Remittance Opens the Doors for High Competition
As holidays approach, it is almost an expected scenario for any observer to hear banks advertising about the name and the number of remittance service operators and their regional coverage's in terms of operation. Such adverts are aggressively broadcasted during big holidays like Easter, which are intended to initiate customers to send their money using operators.
However, stakeholders within the banking sector argue that despite such efforts, what is called the impact of a huge deportation of a significant number of immigrant from Kingdom of Saudi Arabia (KSA), where Ethiopians were also a part of it and in turn a decrease in the flow of remittance that comes from this area is still felt by the sector as a drawback. According to data from World Bank, almost 370,000 migrants were deported from KSA. The number of Ethiopians was estimated to be almost 150,000.
Out of the players in the banking sector, Commercial Bank of Ethiopia (CBE), a state owned bank has 20 operators in its list that have been working with it, including Western Union, Money Gram, Bole Atlantic and Dahabshiil are the top operators from which a significant number of transactions is taking place, according to Ephrem Mekuria, communications head CBE.
And as far as Easter holiday is concerned, the Bank is extensively using different media outlets to get the attention of those who are expected to send money to their folks in Ethiopia.
For instance, in the past couple of weeks, CBE has been using radios such as Fana Broadcasting Corporations (FBC), Sheger 102.1 and Oromia Radio and in the same token, television stations like Ethiopian Broadcasting Corporations (EBC) and EBS.
"We are almost advertising in every media outlet everyday as the holiday is one of the peak seasons for the flow of remittance," said Ephrem.
Despite some freezing down on the inflow of remittance from KSA, the money that came from North America and South Africa is expected to increase. The Bank expects to record more than 1.2 million transactions within the week prior to the holiday.
In terms of delivering the service to customers, since CBE has now reached 930 branches across the country, it will make the service easily accessible, Ephrem says. Moreover, given the fact that starting from the time that the Bank branches' have connected online, it broadens the scope area where remittance service had been given. The old system would employ checking with the centre to make sure that the remittance had arrived.
However, Kebede Feten, one of the Bank's customers whom Fortune spoke to in the afternoon of April 7, 2015 while waiting to receive money sent from U.S from a friend of his, seems unconvinced about this fact, saying that there is still a delay in the service due to network failures and concentration of many users in one centre.
"I use CBE at least every holiday to receive money from friends and family from United States and what I have been observing is that there are still long lines of customers who are forced to spend long hours," said Kebede.
Admitting to this, Ephrem said that this is a problem that has been occurring on other services of the Bank such as electronic money exchange.
With its branches throughout the country, CBE has the major share of the country's remittance inflow. For the 2013/14 fiscal year, the Bank had registered 5.5 billion dollars from foreign exchange, which is an increase by 720 million dollars from the previous fiscal year.
Sharing the argument by Ephrem that the inflow from KSA had decreased and the echo still exists is Mulugeta Asmare, president of the Bank of Abyssinia (BoA).
"We still feel the reduction and in general sense, some portion of the remittance inflow out of the total that used to come from Middle East and Saudi has a role in it," said Mulugeta.
Last year, the Bank saw a decrease in the volume and the revenue it collected from remittance flow.
BoA was established in 1996 with an authorized and paid-up capital of 50 million Br and 17.8 million Br, respectively. Currently, the Bank has 103 branches across the country with 1.5 billion Br in authorized and 929.3 million Br in paid-up capital, with a total deposit balance of 9.4 billion Br.
During 2013/14 fiscal year, the Bank had gained 89 million Br from foreign exchange dealings and rates fluctuation, which went down by 15pc from the previous year.
The remittance inflows to Ethiopia in 2013/14 are directly related to the number of Ethiopians working abroad, with main sources being the United States, 34.5pc; Israel, 15.7pc, Sudan 11.2pc, and KSA five percent, according to a 2015 UNDP document, the Overall Development Financing Envelope in Ethiopia and Implications for the UN.
BoA previously used to work with only six foreign exchange operators, such as Western Union, Dahabshiil, Xpress Money, and Turbo Cash. But as of 2014/15, the Bank has added two more operators as a channel, i.e Ezremit and Money Gram.
Ezremit mostly works as a channel for money that flows from Bahrain and Oman. In regards to agreeing with operators, permission has to come from the National Bank of Ethiopia (NBE) after studying and assessing the records of each operator, the Bank will sign a contract with these operators on different basis, according to Mulugeta.
Different terms will be a part of the contract starting from agreeing on the commission to the way of solving any problems. For instance, if operators are new, demanding them to have a deposit here will be part of the contract in case any problems occur after the Bank makes payments. This is to make sure that the Bank will get its commission from such service.
Adding to this, a senior officer of a private bank who wants to remain anonymous told Fortune that the current status of remittance inflow in general is not as satisfactory as it should be.
According to Abdulfetha Mohammed, a country representative of Bole Atlantic and a foreign exchange operator in Ethiopia, operators may have a number of service charging systems which vary from area to area and mostly, this variation is affected by the scope of competition among operators in the same regions.
As the competition is fierce and high, the operators probably may charge low amount service charge from senders, said Abdulfetha. The rate may range from as low as three to four percent to as much as 10pc. He says that the impact of the decline of remittance from KSA was mostly seen in the black market. Most of the illegal immigrants that were deported from Saudi Arabia mostly used the informal sectors for years to send money home, which directly translated to the black market.
The flow from the Middle East is now increasing but at a decreasing rate, added Abdulfetha.
The amount of hard currency in Ethiopia was affected not only by decline in remittances, according to a macroeconomist who is close to the sector, but also by the decline in export revenue.
The share of remittances as percentage of GDP averaged 5.7pc in the past five years, the UNDP report says. Given that earnings from exports cover only around 28pc of the total import bill, the role of remittances in narrowing the balance of payment gap is significant, reads the report by UNDP on the remittance flow prior to 2012/13.
The shortage of hard currency resulted from poor performance of the export, specifically coffee and the decrease of hard currency from Middle East, said macroeconomist. And since the black market, is the mirror of the formal market we can see shortage in both markets, he said.
According to data from World Bank sample survey, 39pc of Ethiopians are with relatives abroad. Out of these, 18pc are regular remittance recipients, with an average sum of 120 dollars received at least five times a year. And it is estimated that two million Ethiopians living abroad registered 400 million dollar of remittance flow.
Contrary to this data, National Bank of Ethiopia (NBE) indicated that Ethiopia has managed to collect 622 million dollars of remittance during the first quarter of 2013/14 and 702.7 million dollar on the same season of 2014/15. This data is a sum total of individual transfers both in cash and in kind, transacted via formal sector and an estimation of underground remittance. The central bank has no exact figures showing the weight of underground remittance.
Source: AllAfrica
As holidays approach, it is almost an expected scenario for any observer to hear banks advertising about the name and the number of remittance service operators and their regional coverage's in terms of operation. Such adverts are aggressively broadcasted during big holidays like Easter, which are intended to initiate customers to send their money using operators.
However, stakeholders within the banking sector argue that despite such efforts, what is called the impact of a huge deportation of a significant number of immigrant from Kingdom of Saudi Arabia (KSA), where Ethiopians were also a part of it and in turn a decrease in the flow of remittance that comes from this area is still felt by the sector as a drawback. According to data from World Bank, almost 370,000 migrants were deported from KSA. The number of Ethiopians was estimated to be almost 150,000.
Out of the players in the banking sector, Commercial Bank of Ethiopia (CBE), a state owned bank has 20 operators in its list that have been working with it, including Western Union, Money Gram, Bole Atlantic and Dahabshiil are the top operators from which a significant number of transactions is taking place, according to Ephrem Mekuria, communications head CBE.
And as far as Easter holiday is concerned, the Bank is extensively using different media outlets to get the attention of those who are expected to send money to their folks in Ethiopia.
For instance, in the past couple of weeks, CBE has been using radios such as Fana Broadcasting Corporations (FBC), Sheger 102.1 and Oromia Radio and in the same token, television stations like Ethiopian Broadcasting Corporations (EBC) and EBS.
"We are almost advertising in every media outlet everyday as the holiday is one of the peak seasons for the flow of remittance," said Ephrem.
Despite some freezing down on the inflow of remittance from KSA, the money that came from North America and South Africa is expected to increase. The Bank expects to record more than 1.2 million transactions within the week prior to the holiday.
In terms of delivering the service to customers, since CBE has now reached 930 branches across the country, it will make the service easily accessible, Ephrem says. Moreover, given the fact that starting from the time that the Bank branches' have connected online, it broadens the scope area where remittance service had been given. The old system would employ checking with the centre to make sure that the remittance had arrived.
However, Kebede Feten, one of the Bank's customers whom Fortune spoke to in the afternoon of April 7, 2015 while waiting to receive money sent from U.S from a friend of his, seems unconvinced about this fact, saying that there is still a delay in the service due to network failures and concentration of many users in one centre.
"I use CBE at least every holiday to receive money from friends and family from United States and what I have been observing is that there are still long lines of customers who are forced to spend long hours," said Kebede.
Admitting to this, Ephrem said that this is a problem that has been occurring on other services of the Bank such as electronic money exchange.
With its branches throughout the country, CBE has the major share of the country's remittance inflow. For the 2013/14 fiscal year, the Bank had registered 5.5 billion dollars from foreign exchange, which is an increase by 720 million dollars from the previous fiscal year.
Sharing the argument by Ephrem that the inflow from KSA had decreased and the echo still exists is Mulugeta Asmare, president of the Bank of Abyssinia (BoA).
"We still feel the reduction and in general sense, some portion of the remittance inflow out of the total that used to come from Middle East and Saudi has a role in it," said Mulugeta.
Last year, the Bank saw a decrease in the volume and the revenue it collected from remittance flow.
BoA was established in 1996 with an authorized and paid-up capital of 50 million Br and 17.8 million Br, respectively. Currently, the Bank has 103 branches across the country with 1.5 billion Br in authorized and 929.3 million Br in paid-up capital, with a total deposit balance of 9.4 billion Br.
During 2013/14 fiscal year, the Bank had gained 89 million Br from foreign exchange dealings and rates fluctuation, which went down by 15pc from the previous year.
The remittance inflows to Ethiopia in 2013/14 are directly related to the number of Ethiopians working abroad, with main sources being the United States, 34.5pc; Israel, 15.7pc, Sudan 11.2pc, and KSA five percent, according to a 2015 UNDP document, the Overall Development Financing Envelope in Ethiopia and Implications for the UN.
BoA previously used to work with only six foreign exchange operators, such as Western Union, Dahabshiil, Xpress Money, and Turbo Cash. But as of 2014/15, the Bank has added two more operators as a channel, i.e Ezremit and Money Gram.
Ezremit mostly works as a channel for money that flows from Bahrain and Oman. In regards to agreeing with operators, permission has to come from the National Bank of Ethiopia (NBE) after studying and assessing the records of each operator, the Bank will sign a contract with these operators on different basis, according to Mulugeta.
Different terms will be a part of the contract starting from agreeing on the commission to the way of solving any problems. For instance, if operators are new, demanding them to have a deposit here will be part of the contract in case any problems occur after the Bank makes payments. This is to make sure that the Bank will get its commission from such service.
Adding to this, a senior officer of a private bank who wants to remain anonymous told Fortune that the current status of remittance inflow in general is not as satisfactory as it should be.
According to Abdulfetha Mohammed, a country representative of Bole Atlantic and a foreign exchange operator in Ethiopia, operators may have a number of service charging systems which vary from area to area and mostly, this variation is affected by the scope of competition among operators in the same regions.
As the competition is fierce and high, the operators probably may charge low amount service charge from senders, said Abdulfetha. The rate may range from as low as three to four percent to as much as 10pc. He says that the impact of the decline of remittance from KSA was mostly seen in the black market. Most of the illegal immigrants that were deported from Saudi Arabia mostly used the informal sectors for years to send money home, which directly translated to the black market.
The flow from the Middle East is now increasing but at a decreasing rate, added Abdulfetha.
The amount of hard currency in Ethiopia was affected not only by decline in remittances, according to a macroeconomist who is close to the sector, but also by the decline in export revenue.
The share of remittances as percentage of GDP averaged 5.7pc in the past five years, the UNDP report says. Given that earnings from exports cover only around 28pc of the total import bill, the role of remittances in narrowing the balance of payment gap is significant, reads the report by UNDP on the remittance flow prior to 2012/13.
The shortage of hard currency resulted from poor performance of the export, specifically coffee and the decrease of hard currency from Middle East, said macroeconomist. And since the black market, is the mirror of the formal market we can see shortage in both markets, he said.
According to data from World Bank sample survey, 39pc of Ethiopians are with relatives abroad. Out of these, 18pc are regular remittance recipients, with an average sum of 120 dollars received at least five times a year. And it is estimated that two million Ethiopians living abroad registered 400 million dollar of remittance flow.
Contrary to this data, National Bank of Ethiopia (NBE) indicated that Ethiopia has managed to collect 622 million dollars of remittance during the first quarter of 2013/14 and 702.7 million dollar on the same season of 2014/15. This data is a sum total of individual transfers both in cash and in kind, transacted via formal sector and an estimation of underground remittance. The central bank has no exact figures showing the weight of underground remittance.
Source: AllAfrica
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