After a meeting between bank presidents and the National Bank of Ethiopia (NBE), which regulates the financial sector, banks are hopeful that NBE bills will be lifted and they will be permitted to create an alternative proposal to the letter of credit (LC) allocation.
The new leaders of NBE and bank heads met on Thursday November 1, at the central bank to discuss issues in the financial sector.
On that occasion, hope was secured that the controversial NBE bill directive imposed since 2011 would be lifted, according to sources who attended the meeting.
The directive mandated that all banks except the Commercial Bank of Ethiopia and Development Bank of Ethiopia, both which are state owned, buy 27 percent of NBE bills for every loan disbursement at a three percent interest rate with a five year maturity period.
Banks have claimed that the NBE bills shrink their liquidity and smash their capacity to provide loans for clients. They have also argued that the 3 percent interest rate goes against the minimum market rate that NBE itself imposed. When the directive, ‘MFA/ NBEBILLS/001/2011’, became effective the minimum interest rate was 5 percent and then increased to 7 percent a year ago when the birr devalued by 15 percent along with other major hard currencies.
During several discussions including public private dialogue forums the issue was one of the top topics brought up by the private sector but the government strongly defended and rejected the claim. International partners like the International Monetary Fund (IMF) also expressed their concern about the directive. They stated that the directive could affect the private sector’s access to finance.
In 2015 during talks with financial institution leaders including banks, insurance companies and micro finance organizations, the former central bank leaders said that insurance firms may share the burden and be included in similar schemes. However this has not yet been applied in the insurance industry.
On Thursday bankers expressed their concern about the directive.
Yinager Dessie (PhD), Governor, who chaired the meeting, disclosed that the central bank has created an exit strategy to lift the directive, according to sources.
He said that NBE is working to develop an exit plan. “It is good news for the banking sector,” one of the bank presidents, who requested anonymity, told Capital. “In general I think the discussion was fruitful. They are trying to solve challenges faced by the sector but it may be a bit difficult for them to do this in a short period since there are a lot of challenges and they have been imposed for several years,” he added.
The central bank has also given an opportunity for banks to come up with an alternative proposal to implement a LC operation. In relation to the hard currency shortage and fraud the central banks have applied several rules and procedures on the IBD at the banks.
In February 2016 NBE applied a directive known as ‘Transparency in Foreign Currency Allocation and Foreign Exchange Management,” Directives No.FXD/45/2016’ that made banks provide service to their customers on a first come first serve scheme to tackle misdemeanors at IBD.
However, banks and foreign currency buyers have expressed their complaints about the law, which was amended last year.
In the past banks wanted the regulatory body to ease the new directive that controlled the way banks handle hard currency. They asked the central bank to give them the responsibility of managing the LC process.
They say the directive is not relevant to their day to day activity.
The directive has also imposed priority sectors in terms of access the hard currency at banks.
Besides the priority sectors sub article 6.2 of the directive indicated that a bank shall sell foreign currency to its customers on a first come first serve basis.
During Thursday’s meeting bankers expressed their concern about the directive which they claim does not benefit banks or customers.
They said illegal actors are still accessing the hard currency and distributing it unfairly. The central bank leaders argued that they applied to directive to create fairness. “They told us to come up with a proposal to replace the directive,” sources said.
The Ethiopian Bankers Association is expected to handle the proposal work.
In a related development, NBE has amended the ‘Bank Corporate Governance Directive No. SBB/62/2015’.
This is the first directive that Yinager has signed as governor. It replaces the 2015 directive sub article 6.7 into the following: ‘resolution of shareholders meeting shall not come into force before completing registration of the minutes of the meeting at a relevant government agency. However, a dividend payment shall be affected on the date and methods of payment as decided by the ordinary general meeting.’
The replaced sub article was not allowed to settle dividend payments before the completing registration of the minutes of the meeting with appropriate government organ, which is the Documents Authentication and Registration Agency.
NBE likely to lift NBE bills, allow banks alternative to credit allocation
United Insurance wins right to cover domestic workers abroad
The Ministry of Labor and Social Affairs, which floated a tender two weeks ago to award domestic worker life insurance coverage for Ethiopians working in Arab countries, awarded the contract to United Insurance Company (UNIC).
Ethiopian Insurance Corporation, Awash, Nyala, Ethio Life, Oromia, and Nib were among those contending for the bid.
MoLSA’s endeavor is for domestic workers to be covered for accidental death and disability.
The insurance will cover domestic workers who fly to Saudi Arabia, Jordan and Qatar under a bilateral domestic worker agreement with the Ethiopian government.
Domestic workers who travel to these countries must have proper training from vocational schools.
The vocational school trainings last from one to three months and focus on housekeeping, caregiving, domestic work and driving cars.
So far 140 agencies have registered to send domestic workers to the destination countries.
On October 2013, the government banned domestic workers from traveling abroad due to the rampant torturing, sexual harassment and other civil rights violations endured by many Ethiopians in Saudi Arabia, Lebanon and other Middle Eastern countries.
After the ban was placed, the number of illegal brokers and undocumented migrants increased, causing a surge in the loss of life en route and at sea.
According to proclamation 923/2016 direct domestic worker employment is only for staff where the employers is an Ethiopian mission or an international organization and where the job seekers acquires a job opportunity by their own accord in job positions other than house maid service.
Receiving countries are expected to protect the life and the disability insurance coverage rights of domestic workers.
The proclamation requires domestic workers to have certificates proving that they have at least three months of training in their respective fields. Agencies that send workers abroad must have one million birr in capital in order to obtain a license.
Currently the International Labor Organization and the European Union are working with the Ethiopian government to reduce illegal migration protect the rights of domestic workers.
Zemen Certified
Zemen Bank has obtained a global payment Card Industry Standard (PCI DSS 3.2) certification effective August 10, 2018. Zemen Bank became the first bank in Ethiopia to receive the last PCI DSS compliance.
The PCI standard allows for all service providers and merchants who process card payments the guidelines to store or transmit credit, debit or prepaid card information securely.
Mesrete Wendeme Vice President of the Bank said,” being PCI DSS compliant ensures that the bank has put in place the proper controls to safeguard customers’ data.
“And it ensures our customer transactions are done with platforms that comply with the highest security standard as required by major associations including VISA, MasterCard and American Express,” he said.
Trade bureau to overhaul 8,000 analogue scales
The Addis Ababa Trade Bureau, is planning on replacing the sometimes inaccurate analog scales with digital scales to weigh fruit and meat in many retail shops by this coming February.
Traders will cover the costs of the 8,000 scales which will be floated via tenders for importers. A source in the trade bureau told Capital that fruit and meat sellers will be the first mandated to use the digital scales and that this is expected to occur shortly. Right now there are approximately 50,000 analog scales in shops half of which are in retail markets.
The Trade Bureau has been very suspicious about the accuracy of the analog scales so they are planning to replace them with digital scales to put them on the market at places that sell fruits, meat and other retails shops.
The 8,000 scales whose cost will covered by Sthe traders themselves will be floated in tenders for the importers who have the capacity to bring them from abroad.
A source in the trade bureau told Capital that fruit and meat sellers will be the first target to use digital scales to weigh their goods.
Currently there are over 50,000 analog scales and more than half are found in retail markets selling a variety of goods.
The source added that the replacement of the digital scales will begin in a short period of time.
“There is one proclamation we requested that the trade ministry to forcefully make traders use digital machines and I hope this proclamation will be effective in the coming one month and then we will go to the market and let the traders use the digital machines and we will give awareness raising to the consumers about the importance of measuring their goods on digital scales and in parallel we will supervise the market about how to use these scales.
A recent study from the Trade Competition and Consumer Protection Authority (TCCPA) indicates that some butchers are using fake scales to cheat customers by as much as 140 grams of meat when they purchase a kilogram.
The study, which focused on meat and retail commodities showed that many of the scales used in Ethiopia are substandard regardless if they are digital or analog, meaning that consumers often end up getting the short end of the stick when it comes to purchasing meat.
Of the 12 consumer associations 83 percent of butchers who sell a kilo of meat for 80 birr deduct from 10 to 143 grams from a kilo of meat, which means consumers loose more than 2,000 birr per 100kg meat.
The study also looked 21 private butchers who sell a kilo of meat for 160 birr or above and found that 64 percent of them cheated customers 130 grams per kilo of meat because they used bad scales.
According to the study conducted on 76 retailers who sold sugar, salt, coffee, wheat, white flour, and lentils from 5 to 15 grams is deducted by incorrect measuring scales.
The fake weighing machines are manufactured using cast-iron instead of aluminum and are being used by the traders to cheat the unsuspecting customers.
Many complain that they are being taken advantage of by sellers and the Authority is blaming the Addis Ababa Trade Bureau for not taking action.
