Monday, October 26, 2020
Wardheer News
  • Global News & Politics
  • News
  • Slideshow

New Currency Notes Gets 1 Million Ethiopians Into Banking System

By Samuel Gebre and Simon Marks

 Ethiopian currency notes advertised outside a United Bank branch in Addis Ababa, on Oct. 15. Photographer: Simon Marks/Bloomberg

Ethiopia’s effort to stamp out counterfeiting by introducing new currency notes is pulling people who’ve never had a bank account into the financial system.

Over the past four weeks, almost 1 million previously unbanked Ethiopians have handed in their two-decade-old banknotes, according to the central bank. In exchange, they were given a bank account from which they can draw the new notes. The regulator is trying to deter cash hoarding that enables corruption and illegal trading to thrive, and escapes the tax net.

The rush of applications forced the nation’s biggest commercial lender to assign more tellers to only handle money changing at it’s main branch next to it headquarters in the capital, Addis Ababa. The Commercial Bank of Ethiopia branch gained at least 1,000 customers in the past month, while many others deposited cash in accounts that had been dormant.

“On the first day of the new currency notes, you wouldn’t believe what happened here — everybody came,” said Nebyou Birhanu, who heads digital services at CBE. “The money is coming into the bank.”

Only 35% of Ethiopian adults held a bank account in 2017, lagging peers such as neighboring Kenya, where the ratio is 82%, according to the World Bank.

The Horn of Africa nation of 100 million people is following a process that flopped in India. There steps in 2016 to ban high-denomination currency notes to try weed out cash gained through illegal means backfired as economic growth slowed and millions of daily wage earners lost their livelihoods.

While Kenya’s demonetization process that started last year went smoothly, the equivalent of about $68 million was not returned, according to the central bank. South Sudan is also contemplating demonetization to curb illicit financial flows.

For Ethiopia, the initiative has added 31 billion birr ($830 million) to the 990 billion birr of deposits that were in the country’s 19 banks at the end of March. The central bank estimates there was 92 billion birr of unbanked cash in Ethiopia in July 2019.

“We expect more people, in the rural and urban areas, to open bank accounts,” National Bank of Ethiopia Governor Yinager Dessie told state television last week.

The central bank is preparing to allow non-financial institutions to offer mobile-money services, opening up banking to local phone companies.

To ward off that threat, Commercial Bank of Ethiopia updated its banking app to allow customers to get credit, pay utility bills and transfer cash more easily, said Nebyou.

Dawit Belay, a 36-year-old car importer, said he supported the drive. He spoke as he withdrew cash at United Bank SC’s Gandhi Branch in central Addis Ababa, where tellers were tending to the steady flow of customers.

“About the new currency, I feel like it’s very safe,” he said. “It’s good for the whole community, as everything comes inside the system. We’re not going to use as much cash anymore.”

Source: Bloomberg

Leave a Reply

You must be logged in to post a comment.