The Impact of Job Satisfaction

Contents

Introduction        

Overview of the Banking Sector        

2.1        Regulatory Environment        

2.2        Banks Operating in the Country        

2.2.1        Branch Network        

2.3        Deposit of Commercial Banks.        

2.3.1        Trends in Deposit        

2.3.2        Structure of Deposit        

2.3.3        Market share        

2.3.3.1        Banking Industry        

2.3.3.2        Private Banks        

The Role banks in Ethiopian Economic growth        

Introduction

Over the past decade, Ethiopia has achieved impressive economic growth averaging close to 11 percent annually. The development of a vibrant and active private banking system that complements existing public sector work is considered important to Ethiopia’s economic progress by a range of experts, including the World Bank, the African Development Bank (AfDB), and the International Monetary Fund (IMF). These bodies view the expansion of the private banking system in a prudent and controlled manner as key to the success of Ethiopia’s “Growth and Transformation Plan (GTP),” an ambitious five-year development plan launched in 2010 to assist the country in reaching “middle income” status.

Banks play an important function in the economy of any country. They are the main intermediaries between those with excess money (depositors) and those individuals and businesses with viable projects but requiring money for their investment (creditors). Banks have at least the following functions: lending money, depositing others’ money, transferring money locally or globally and working as paying agent.

This paper seeks to analyze the role of commercial banks in the development of Ethiopian economy over the past decades.

Private commercial banks are a recent phenomenon in the Ethiopian economy. They came into existence after the downfall of the Dergue regime. Before the Dergue, in the Imperial regime, private commercial banks used to operate in the economy. But after Dergue came to power, private commercial banks were nationalized and amalgamated with the state owned banks, then after that Ethiopian economy was dominated by state owned banks. And in the time of the Dergue they were not allowed, and not only banks but also there were no other private sector - it was a socialist economy.

After the downfall of the Dergue private commercial banks were allowed to operate and they started to have market share, and now they have some growing market share in the Ethiopian economy and are some of the major players in the Ethiopian economy. Their number is also growing from time to time and currently new commercial banks are also joining the market.

Though private commercial banks are becoming major players in the Ethiopian economy there are challenges and prospects they face. Some are related with the internal organization of the banks themselves and others are external. Like any other business organization banks, specifically private commercial banks require a suitable business environment and global economic recessions have created a challenge to the banking industry but recently this global recession has started to subside and the world economy particularly the economy of Western countries is gradually recovering .

Overview of the Banking Sector for the Last quarter of 2015

The Commercial banking ecosystem consist a total of Nineteen banks (Three public owned and    Sixteen privately owned). In general, all the commercial banks have been performed well in the past except the public ones in the areas of deposit mobilization, extension of loans and advances as well as foreign currency generation. But, this phenomenon might not be continued due to the strong competition and tighter regulatory environment which incorporates recently the Housing Project of Addis Ababa.

1. Regulatory Environment

Banks are still required to purchase NBE Bills amounting 27% of their loan disbursement as per directive no MFA/NBEBILLS/001/2011 which was effective since April 2011 and highly affects their liquidity. In addition, the housing project of Addis Ababa is also another challenge for the industry in mobilization of deposit. Particularly, banks involved in Red Oceans Strategy, are going to confront it with the fact that, the majority of their clients are highly in need of home that are designed by the government of Ethiopia. The project will be implemented through constant saving in Commercial Bank of Ethiopia for the coming five to seven years. Recently, National Bank of Ethiopia reduced the minimum ratio of deposits Ethiopian banks required to hold as a reserve from 15% to 10%. Similarly, the amount of ‘liquid assets’ to be held as a proportion of deposit was also decreased from 25% to 20% to partially resolve liquidity problem of the industry.

1. Banks Operating in the Country

Currently, there are a total of nineteen banks which have got license to operate in the Country. Of which, three are public banks (CBE, CBB, DBE,) and the rest are private (Dashen, Awash, Abyssinia, Wegagen, United, Nib, Lion, CBO, OIB, Zemen, Berhan, Bunna, Abay, Addis, Debub Global and Enat Bank).

1. Branch Network

The total number of private bank branches in the country has been increasing from time to time and reached to 2,350 as of December 2014, an increase by 163 branches as compared to September 2014. The reason for this increasing number of branches in the country is just to mobilize deposits, which is the base for all activities of business. It is believed that, CBE’s aggressive effort in branch deployment contributed a lot to the increase in the total number of branches in the country.