NBE applauds financial industry’s progressive stride
During its extraordinary session with banks, the National Bank of Ethiopia (NBE) applauds the success of the financial sector which has been attained over the past four years.
Yinager Dessie, Governor of NBE, said that in the past four years major reforms have been undertaken within the financial industry which has reeled in significant results in different measures. He stated that the financial sector had registered a massive change through the reform period which expanded its asset on average by 24.5 percent every year for the past four years.
Frezer Ayalew, Director of Banking Supervision Directorate at NBE, said that in the financial year that ended in 2019, the total assets of banks was 1.3 trillion birr which has now shot up by 92 percent to reach 2.5 trillion birr at the end of the 2021/22 financial year. Deposit mobilization is the other area which the financial sector secured a huge success with 25 percent growth every year since 2019. “Compared to 2019 the deposit mobilization has expanded by 93 percent by June 2022 to reach 1.74 trillion birr from 899.8 billion birr. Similarly the banking sector’s total capital has expanded to 199 billion birr by 27 percent on yearly growth from 99 billion birr in 2019,” the Banking Supervision head said.
Over the four year period, the number of deposit accounts has increased by 108 percent to reach 83.3 million. Regarding profitability, the banking sector has amassed close to 50 billion birr in net profit in the just concluded financial year which is an increased of 122 percent in comparison to 2019. In the financial year that ended on June 2019, the banking sector’s net profit after tax was 22.5 billion birr.
In loan and advance development, the private sector has accessed 889.6 billion birr in the past financial year that was 377.6 billion birr in 2019, while the total loan and advance excluding bonds has climbed to 1.09 trillion in June 2022 which is over double the amount when compared to four years ago. Frezer said that the banking sector has continued its safe and sound operation. “The banking sector capital adequacy ratio stands at 16.04 percent above the internationally required standard of eight percent. Similarly the non performing loan ratio is 3.87 percent against five percent of the requirement, while liquidity ratio at the banking sector is 27.05 percent, which NBE’S threshold is 15 percent,” he said.
“Our banks are operating in an internationally required model that makes them financially sound,” the Director added.
He reminded that the policy bank, Development Bank of Ethiopia, attained massive progress in the past few years to return to its prudent operational status. The banking industry which registered significant change is the Interest Free Banking (IFB) with two full-fledged banks already operational; and besides one firm which transformed to a bank from a micro finance institution, one more bank has secured its license to open its door. In addition to the two fullfledged banks, 11 banks are providing IFB services through windows. As of March 2022 over 11 million accounts holders have registered for the deposit mobilization of 117.2 billion birr in the IFB.
“35.5 billion birr have been availed through 4,842 IFB credit accounts on the financing side,” Frezer said. During the occasion, bank executives appreciated the initiative of the regulatory body to call such kind of appreciation meetings and for its recognition of the success that the financial industry attained in the stated period.