DIFTZ whose role is as an operator in the sea air logistics has been able to attract customers through its innovative and competitive models. On the other end, Djibouti and Ethiopian airlines have been constant national flagship carriers which partner to connect Africa to the world and vice versa while SGTD is a former Doraleh Container Port.
“Today, our multimodal system is taken to higher lever with the launch of the sea-air logistics model, which is nearly unique in Africa,” Mohamed Aref, Head of Marketing Department of DPFZA, said.
“For almost four months now, we have been handling trial operations to create a smooth and well-coordinated chain. If today we are here to witness the signing of the agreement, it means that the parties are all well prepared for a larger rollout of the business,” he added.
The latest move that was on trial for months shall make Djibouti as a hub for air-sea logistics in the continent. “The signing of the agreements today will further consolidated the gains,” Mohamed Aref said.
Abel Alemu, Managing Director of Ethiopian Airlines Cargo and Logistics, Abdourahman Ali, CEO of Air Djibouti, Abdillahi Adaweh, CEO of SGTD, and Jeffrey Ho, CEO of DIFTZ inked on the agreement documents, as Mohammed Hassen, Deputy Head of Mission of the Embassy of Ethiopia to Djibouti, and DPFZA Chairman bore witness to the proceedings.
