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Leader in financial inclusion expands its reach

Interview - March 23, 2016

Through its agent, mobile and internet services, United Bank is expanding banking access considerably into Ethiopia’s large unbanked population. It is also increasing awareness of its Islamic Sharia-compliant services to the country’s Muslim communities. President Taye Dibekulu details the banks’s progress and its drive to help the country’s SMEs.



How is the financial sector, and especially United Bank, taking advantage of this great momentum of interest in Africa and Ethiopia?

In terms of boosting the deposits and integrating the transactions with a source for mobilization of the financial resources, one of our strategies is to increase our banking coverage physically through the opening of branches all over the country. United Bank is in every region including developing regions such as Gambela and Somali Regions. Our motto is, we have to increase financial inclusion so that the impact of our bank performance can be significant, in terms of the economic growth of the country. That is our main objective.

The second focus is investing in technology. Apart from procuring the hardware and software, we invest a lot in our staff in terms of acquiring knowledge. We send some of our staff abroad for training and capacity building. This knowledge transfer allowed us to introduce SMS banking and internet banking. Eight years ago, given the environment at that time, we started with just information submission to enable customers to monitor their account by using SMS and through the internet, while using SMS they could make some transactions. There was no legal framework when we developed internet banking for the first time; it was later developed by the government.

Now we are in a position to offer fully-fledged internet banking services, including for transactional purposes. The transactions include transfers from United Bank to other banks, since we have enabled our internet banking to interface with the national payment system. That is unique for Ethiopia’s economy.

The motive behind it is to attract more customers and allow them to make their transactions with reduced costs and time. Multi-channel banking offers banking services without needing a physical branch; it is also known as self-service banking. This increases our availability to our customers, so they can do banking transactions even outside banking hours.

Apart from that, those services fill the gap of inclusion. All these multi-channel banking services allow electronic transactions and contribute to financial inclusion. This is a cash society, and cash could only be accessed from ATMs or from branches. That is why we were the first bank in the country to develop and start agent and mobile banking. With this model we recruit agents in remote areas so that our customers have access to cash from the agents by using their mobile.


Financial inclusion is key, especially in developing economies. We understand you also conduct workshops with some clients to explain the benefits of being included in the financial system.

The motive of agent banking is to make financial services accessible to the disadvantaged people, and that is the larger population in the rural areas. Banking services should not be bounded only to the banking hours. They should be accessible anytime, anywhere. We are doing that.

We are also giving access to banking and financial services to Muslim people who are not willing to use formal banking services because of religious reasons. We introduced interest-free banking services. We then conducted workshops around the country to raise awareness about our Sharia-compliant banking and financial services .


Sharia-compliant banking services are growing a lot in different countries. Have you any plans to engage with Middle Eastern banks and clients?

Yes, that is our approach. Before we started, some of my colleagues and myself visited the Middle East to learn from Sharia-compliant interest-free banking services and adapt them to our own context. This also helps United Bank to contribute more to financial inclusion. There are banks that started Islamic banking before United Bank, but in terms of market penetration we are one of the leaders, especially in terms of creating awareness.


United Bank provides comprehensive international banking services that represented 22.37% of the total income of the bank in FY 2014/15. In what sectors/operations have you been focusing your international business?

We handle our international banking with well-known global banks, like Standard Chartered, Barclays, Commerzbank, City Bank… We have been given a lot of awards from these banks thanks to our best practices. We are already subscribed to Swift. Nowadays, compliance is a critical requirement for global banks, and fulfillment demands need a lot of investment. We also decentralized the trade finance function to our branches, meaning that the transactions are initiated at branch level and our core banking is already interfaced with Swift, so transactions can be handled easily.

There is also a huge trade deficit in Ethiopia, so we are very focused on supporting exports. Apart from that, we work heavily on inward or inbound remittances, both from investment and the diaspora.


How would you describe Ethiopia’s finance sector to people overseas?

Banking started in Ethiopia more than a century ago and there has not been any bankruptcy ever since. Banks benefit from profitability, growth and reliability. Domestic banking services are free of charge, as there is no account maintenance fee nor deposit fee. The reasoning behind that is our interest to promote banking services and reduce the unbanked rate. Our internet banking is also free of charge.

We also provide tailored-made banking products such as the cash pick-up service for companies. They only have to pay the insurance to cover the trip from their premises. We also offer free transfer of salaries for the companies that work with us. In order to mobilize financial resources, efficient payment and banking services are critical.


As well as talks of foreign banks being allowed to operate in the domestic sphere, you also have to adapt to the demand of the economy and new international companies entering Ethiopia. How are you adapting to this new landscape?

We believe the financial sector will be open eventually. We are very optimistic and we are very proactive in that sense. Our approach is that we have to be good enough to attract new partners so we can benefit from knowledge transfer and synergies with foreign banks. Most of the regional and international banks are opening representative offices in Ethiopia, so they are on our doorsteps waiting for the door to be opened and we are also eager to work with anyone who knocks at the door.


How are you working to help SMEs grow and eventually even become the multinationals of Ethiopia?

The majority of our clients are currently SMEs, because of the nature of our economy and also because of our capacity. We support mainly small and medium enterprises, and we see they are growing significantly. This sector contributes a lot in terms of employment and to the overall economic growth. We want also to mix our portfolio by providing financial services to the larger organizations, but there is always a limitation because of the resources.

One of the characteristics of private banks in Ethiopia is that we have only one source of funding and it is limited and depository. There is no debt market in this economy. In finance, especially in banking, there is a saying that the ability of the banks to change the short-term liability into long-term assets makes them competitive. Because of the living standards of the country, most people are not saving for future investment but for future risks. We are trying to change that mentality and encourage long-term investments so we can keep the match the demand from the depositors and the demand from our borrowers.

We are also significantly supporting the government in terms of investment needs. For our growth model this is necessary, and we are very happy in terms of supporting the government development strategy. That brings a significant impact on the economy – the investments that are done in infrastructure, power and utilities have a significant impact and bring sustainable business for our banks too.

United Bank is a proud Ethiopian corporate citizen and purchased 2 million Birr Bond for the Grand Ethiopian Renaissance Dam last year. What is the responsibility institutions like yours have in order to enhance Ethiopians life standards?

Apart from that, we execute our social responsibility by supporting communities and disadvantaged groups and addressing their specific needs in the form of sponsorship and donation. One of the major projects is the support we extend to blind students by financing their supplies need in higher education.


Ethiopia and the UK have had long and fruitful relations. You did a master based in the English model as well. What is your assessment on the current diplomatic and commercial relations of both countries?

If you consider it from a diplomatic perspective, the relation between Ethiopia and the UK is more than 100 years old. We do have business relationships with some UK financial institutions. We want to develop those and there are some investors working on that, and United Bank too.

We want to increase our market share with the UK in terms of investments and in terms of having banking relationships with investors. Most of the time when investors come, they prefer to work with government banks than private banks. They do have their own reasons, but we were the ones who facilitated Diageo’s participation in the bid, and it was a good job if you ask the people from Diageo. At the last minute we had to facilitate their bid bond issue – the bid bond that was going to be submitted to the public enterprise. If that was not submitted on time to the public enterprise, they might have been disqualified from that bid. We did our best, even though there was some incompetency from the side, we had to try to accommodate and issue or counter guarantee for the bid bond immediately, and get the bid bond before the deadline. This is one of the biggest operations involving a UK firm in Africa. After that we didn’t have a significant relationship, but we are still trying. We are visiting them, we are knocking on the door, and since we are business people, we never stop visiting them in order to have more business with them, and I hope they will also consider that.

Apart from that, we are also approaching the DFID. There is a wing in the British Embassy that is actively involved in various development activities and recently we also facilitated and gave credit for some projects overseas. We are also facilitating their transactions. But we need to do more; we want to have more business relationships with UK enterprises.


Regarding the diaspora, how are you targeting it and making them aware that United Bank is here to be their partner?

With regard to the diaspora, we encourage them to have a banking relationship with United Bank, so that they can use it for their investments or even to support their relatives. Other than making transactions, they can open a foreign currency account here and they can open an account for their relatives and manage that transactions from their laptop by making transfers directly from that account. They can monitor their account also. Since they don’t have service charges, it’s free internet banking and we can support them in that regard. As it’s a foreign currency account, and the Birr is always depreciating, they can maintain it in pounds or US dollars, so there is only foreign exchange risk with the denominator foreign currency. Otherwise there is no risk with regard to the Birr; the Birr is always depreciating so they have more assets if they maintain the foreign currency account.


What has brought you the most satisfaction heading the bank over the past two and a half years, and why?

That is a very challenging question. When I came to this office, the Head Office Building project was one of our big projects. Making that happen is by itself one of the challenges. In fact, before I came to this office a lot of things were done, and I was also part of that process, but we didn’t sign the construction agreement with the contractor. So, that in itself was a lot of hassle and a lot of hard work for us. I was able to conclude the award and the project has already kicked off. It is a project that is going as per schedule.

Apart from that, our move in terms of financial inclusion is very important. Especially the agent banking; since it is unknown in Ethiopia it is very challenging. We have to develop the product, we have to look for partners, we have to look for the software, and we want to have that software in a different business model. We want to make it known to the public. If you look at agent banking and the multi-channel products in some African countries, the growth rate is unbelievable. People become easily accustomed to that product. When you come to Ethiopia, the growth rate is not as visible. Making agent banking or mobile banking known to the public in itself is still a challenge, as we have not yet conquered the market as we expect. Still we strive.