This action might not be possible to undo. Are you sure you want to continue?
Bureau and Credit Information System in a half day ceremony organized at Hilton Addis, Ethiopia, in August 2011. The new system is an upgrading of what NBE had introduced in 2004 in which 12 banks operating then were involved. This Credit Information System marks an important milestone in financial infrastructure development in Ethiopia, as it introduces a state-of-the-art platform to facilitate sophesticated credit information sharing in the country. The launch heralds the beginning of a new approach in credit processing, extension and management. It is the beginning of the end of collateral based lending, which dominated our entire banking history, H.E. Getahun Nana, Vice Governor of Financial Institutions Supervision at NBE, said in his opening remark at the ceremony. The government has launched an ambitious but achievable five year Growth and Transformation Plan. The plan’s financing need is huge and domestic sources are expected to finance a significant part of it. And this launch would increase access to finance, he added. Existence of credit bureau and credit reporting system enables financial institutions to make informed decisions. This in turn has benefits both to the customer and the provider of the services. Making informed decision is a fundamental issue creditors have to address as part of their routine loan provision. In the absence of information the risk is high. However, provision of loans is still traditional in that many financial institutions are more comfortable lending to large corporate bodies. At the moment access to finance in developing countries is less than 25 percent as opposed to more than 90 percent in the developed countries, Mr. Uli Zeisluft, Principal Financial Specialist with International Finance Corporation said in his presentation. The new system facilitates inclusion of the informal sector of the economy in the formal economy, he added. Creating an enabling environment for sustained private sector growth requires a strong and well developed financial sector that can meet their financing needs. Up to now a major obstacle in responding to this challenge has been the very great reliance on collateral as the primary determinant in deciding whether to approve a loan request, Mr. Greg Tolumin, World Bank Acting Country Director underlined at the launching ceremony. The World Bank financed the project; International Finance Corporation provided techinical support; and Compuscan Direct (CSD) did installation of the infrastruture and implementation of the system. However, the new system would only be a technology platform improvement and more need to be done to further improve credit market in Ethiopia, Mr. Adamou Labara, Resident Representative of IFC Ethiopia said on the occasion. “I urge all banks and micro-finance institutions to actively participate in the credit information system,” Ato Getahun underlined. News: NBE to set up online credit history The financial sector regulating arm of the Ethiopian government, National Bank of Ethiopia (NBE), is set to commence an online client credit history at a cost of four million dollars in one month. The real time approach of sharing information with the central data system is expected to significantly reduce the information gap between lender and borrower. It also enables the regulator to assess and prevent systemic risks in the financial sector. “The system provides information about a borrower’s behavior. Does the borrower have a positive credit history or a negative one? Such information helps one to make a decision of whether or not to lend much more easier,” explained Uli Zeisluft, Principal Financial Specialist at International Financial Corporation Advisory Services.
IFC would be pleased tomorrow to provide its technical support to NBE with the overall objective of developing the private sector. The technology upgrading project will totally transform and expand the capacity of the former Credit Center under the Bank Supervision Department of NBE. collateral information and court related issues. will not be an amendment of the existing but an abrogation. the proclamation would change many things about the industry.The system includes in its database borrower’s addresses. if ratified. the regulator is forced to make use of the Tax Payers Identification Number (TIN) provided by the Ethiopian Revenue and Custom Authority. still. It will replace manual correspondence between banks and NBE about both commercial and consumer loans borrowed once a month enabling a real time information exchange. In the near future it will also include insurance.” added Mathiwos. contributing not only to the reduction of NPL but also to the stabilization of the financial sector in general. “Non performing loans (NPL) will significantly fall following the implementation of the project because every lender will have full information about their clients’ credit history. Some of the major changes in the new draft include a restriction of individual and family shareholding to only five per cent and an end to the credit policy of selling to non-state clients. Financial Sector Capacity Building Project Coordinator at NBE. The program was financed by the World Bank and technically consulted by the International Financial Corporation (IFC). Draft Insurance Proclamation Rewrites Existing Requirements Addis fortune newspaper Includes five per cent cap for each shareholder.” the project coordinator explained. “As we did yesterday and as we are today. the amount of time credit has been in use. Country Director of IFC at Ethiopia. the draft. If ratified. but. Above all. limits coverage by credit to the government A new draft insurance proclamation that completely rewrites the existing proclamation has been submitted to the Council of Ministers.” said Mathiwos Shamo.” said Adamou Labara. previous credit performance. There are similarities between the existing proclamation and the draft. current levels of indebtedness. This in itself facilitates access to credit and lowers credit costs thereby enhancing profitability for all parties involved in the lending and borrowing process. repealing the licensing and . the partner’s information. This reduces risks of default. “At present the database is set to link borrower’s information from banks and microfinance institutions. Experts in the financial sector argue that the creation of such an information mechanism will broaden and ensure fair access to credit by reducing the level of asymmetrical information on the part of tender about the borrower. If the rate of default goes down. a World Bank Group financial advisory entity. “Since there are no unique identifiers such as an address on a national level. profitability will subsequently increase. it ensures better financial resource allocation.
and knock on doors in order to get our money. “Insurance policies issued on a partial or full credit basis shall be null and void. creating an uneven playing field. but I think that 10pc would be a fairer limit in order to control one person from dominating the sector. Out of the total amount sold. and children under 21 to a maximum share of 20pc. according to Meseret. EIC has the largest market share in the sector. This article has been a source of pleasure for at least the legal experts at three insurance firms who talked to Fortune sharing the same voice. A shareholder with a two per cent share is also considered an influential shareholder.” an underwriter at Nice Insurance told Fortune. as well as to United Insurance. There are 14 insurance companies currently operating. It does not attract as many shareholders as the banking sector.” The draft. according to data from NBE. also includes a provision for more inclusions by a directive that NBE will produce after the ratification of the draft. They were asked for input on the draft as early as 2008. officials from insurance companies say. Ethiopian Insurance Corporation (EIC). which allows credit sales to state clients. the new draft brings that down to five per cent. whose share acquisition would surpass the limit set by the draft proclamation. but it is nowhere in sight. the exemption effectively gives the government-owned insurance company a clear advantage. The company had decided. out of which only one.” states the new draft. it is very few shareholders that come up with the money to establish an insurance company.” she argued. to raise its paid-up capital to 100 million from 60. thinks that five per cent is a low number for insurance companies. then rules have to apply to everybody.” It is true that United may not have problems selling shares.supervision of the Insurance Proclamation of 1994. However. “I have heard about the new insurance proclamation for almost four years now. “The resources we spend on collection are truly a headache. Meseret is not happy about the exemptions made for policies of federal and regional governments and their agents. The 13 other insurance companies share 48pc of the premium production in the country.000 Br each during the first week of December. While.” said an expert in the legal department of a private insurance company. the existing proclamation restricted a shareholder. We have to hire collectors.” said Meseret Bezabih. initially. “The insurance sector is a long-term investment. a spouse. Eyesuswork Zafu. while the rest was . if the new draft becomes a law.” he said. former president of United Insurance and the largest shareholder.000 Br. Professionals in the sector were referring to the proclamation as the “no premium. I can easily transfer my shares. which is why I have invested a lot in the company. bringing the number of shareholders up from 280 to 312. on October 28. so. just as in banks. 78pc was paid in cash.000 shares worth 1. and is not allowed to have any shares in any other insurance company. general manager of United Insurance. because most of these are supplied by the government’s own insurance company. “I was in the insurance sector for a long time. “If the insurance sector is to grow. “The risk of covering insurance on credit is too great both for the insurance and National Bank of Ethiopia (NBE). The new proclamation has been many years in the making. no cover” proclamation. “If the proclamation comes out. opposing the five per cent restriction. The insurance industry will resemble the banking industry in some respects. speaking of the credit sale. is government owned. 2011. It sold out 40. spend money on phone bills. and know it very well.
we might have to compete with foreign insurance companies. presidents of other private insurance companies in the market have said. several insurance companies have reported being approached by NBE to fill out forms suggesting an amount for setting paid-up capital. . The draft proclamation does not set the paid-up capital but stipulates that a directive will be issued in the future that will set the amount. The NBE has declined to comment about the draft proclamation.subscribed. However.” Penetration of the insurance sector is poor in Ethiopia. and seven million Br for both kinds of insurance combined. The insurance business only contributes to 0. because we need to be competitive in the market.” Meseret told Fortune.041pc of the country’s gross domestic product (GDP). four million Br for long-term insurance. “We have suggested 60 million Br. The paid-up capital of insurance companies is also likely to be changed if the draft proclamation is ratified. The 1994 proclamation included within it a provision that requires insurance companies to have three million Br in paid-up capital for general insurance. the gross written premium of life assurance was 103 million Br and the gross written premium for general insurance was 1.8 billion Br. according to publications from NBE. Raising the amount would further strengthen the insurance sector. Shareholders will find the time to transfer or relinquish shares if they are given the same amount of time that banks were given. In 2010. “If Ethiopia is going to join the World Trade Organisation (WTO).
The problem we have in the World Trade Organisation (WTO). about the functioning relationship he has developed with Meles. Switzerland. Giorgis. is not that we do not have a platform. we apply . Excerpts: WTO CHIEF Ethiopia Must Take Its Time in Joining Fortune: In your recent statement made in Davos. now. We have a rules-based system. we have a multilateral platform that has been built constantly for the last 60 years. aspire to join the multilateral platform while others are trying to dodge it? Pascal Lamy: In trade matters. two shadows are cast on the multilateral trading system. Lamy was here last week attending the African Union (AU) Summit and met Prime Minister Meles Zenawi. In between are least developed countries (LDCs) that are lined up to become members of this Organisation.Provoked by the economic crises in the rich world since 2008. Rich countries have increasingly become protectionist. which you said are avoiding the multilateral trading platform and focusing on bilateral and regional trade discussions. We administer and follow that every day. a system and rules that govern multilateral trade. you voiced frustration over how things were going with major countries. which Director General Pascal Lamy argues is the norm rather than the exception. he told Tamrat G. In an exclusive interview. managing editor. we have that. mostly in the least developed category. As long as we do not change the rules we have. Where we have a problem is that the negotiations for the new version of the system are not yet concluded. institutionalised as the World Trade Organisation (WTO). while at the same time opting for regional trade agreements with binding and reciprocal international pacts over the movement of goods and services. Why would some countries.
The price paid by Ethiopia is to provide WTO members the appropriate level of stability. [too]. we cover 97pc of world trade. and the others also benefit from it playing by the rules of the same game.0 is being implemented. In order to join and benefit from the system. if I want to run the New York Marathon. and fairness. It is like. is entitled to specific treatments. Ethiopia is now the largest (in population size) country among non-members of the WTO. Q: Where do you place Ethiopia in these terms? I think it is both. The WTO is providing the certificate that Ethiopia matches the standards. I have to provide a certificate by a doctor that I am fit to run a marathon. the WTO will be a universal organisation. It works two ways. Roughly 30 countries are in negotiations to join it. Cambodia. investors are sure that Ethiopia plays by the rules of the game. Countries want to join because they want to benefit from the insurance policy that this multilateral trade system provides in exchange for their concessions in the global economy. That is what is called a multilateral trading regime. if Ethiopia trades with a country. Ethiopia. This implies a lot of preparation. If your economy needs some sort of organising. others cannot object to Ethiopia’s exports. Ethiopia benefits from playing by the rules of the game. and it will join the WTO only when members have the certainty that Ethiopia’s trade regime is alright with the standards. For the moment. The reason that Version 3. currencies. as a least developed country (LDC). transparency. Once Ethiopia is member of the system. Ethiopia might not be required to make the same commitments as Russia or Saudi Arabia. then. But. What Ethiopia wants to do in joining the Organisation is to benefit from these rules of the game. climate change. The rule is to be in and the oddity should be to be out.0 which is not ready. predictability. and if this country decides that it does not like Ethiopian exports. it will benefit from trade access to a . The reality is that it mostly brings both benefits. and transparency in its trade regime. it is the market access that is the main benefit. Once this has been done. It is WTO Version 3. Ukraine. and multilateral coordination. but WTO Version 2. It has moderately stepped into the global economy but without any insurance policy on the rules of the game. Of course. Trade is not an exception. Where there has not been agreement yet is on the new version. Ethiopia will benefit from more market access. stability. the rules of which they have accepted and regulate the way they trade. and Saudi Arabia that the moment countries get the WTO quality standard.0 is not agreed [upon yet] is because of fundamental political disagreements between big players. Second will be the quality level for investors. The multilateral system cannot be in good shape if members of the system are in bad shape. where does the biggest benefit comes from? The proportion of reforms depends on the country. and checkups on domestic regulatory systems. it is playing the game of international relations by itself. There is a synergy and dialectic between what it does to join and upgrade its trade regime to WTO standards. It is basically opening trade with predictability. After Russia’s accession to the WTO. it is the upgrading of the regulatory system that brings the most benefit to the economy. It is a bit like China at the time [of accession]. You can see that in trade. verification. If your economy is extremely competitive. Q: If you were to emphasise the benefits that joining the WTO brings and the advantages that come from introducing domestic reforms in the process of accession. We know very well from experience and recent examples like Vietnam. As it is now. the [global economic] crisis is not helping. The others are playing the game. the country can do what it wants.the rules we have.
we will still have to work on the legislative action plan: a sequence of processes that involves various ministries. Q: Are you happy with the progress. Others may have a different view on what is good for Ethiopia. Q: Talking to Prime Minister Meles Zenawi. which is on goods. I have to make sure that we mobilise enough resources globally. and the United Nations Development Programme (UNDP) in order to raise the necessary awareness and knowledge in Ethiopia and enhance capacity. where we came from. I understand. Then. he wants to do this [based] on conditions that he believes will benefit his country. That is my normal work. After all. It inevitably takes some time for all legislation on property. Once that is done. he wants his country to join the organisation because he knows that remaining outside of this organisation would be at a cost to the development of his country. There have been moments of activity as well as slowdown. but also from the World Bank. which is the tabling of its offers on tariffs for goods to other WTO members. It is a question of this process leading to the end. So far. which.market larger than Russia or Saudi Arabia. do you have a sense that there is that political will or determination to join the WTO? I have been hearing you talk about how political will is lacking. and the maximum tariff that Ethiopia will set. regulatory agencies. and what the next steps should. we all know. the International Trade Centre (ITC). We have been back to a good level of activity for two or three years. we have had a very long and friendly discussion with Prime Minister Meles Zenawi. Although he is a prime minister of a country and I am director general of the WTO. [so] Ethiopia always has the freedom to go below it. in a broader sense. It also takes time to stabilise and consolidate the trade regime in terms of market access. then. and we have a sort of personal relationship that allows us a lot of informal exchanges. He is a friend of mine. is twofold. I have to help the demand and the supply to meet. with all clarity and transparency. Ethiopia is on the verge of advancing one more step in this direction. we will go on to the negotiations on services. it is for the Ethiopian government to decide what is good and what is not good and the balance. It is a long process of preparation and maturation. so far? It started its formal application in 2003. true? My role here in Ethiopia’s accession. But. Ethiopia will have to tell other WTO members. among different member countries in the negotiation process. We reviewed where we were. which sectors will be open for foreign operators. On services. so far? It is not a question of me being happy. of course. and the end of the process is. now. There is a [large] bulk of regulatory infrastructure with the necessity to upgrade. Q: Are you satisfied with the pace that Ethiopia has been progressing. Q: Talking to him. and licensing requirements to be compiled. do you think that he is prepared to open the economy to the extent that . investment. we will have crossed one more step. all are entitled to freedom of thought. at the end of the day. It is [just] a ceiling. There is supply and demand. And. the sort of reenergising that started two years ago has worked. and Parliament. My feeling is that. Once the negations on goods are done. not only from the WTO. is a sensitive one. Q: How do you characterise your meeting with him? It was inevitably a technical meeting. not in sight. Then. On this subject. we have a functional relationship. yet.
Cancun was in 2003. the US and China. On top of that.5pc growth rate. You have to see both sides of the question. Both the World Bank and the IMF estimated that growth for the world economy will only average 2. Since then. We had a meeting in Davos to reconfirm this. it is very unbalanced growth. Q: Considering what happened to the global economy in 2011. The easier to conclude [negotiations] must be approached in the short-term. But. which was the agenda of industrial tariff reduction between.negotiating countries such as the US.” I would say if I am the Ethiopian authorities. unilaterally. I want to do this at the necessary quantum. Trade is. this is something that must be negotiated with the necessary transition period so that the country can have time to adjust. When the economy slows down. [though]. If I can do more unilaterally. negotiations never die. Q: Do you think Doha has hope to survive? As is always said. Canada. “This Ethiopian market. What is happening is that members have decided to do it pragmatically. yes? The last time we tried the big package full speed was in 2008. I know that I have joined and benefited from the system on the terms that I can implement. I will take precautions because I will be bound within the WTO to a level of commitment that I am sure I can live with. you seem to have had a change in strategy where you would rather have agreements made on smaller issues and avoid the most controversial ones. Approach the low hanging fruit. supply . in most ways. The world economy is slowing down. then. and we are now testing that in Geneva. we have been stuck on one of 20 issues. At the end of the day. Often. or the EU. while the big package is stuck by this geopolitical conundrum. but I can always do more. because the developed nations are to grow by a marginal 1. and. I will do it and test it. supply shrinks and trade shrinks.” I would say if I am the US. Mexico. What are the bases of your fears? The numbers forecasted on world economy almost similarly show that growth will stay lower than that of 2011. they are never dead. They sometimes get into deadlock. That is the natural cycle.5pc. We nearly got there in July 2008. the approach is to explore the possibilities silently and pragmatically. What we did in December 2011 was to agree that. They sometimes go [just] to stop and then go again. “I have to be careful about what I do and how much and when I open up because I want my system to not be broken. Q: Since the WTO Ministerial in Cancun. the EU. a translation of supply and demand. you projected that 2012 would be a very difficult year for trade. trade slows down. and Canada are demanding? It is under negotiation. we now have to try a sort of issue-byissue. if I can do more on my own. I will negotiate to remove it from my commitments. I would like to access this market. they go on for decades and decades. Thus. is good. which is a sort of Chinese rate. more piecemeal approach. Q: What sort of initiative do you think should be taken by the multilateral platform to move forward from the Doha Round? What needs to be done is to test the ones that can be concluded early. When demand grows. I know of no international negotiations that die. basically.5pc. growing at over 10pc a year. [When] demand shrinks. while developing countries will see a 5. which is lower than the previous year.
There are regional integration processes that can serve as building stones for continental effort. they tell you. do in order to offset this bleak projection? For a continent like Africa. Q: But. This will make the economy of the continent more resilient and less prone to external shocks. the EU. Part of your job is to build that capacity. 60pc. which provides the WTO with an overarching mandate to mobilise more development assistance for the benefit of trade capacity building. awareness raising programmes. China fronts. full stop. Closing a support programme may be a good sign that the support worked. We all know that LDCs are limited by their resources in their negotiating efforts. Africa’s trade with itself is only 10pc. indeed. If you compare Africa with other regions of the world. they can accede to the WTO differently than richer countries. is to strengthen trade within itself. Regional integration processes are of the utmost priority for Africa. Look at the way the Chinese do it.grows and trade grows. There is now a roadmap based on regional integration processes. specifically designed for trade negotiation capacity building. it is not all bleak. On top of that. My advice for Africa. They will be there for three years. I would doubt whether it is working. which I think is here to stay. Q: What do you want to see African countries. you will not trade properly with the rest of the world. or partnership programmes with multilateral organisations. How much capacity building are you prepared to do now? The capacity issue is well recognised by the WTO. Because the LDCs have a lower capacity. Q: Joining the WTO is all about having negotiating capacity. If you do not trade with your neighbours. There is bad news in traditional markets and good news for new markets. Given the global uncertainty. is to start at home with your neighbours. It is as simple as that. particularly LDCs. closed. as I said at the AU Summit [last week]. The amount of official development assistance (ODA) going for trade capacity building has increased by 40pc or 50pc since 2005. This is the area that has seen remarkable growth. We also have specific programmes. you have an incredible number of countries and an incredible number of landlocked countries. which is only part of the trade relationship for Africa. recently. the WTO has been criticised for not doing enough on these terms. But. the first thing you might notice is that there are many countries in this part of the world. as Ethiopia was about to start the real talks. we saw a USAID programme. the US. you know that it just does not happen simply because you wish so. Q: But. It is bright for Asia. which is a growing part of [trade] relationships for Africa. The accession regime in itself recognises this lower capacity issue. This. right? It is not only about a wish. After all. the most important thing will be growing intraAfrican trade. I strongly believe. If you look at Africa from the moon. . We are looking at remarkable achievements in those areas. either WTO-specific trainings. that I always say frankly. There is a huge potential for the Africanisation of African trade. and 40pc. My own view. will have huge trade consequences. It is the way that Africa prefers to follow. we have the Aid for Trade Programme. and North America trade with themselves 60pc. respectively. you earlier mentioned. It is bleak for the EU and probably the US. if I see a support programme that has been there forever. like what happened on the EU. Asia.
Q: Are you impressed with the building that they built in Addis Abeba [for the AU Headquarters]? Who would not? It is built to impress. .