The first annual East Africa Finance Summit (EAFS) wrapped up in Ethiopia in December 2016. Business, academic, public institution, and industry leaders gathered for two days to talk about the future of the financial sector in the region.
By working collaboratively, rather than as individual countries trying to solve problems and promote growth alone, leaders hope that the region’s finance industry can find success in commonality. Ethiopia in particular is experiencing rapid growth in urbanization, population, and industrialization, and is in the midst of an information and communications technology (ICT) revolution.
About the Summit
EAFS was organized by Addis Ababa and Jimma universities, the Public Financial Enterprises Agency, i-Capital Africa Institute, and Addis Ababa Business Enterprises PLC.
Press information for the summit noted that financial services in East Africa have been changing significantly for the past two decades. These changes entail the integration of new reforms, an increase in institutional capacity, and the presence of cross-border banking between countries.
Pan-African banking networks are growing to the point where most countries – with the exception of Ethiopia and a few others – have a subsidiary of at least one Pan-African bank (PAB). The proliferation of PABs has increased competition for everything from loans to deposits.
However, leaders worry this growth may not be sufficient to support the economic future of East Africa. Some of the region’s shallower financial systems need competition to grow and implement sound financial instruments robust enough to handle an expanding economy. Kenya, the continent’s financial center, has embraced mobile financial innovations and now reports the highest share of adults using a mobile money account.
Leaders note, however, that some trends already are suggesting how the financial sector in East Africa will be shaped. These trends include customers seeking cheaper and more innovative financial solutions, more interest from international banks wanting to invest in the region, and ongoing growth of ICT. Leaders in these industries need to work together to forge a way forward for East Africa.
The summit was centered on the theme of “Building Competitive, Cooperation and Innovative Financial Sector in East Africa: Emphasis on Ethiopia.” Many of its speakers were based in Ethiopia, including Sintayehu Woldemichael, who opened the summit.
Woldemichael is the director general of Ethiopia’s Public Financial Enterprises Agency. At the summit he discussed the need to support financial institutions in East Africa and for policy makers to work together and learn from each other’s challenges and successes.
He noted that an increasing number of financial institutions are investing significantly in Ethiopia, and as a result the financial sector needs to ensure that the financial system is built through consistent technology application. “The financial system management in the country contributes to the increment in investment,” Woldemichael said at the summit.
Zemedeneh Negatu, managing partner of Ernst & Young Ethiopia, said the summit was an important means for identifying service challenges in the financial sector and discussing ways to strengthen the use of technology in the industry to make the system more globally competitive. Ethiopia, he noted, has the fourth-largest GDP in Africa after Nigeria, South Africa, and Angola.
Spotlight on Ethiopia
If Ethiopia continues its current growth trajectory, it could own more than $100 billion U.S. and overtake Angola as the third-largest African GDP. To accomplish that, banks must merge and consolidate their capital to promote stability in Ethiopia’s economy. Ethiopia now is home to seventeen different private banks, according to Negatu.
Ethiopian banking leaders said the country’s banks are profitable and are successfully implementing “fin-tech” (financial technology) into their management systems. Yehuala Gessesse, president of Abay Bank Share Company, said that studies should precede any bank merger. Deribie Asfaw, president of the Cooperative Bank of Oromia Share Company, stated that banks’ improved customer service and applications such as mob banking were contributing to their growth.
Conference attendees met with representatives from many areas of the financial sector, including banks, financial technology suppliers, regulators, and microfinance institutions. They also attend workshops and speaker sessions, including seminars led by these featured speakers:
The chairman of the United Bank SC (Ethiopia) board of directors, Eyesuswork discussed the role of corporate governance in local and national legislative authorities. Good public governance, he said, often creates good corporate governance.
Eyesuswork believes the insurance industry in Ethiopia should be subject to less government oversight and instead be directed by a special commission or agency that would include a member of the insurance industry on its board. He argues that this system could help promote fairness in the industry and ensure that all insurers adhere to the same laws and regulations.
The director of Institutional Transformation and Research FDRE for Ethiopia’s Public Financial Enterprises Agency, Chane gave an assessment of business loan delivery in Ethiopia based on a study of private business loan demand and delivery.
The study showed that factors such as banks’ tendency to focus on a small number of customers and a lack of transparency were prevalent in the business loan climate. He called for several changes, including improved loan delivery management and governance and establishing a secondary capital market.