By most predictions, the past fiscal year should have been a devastating one for the banking industry. The country's political situation was dire, and there was a liquidity shortage earlier in the year, the likes of which had not been seen for two decades. The banks' commitments in the corporate social responsibility sphere also grew, with contributions to massive projects such as "Dine for the Nation" tightening their balance sheets. In the fourth quarter, a once in a generation pandemic closed most of the world, and Ethiopia moved forward with limited lockdowns.
It was not all well, no doubt, but it was also not all bad either for the country's fledgling banking industry. Outstanding loans, excluding corporate bonds, increased by a fifth in value; deposits mobilised by banks increased by 15.8pc to a little over one trillion Birr; and they added nearly a thousand new branches to their network, increasing the total by about 20pc.
In the face of it, it seems that the banks have weathered what is perhaps their most challenging year in more than two decades. But look under the surface, experts and industry insiders say, and there is reason to worry.
This is hard to deny since the National Bank of Ethiopia (NBE) had to essentially bail them out with an injection of 14.5 billion Br in loans owing to their unprecedented liquidity crisis. Also coming at a momentous time was the repeal of the mandatory bond that compelled them to surrender 27pc of their gross loans and advances.
Industry insiders add that all of these have not improved the banks' circumstances as much as would have been liked.
"Except for the banks with solid capital, I didn't see substantial growth of other banks," said Zafu Eyessuswork, the board chairperson of Hibret Bank and a veteran of the financial sector.
Neither is the future as rosy as the banks would like, at least for those currently in business. Space is increasingly getting crowded, with over a dozen banks queued to join the industry, and the country's telecom monopoly, Ethio telecom, is set to engage in financial services. Experts caution that the industry's wellbeing is a product of the economic environment.
"It's very difficult to have a healthy financial sector while the economy is unstable," said a macroeconomist.
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