During the Islamic holy month of Ramadan the Ethiopian Islamic community received miraculous news from the National Bank of Ethiopia (NBE), the financial regulatory body, to resurrect the formation of Zamzam Bank, the under formation first full-fledged interest free banking institution.
Sources told Capital that during a meeting held on Wednesday May 22 between the organizing committee members of Zamzam and Central Bank officials, Yinager Dessie, Governor of NBE, allowed Zamzam to undertake the formation process. The green light came on the same day that PM Abiy Ahmed, who attended the massive Grand Iftar evening organized by the Ethiopian Islamic Affairs Supreme Council, announced that the government will allow interest free banking in the country.
Even though the case started immediately after the Banking Business Proclamation authorizing the establishment of interest-free banking in 2008, Zamzam was officially launched founding share sales in December 2010, and within a short period the organizing committee has been successfully amassed more than the proposed 250 million birr capital. Before the first general assembly held in April 2011 the actual collection was 330 million birr.
Even though the under formation bank raised a significant amount of money within a few months and concluded the first general assembly effectively the pioneer non conventional bank could not open a single door for operation because the NBE directive was ratified in September 2011, barring Islamic banking.
The late directive to override the 2008 Banking Business Proclamation stated that Islamic banking operations are permissible only as part of other services and thus a fully Islamic bank was not allowed.
The situation forced the then board of directors to call the first extraordinary meeting to disclose the situation to shareholders. On the occasion the board of directors of Zamzam told shareholders that the board held several discussions about the future of the bank before it called the extra ordinary assembly that was held on Saturday June 2, 2012.
They said that in the past nine months the board members conducted several discussions with government and NBE officials to get an Islamic banking permit but to no avail. “We have also written a letter to the then PM Meles Zenawi to get solution on the issue but we did not get any response,” the board of directors explained.
The board has clearly stated that the bank could not continue in that situation and proposed three options for the share holders; under Islamic banking injecting their capital on other banks and open a window, dissolving the bank and disburse back the raised capital or involve on other investment sector with the collected money, while shareholders preferred to get their funds.
But in the meeting most of the shareholders said that NBE’s decision is against the country’s constitution, that allows citizens to involve in any business. “The central bank’s decision is against our rights,” the participants said.
Nassir Dino, who is one of the organizing committee member and member of the first board of directors of the bank, remembered that for the last 12 months they have tried their best to realize the interest free banking, which is common not only in Islamic countries but all over the world.
He said that since the late Prime Minister period “we have tried to convince the government about our mission. We have also written a letter for the former PM but to no avail, but the one thing which is at least better is the Islamic banking scheme is operating in a separate window at conventional banks,” he said.
“We have been working for our country as educated citizen not for sect, religious or group,” Nassir recounts the motive of formation of such kind of financial sector, which is considered as best option on project financing since it focus on business idea than collateral as conventional banks.
“The window has given hopes for us that one day the concept will get acceptance,” he said.
He further noted that the committee has written a letter to PM Abiy immediately after his assignment at his new post as PM. “We would like to appreciate the PM for taking quick action on the matter,” he added.
Sources said that last week the Deputy PM Office evaluated the case of Zamzam and they have called upon them to come up with a brief explanation about their case, while in the middle of this week the committee met with the governor and obtained permission.
“The cost we lost is uncounted compared with the harassment including the life threat we faced related to our activity,” Nassir told Capital. He confirmed their meeting with the governor but declined to give further information about it. “In the coming weeks we will have concrete information regarding our future activity but for now we cannot talk details,” he added.
Experts in the financial industry and religious scholars claimed that the government previously misunderstood the concept of Islamic banking.
Currently the interest free banking scheme is done at a separate window at ten banks, and over 30 billion birr has been mobilized.
Asfaw Alemu, President of Dashen Bank, told Capital that initially the sector was not neglected since it is successful in other countries. “For instance other countries including neighbor states are practicing interest free banking but I don’t know the reason why it is not allowed here, the central bank should answer that,” Asfaw explained.
“We are currently working under a separate window by the support of Sharia advisory committee, which is like a board that follows the operation of interest free banking,” he said.
Experts said if the study was properly done and applied to the business it would be beneficial and would create a good opportunity for competition.
Zamzam becomes first recognized Islamic Bank
Almost all forex goes to foreign investors
Almost 94 percent of foreign currency allocated to private investors since the beginning of the budget year has gone to foreign companies. Only six percent was transferred to local investors.
The government stated it provided USD five billion to the private sector mainly to import priority products and input for the manufacturing industry. People working in the sector told Capital that over the last year almost all hard currency has gone to foreign investors.
They said that foreign companies here in Ethiopia are benefiting from a separate scheme called the suppliers’ credit condition which was previously allowed for companies engaged in hard currency earnings or exports. Since early last budget year the National Bank of Ethiopia (NBE), has amended the suppliers’ credit directive and allowed foreign investors to be a beneficiary through the credit import of inputs or spare parts for their production here.
Since the directive amended that allowed investors to access guarantee to import products that the payment will be settled in 180 days, they can access hard currency more easily than other local investors, even though they might be engaged in similar investments. Local investors have claimed that the law discriminates against local investors and makes them to wait in a long line for a letter of credit (LC) to access foreign currency for their import, meanwhile they produce similar products.
Last week the government announced that it has made available USD 300 million for the manufacturing sector, which is done almost for the first time in the budget year. “the government stated that it has provided USD 5 billion in the stated period but the local investors got almost nothing, which indicate that almost 94 percent of the total foreign currency dispersed in the past nine or more months is disbursed for foreign investors,” experts in the industry sector claimed.
They complained that the situation pushed them to halt their production. “We are confused that the government may want local investors to be distributer of the products that foreign companies produce here,” they added.
The investors who called the directive as ‘apartheid law’ argued that the law is against the investment proclamation, however NBE officials downs the claim.
During his meeting with the media a few months ago Yinager Dessie, Governor of NBE, said that the government will continue providing foreign currency for international investors via the suppliers’ credit scheme despite the concerns of local investors.
On the other hand the sector actors claimed that the scheme by itself is vulnerable to misdemeanors since the approval is giving separately. “This kind of scheme may highly aligned with corruption,” they said.
Currently there are long queues at banks for LC, since the demand of hard currency does not meet the supply. Experts at banks told Capital that speculators are major challenges for the long line that most of them open LC in different banks. They added that those who really don’t want the foreign currency are engaged in selling their turn to those who want it badly on a commission basis. They recommended that the government shall introduce a new scheme at least to solve the problem and ease the line.
They said that settling some amount of the money as a guarantee that LC demands is genuine or not shall solve the problem. “Putting some money when LC is opened at the banks may only attract real foreign currency seekers and they shall only engage on the process than speculators,” they recommended.
“But the initial solution shall be allowing local investors to be part of the suppliers’ credit scheme like foreign investors. We support providing suppliers’ credit for foreign manufacturers since they have to have smooth operation but the law should not neglect locals,” they added.
Experts explained that currently foreign industries undertake their normal production with economic scale of operation cost, while local industries that produce similar products have battling on high cost of production due to under capacity operation.
“It has also make the foreign companies to handle huge liquidity that lead them to involve on illegal exchange to transfer their earnings to their home country than waiting long line to convert their local currency to foreign currency and send it to home country,” experts said.
Last week the government disbursed USD 200 million via Commercial Bank of Ethiopia and USD 100 million by the rest 16 private banks, which is for the first time disbursing foreign currency via private banks.
Experts said that the amount is very insignificant when disbursed for every private banks. Bankers that Capital interviewed said that even though the volume is very limited the gesture dispersing foreign currency via private banks is good.
However bankers claimed that the difference between local and foreign companies in accessing foreign currency is unfair. “We provide the companies who come with the approval of NBE to access suppliers’ credit but all of them are foreign companies. But local investors who are our customers are expected to wait a long time,” one banker said.
Crazy food prices to be investigated
The Ministry of Trade and Industry, the Addis Ababa Trade and Industry Bureau and the Trade Practices and Consumer Protection Authority have formed a committee to investigate the surprising price rise in basic consumer goods after the Ethiopian Easter.
The committee suspects that there are greedy groups behind the inflation and launched an investigation. They will report the results to the public in a few weeks.
Over the past three weeks prices of meat, milk, Teff, onion, potatoes and tomatoes have increased dramatically.
A half liter of milk previously sold for 14 birr a few weeks ago jumped to 20 birr. Teff prices have skyrocketed to 4,000 birr per quintal from 2,600 birr before Easter.
Many restaurants have raised their prices in response.
Alem Alemayhu a dweller in Addis said, “it is a bizarre condition we are observing now, everywhere you go the food price is increasing and salaried workers can’t afford basic needs with their current income and the market is going mad.’’
Meat has risen by 80 birr per kilo while onions and potatoes have gone up 10 birr per kilo.
Kassahun Abera, Trade Inspection Head at the Bureau told Capital that the prices increase doesn’t make sense.
“There is no reason to escalate prices like this so we have begun investigation. We suspect that some greedy mafia like groups are conspiring to make a huge profit.”
The annual inflation rate in Ethiopia rose to 12.9 percent in April 2019 from 11.2 percent in the prior month, hitting its highest level since August last year. Prices increased faster mostly for food & non-alcoholic beverages (14.5 perecent vs 11.4 percent in March), bread & cereals (16.6 percent), meat (9.5 percent ), milk, cheese & eggs (13.1 percent); and alcoholic beverages & tobacco (14.2 percent vs 1.1 percent), attributable to the Easter holiday season. Meanwhile, cost slowed for housing & utilities (7.9 percent vs 8.9 percent); clothing & footwear (15 percent vs 19.7 percent); restaurants & hotels (12.5 percent vs 13.2 percent) and transport (15.6 percent vs 16.8 percent). On a monthly basis, consumer prices went up 1.8 percent, following a 2.2 percent rise in the previous month. Inflation rate in Ethiopia averaged 16.06 percent from 2006 until 2019, reaching an all-time high of 64.20 percent in July of 2008 and a record low of -4.10 percent in September of 2009.
FRAUD AS A WAY OF LIFE
When a world system collapses it doesn’t always go with a bang, it can also whimper along for quite a while! At times it takes decades, if not more. In the case of the Roman Empire demise took centuries. Nonetheless, the tale-tell signs of impending collapse are/were always there, particularly in the last phase of the dying system. The establishment or acceptance of outright fraud as the modus operandi of the system is one such tale-tell sign. In our prevailing modern world system, fraud is clearly the operating principle cutting across nations, economies and institutions of all kinds. Without the regime of pervading fraud spanning the breadth and depth of late modernity, the system will collapse in no time! See Smith’s article next column.
As an appendage or as a microcosm of the interstate system, the nation state itself has become an embodiment of generalized fraud! To sustain the prevailing global fraud, the interstate system continuously employs, amongst other things, protracted lies all over. For instance, the underlying faulty conviction of the status quo, which assumes that nonstop growth is possible on a finite planet, is one. Once such monumental lies are well established, the little lies follow automatically. Force or coercion is also used to maintain the idiotic narratives. No significant body with a critical mass is allowed to interrogate the fraudulent foundations of the world order. Obviously, the sufficiently numbed sheeple (human mass) as expected, goes along with all the lies that are preached by the establishment. The whole orientation processes, starting from the early years all the way to tertiary education, are all geared to support and reinforce the lies that flow from the powerful and numerous institutions of entrenched interests! One can also mention the other private/semiprivate institutions of indoctrinations, particularly those of the entertainment genre; movies, music, spectator sports, etc. These are some of the staunch cohorts of the global fraud system!
The modern private sector, to a large extent, is a creation of the prevailing global fraud system. On top of the above foundational lie of infinite growth on a finite planet, we also have its associated fraudulent component in finance, which is by far, one of the well-established criminal entities of the systems! As we never tire of proclaiming; Fractional Reserve Banking (FRB) on which the world’s financial/economic system is erected, is the worst (supposedly) nonviolent crime of the millennium. What is FRB? In short, FRB is a financial/banking system whereby money is created out of thin air and is lent to existence. Besides favoring those connected to the money spigot, it widely/globally encourages mal-investments and the utter destruction of the planet’s ecosystem!
The definition or even the very notion of civil society in our modern world system has become problematic. We will not engage that problematic in full, instead, we will contain ourselves within the universe of the common narratives. When a component of civil society is created and supported by capital, in various forms, surely these entities cannot be regarded as civil societies. Since many of these so-called civil society institutions form a portion of the sanctioned entities under the thumb of capital and its states, their independence is bound to remain, at best superficial. Objectively that is what prevails in many of the current nation states. Suffice is to say these entities continue to take active role in the protracted fraud system, lest they lose their direct or indirect support, financial or otherwise. NGOs (Non Governmental Organizations) are nothing more than institutional instruments in the support of the existing global order. In fact, we claim they are WSD, Weapons of State Destruction. This has always been our stand in regards to NGOs unending pronouncements. According to James Corbett; ‘NGOs are the deep state’s geopolitical ‘Trojan horses’! To think that NGOs will bring about positive change to the global system is preposterous! All in all, the major components of modern societies are engaged, directly or indirectly, in furthering the existing global fraud system. Where can one get some respite?
As it stands, the compromised elites and intellectuals of the world system are neither bold nor kosher enough to start widespread integrity systems in support of a resilient existence favoring the global sheeple. It seems the sheeple is on its own in its multifaceted struggle against the prevailing comprehensive fraud, which continues to undermine its welfare. The vacuous ‘good governance’ that is preached all over (by the status quo) doesn’t take into account the myriad consequences of the two fundamental frauds; i.e., that of unlimited growth and FRB doctrines. Therefore, besides lacking credibility, the so-called ‘good governance’ remains absolutely vacuous and frivolous. Luckily, the sheeple has started to take its own initiative to challenge this shortsighted and dangerous system built on lies and fraud. The on going movement of the ‘Yellow Vests’ in France, which just celebrated its sixth months on the streets, is one such sign! Other ascending movements that are dismantling the old guards include, the ‘populists’ (by the status quo). But what is the new populism?
The Princeton dictionary defines populism as ‘a political doctrine that supports the rights and powers of the common people in their struggle with the privileged elite.’ All new movements are still awaiting their organic activist-intellectuals to emerge to the fore and in all likelihood these movements are not going to go anywhere soon. In fact, they might well be the beacons heralding the accelerated collapse of the existing order. “The shepherd always tries to persuade the sheep that their interests and his own are the same.” Stendhal (Marie-Henri Beyle).
Good Day!
