Addis Ababa, Ethiopia

Zemen Bank S.C: Commendable 12-year Journey

by daniel-abn| Originally Published January 25, 2021

By: Aklile Tsige @ABN

Banks play a crucial role for the development of a country. It expedites investment activities which are considered as the back bone of development. A bank is an institution which accepts deposits from the public and in turn advances loans through creating credit. Through this function, banks are vital components of the economy which takes the lions share in the economic developments.

The origin of banking sector in Ethiopia goes back to the early 1990’s. It was started in the monarchial regime followed by the Dergue regime in which the financial institutions were basically executing the economic plans outline by the central planning organ. Following the demise of the Dergue regime a new market economy was launched which has increased the size of the market drastically as private banks were established.

The Ethiopian banking sector is currently comprised of a central bank (The National Bank of Ethiopia or NBE), one state owned development bank, and a government owned commercial bank as well as seventeen private banks. 

The country allows local banks to borrow from foreign banks, opens banking business for foreigners with Ethiopian descent, and lifts the mandatory 27% bond purchase policy. Moreover, the banking industry seems to be promising in the face of adversity while new banks are on pipeline to enter into the market.

Currently, Ethiopia has also allowed a small number of foreign banks to open liaison offices in Addis Ababa to facilitate credit to companies from their countries of origins. Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia. Nevertheless, there are still fears and doubts amongst some bankers who strongly believe that the industry needs to be treated in a very meticulous wayand far-sighted leadership.

Aklile Tsige sat with Ato Dereje Zebene, Zemen Bank S.C. President and CEO to discuss about the 12-year Journey of the Bank, Bank’s contributions to City development and overall banking environment in Ethiopia.

Ato Dereje Zebene earns MBA from Lincoln University, BA in Management and LLB from Addis Ababa University. Prior to his current position, he had served Awash International Bank asCorporate Strategy and Transformation Chief Officer, Banking Operations Vice President and International Banking Vice President. Furthermore, Ato Dereje had also been representative of Commerzbank AG for Ethiopia and EasternAfrica,Wegagen Bank, National Bank of Ethiopia and Ministry of Foreign Affairs in different capacity.

Established in 2006 with Birr 149 million subscribed and Birr 87 million paid up capital, Zemen Bank commenced commercial banking services in 2008under the National Bank of Ethiopia’s Licensing and Supervision of Banking Business Proclamation No 592/2008 and the Commercial Code of Ethiopia 1960, by introducing a one-branch banking services in the country with a main focus on providing services to corporates, high net worth individuals and institutional clients. Headquartered in Addis Ababa, the Bank operates in four segments, namely Personal Banking, Corporate Banking, International and Multi-Channel banking services across the country.

Among commercial banks working in the country, Zemen Bank, uniquely provides professional banking relationships with its customers supported by state of the art technologies and outstanding levels of services in 56- Banking Centers it has opened. The Bank’s operations are based on multiple branch outlets whose activities are supplemented by several service points such as ATMs, POS terminals, Foreign Exchange Bureaus and Banking Kiosks. This is part of its distinctive Multi-Channel Banking modelsallows customers to gain various opportunities of choosing different banking services that suits with their particular needs and wants of customers.

One of the Bank’s peculiar features counted is its highly dedicated and experienced staff, where the Bank’s staff are committed to meeting and/or exceeding the needs and requirements of its clients. All working Units, in this regard, are working towards providing unparalleled banking services and the financial benefits what customers are expecting from the Bank. This, it was affirmed by the President/CEO that would be one of its distinguishing features the Bank had than other competing banks.

Dereje Zebene, Zemen Bank S.C. President and CEO

“Resting on 2,304sqm of land, the Zemen Bank HQ project is a 32-storey building and expected to be one of the few tallest buildings built in one of the financial district areas of the capital, Addis Ababa.”

Also distinctive about Zemen Bank is its focus on delivering technologically-based banking services. All cash deposits, withdrawal services and all other transactions at all Banking Centers are operated using computerized system. Opening of accounts is processed in less than 10 minutes by processing customers’ personal information via applications, pictures, and signatures by securely and digitally recording.

Throughout its 12-year-journey, Zemen Bank has built a very strong presence as a preferred corporate/institutional Bank in the country’s banking business, and has not made change in its unique business models that can be catered to specific requirements of each client, who are engaging in various activities.

Raising its paid-up capital to Birr 2 billion, the Bank has currently embraced over 4,800 shareholders and more than 1,000 professionaland non-professional staff members. The Bank, since it is principally deals with corporate clients, by many it is regarded as wholesale Bank, despite it is also providing full-fledged services to all segments of the economy.

“Since the societies inclination in the usage of cash is still extensive, it was said by the President/CEO that, it needs a long way to go in canvassing large number of users to make use of technologically innovative products. Apart from this, it was said inefficient telecom services along with the low level of awareness in the usage of banking services are also hindrance factors in getting more and more customers in the banking systems.”

Five years back as a young Bank, Zemen Bank commenced to build a magnificent and well-designed Headquarters at the heart of the metropolis. Resting on 2,304sqm plots of land, the Zemen Bank HQ project is a 32-storey building andsupposed to be one of the few tallest buildings in one of the financial district areas built in the capital, Addis Ababa.

The Zemen Bank headquarters, erected in front of Addis Ababa University School of Commerce is estimated to cost about Birr 1.2 billion. This fabulously designed smart building has its own unique features such as full-fledged building management system, eight elevators, out of which two are for transporting goods and materials only and the first six floors of the building are specifically designed for car parking.

This astonishing building is expected to be completed and begin operation in the coming April 2021 since all the finishing works it was said are being undertaken as per the schedule.Dereje, President/ CEO of the Bank said that “We strongly believe that this building and buildingswe aspire to build in the City will have their own contribution to City’s image building, greater value in terms of developmental endeavors and creation of investment opportunities.”

Furthermore, Zemen Bank has made considerable efforts to continue to strengthen the greening campaign being undertaken across the nation. It is substantiated with facts that; the Bank had donated five million Birr for Beautifying Sheger Projects, and also donated Birr 10 millionfor the Gebeta Lehager Project to be carried out at three regional states.

In its annual humanitarian assistance initiative, The Bank has provided supports to different disadvantaged groups such as people with physical disabilities and people undergoing dialysis. In addition, it has plan to extend assistance to about 100 students drawn from low-income families, and also undertaking identification processes for identifying future beneficiary segments.

“Currently many private banks are under formation, following similar trends of the existing ones the majority of which are establishedand/or motivated by either religious, ethnic and/or other group interests. This has to be discouraged for it, if we opt to build and serve the diverse and larger community.

Enhancing its relations with various development partners, The Bank, it was said facilitates and provides support to companies working on hospitality and tourism sectors. “We do have significant number of clients engaged in hotel and tourism sector, and apart from financing of these projects, the President/CEO said that, The Bank had consulted, and created an opportunity for somecompanies in getting foreign loans.”

With regards to government financial policies and regulations, Dereje noted that every financial or banking directives or provisions have their own purposes, but they should be amended in line with the objective reality. The much-trumpeted 27% bond purchase directive, for example, was not lifted timely for the bill has caused moreexpenses than its purpose.

“We are witnessing the fact that, the Ethiopian Government has currently made promising efforts to ease constraints in the banking industry. We have to be very optimist to pave ways for smooth operation of the sector,” he added.

Although the financial sector in Ethiopia has grown remarkably in the 1990’s and 2000s, it was commented that it is still in its infancy stage. Some of the problems are the high and persistent rate of inflation, illiteracy in technological usage, significance on unstable internet and network connections, lack of trained manpower, the non – performing loans banks carry in loan books of accounts, the dominance of the state owned banks in the market, sometimes the government uses them to implement its policies, and they are also to a certain extent vulnerable to international economic and financial crisis.

Indeed, the banking industry in the country has to pursue meticulous path in order to successfully and efficiently contribute to the overall development of the nation. An increase in the number of banks doesn’t bring about the desired economic impact or financial intermediation. But, it was said would be through enhancing their capacity in human resource, technology and capital remains vital for their survival and for productively run its aforesaid businesses.

Establishing, and naming of private banks in Ethiopia with the name of a specific ethnic group, many argued that these kinds of trend have adverse consequences. The President/CEO of the Bank, Ato Dereje emphasized that the need to depoliticize the formation of private banks in the country, saying that when private banks are established, they should consider and should neither be ethnic nor religiously based establishments. This, it was claimed would speed upintroduction of a well-organized financial system in the country.

“Currently many private banks are under formation, following similar trends of the existing ones the majority of which are established and/or motivated by either religious, ethnic and/or other group interests. This has to be discouraged for it, if we opt to build and serve the diverse and larger community.” Dereje stated

Operationallycommercial banks,he explained are financial intermediaries, which mobilize funds from surplus units and channel them to deficit units in the society. With such view, banks mobilize funds in terms of deposits which can be used to finance different projects and to provide loans apart from commercial debts financing or equity shares financing. Similarly, due to the nature of the operation, banks are subject to more unique set of laws, regulations and supervisory issues to both locally and international business operations.

The uniqueness of bank capital structure is also contributed with fact that bank debts includes deposits from smaller depositors who may not have any motive or expertise to monitor bank operation which limits the disciplinary roles. In this regard, Dereje reiterated that banks in Ethiopia appear to be very weak in terms of capital, technology and human resources to merge and form strong banks competing in the international market.

The Bank is expected to strictly abide by the laws and regulations of the jurisdiction where it operates, and observes the guidelines and rules issued by regulatory authority, particularly to the National Bank of Ethiopia. It also keeps its corporate governance system under constant review to ensure that it is in line with international and local best practices since the first day of operation October 2008.

Zemen Bank S.C
YearsGross Profits
 (in millions of Birr)
2010/11                                     133.38
2011/12                                     136.51
2012/13                                     137.88
2013/14                                     178.09
2014/15                                     225.59
2015/16                                     297.85
2016/17                                     388.52
2017/18                                     372.39
2018/19                                     671.53
2019/20                                  1,047.84

Envisionedto being “Ethiopia’s Five Star Bank”, The Bank delivers its clients the most distinctive banking services in the country through a mix of Local Knowledge and International Standards; providing the staff with an engaging, rewarding, and attractive work environment alongside a best-in-industry compensation schemes.

Forwarding recommendations on existing gaps in the sector, Zemen Bank’s President and CEO, Dereje Zebene said that, the National Bank of Ethiopia and the government should work towards creating enabling environment to establish globally competent and strong banks with Ethiopian identity, and buildthe capacity of existing banks.

Moreover, the President, stated that introduction of diaspora banking service that allows Ethiopians overseas to have deposit in foreign currency, use of credit cards as well as the participation of Ethiopian Diasporas in the country’s banking sector, are the major activities being taken to ease restrictions imposed on the industry.

Recent data witness that, the Bank’s 12-year journey has experienced a trend of growth in profitability alongside positive trends related to balance sheet expansion.

As at June 30, 2020, The Bank’s gross profit was Birr 1,047.8 million, remarkably grew by about seven-fold in the past 10- years vis-a vis the year 2010/11 record of Birr 133.4 million.

Similarly, in its 12-year-journey, the Zemen Bank’s total asset has reached Birr 18.5 billion (about $ 523.51 million at Average exchange rate of 30/06/20 at the end of June 30, 2020 indicating more than a thousand percent growth when compared with the year 2010/11 (a decade ago).The last five-year average record of earnings per share performance showed that Zemen Bank’s performance is above the private banking performance by 3.37percentage points.

Leave a comment