Page 4 - Print Version Volume 22 - Number 1126
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Fortune Vol. 22 No. 1126 Nov. 28, 2021
Banks Scramble to KnowPage4             NEWS

Clients in More Depth

                                        The deadline to transition is in less than three months

        By HAWI DADHI                   Banks and microfinance institutions will have until February 2022 to compile customer data unless regulators                 he said.
                                                                                                             at the central bank deem it fit to grant an extension.
   FORTUNE STAFF WRITER                                                                                                                                              Regulators at the central bank
                                        process in the time left," said an   reasonable, we'll extend the           Hibret Bank uses a core banking                  argue the directive is key to
Financial institutions are              executive at the CBE. "The central   deadline," said the Vice Governor.     system from Oracle, which creates                monitoring transactions. Financial
scrambling to get a hold of account     bank should give us an extension."                                          a unique ID for account holders.                 institutions have been advised to
holders' personal information in                                             The directive requires banks           However, clients do not use the ID               look out for clients who provide
the wake of a directive from the        Regulators at the central bank       to assign unique identification        when opening additional accounts,                false information and make
National Bank of Ethiopia (NBE)         are willing to consider such         numbers (ID) to their clients and      leading to multiple IDs assigned to              frequent transactions that do not
requiring them to compile data          requests. The six-month transition   list all accounts by the client under  a client. The Bank operates a tool               match their income.
before the deadline comes to pass       was provided for the financial       the designated ID. In the absence      to filter and aggregate accounts
in February next year.                  institutions to implement certain    of a national digital ID system,       under the same name. Despite the                 However, bank employees
                                        systems, according to Solomon        compliance has been a daunting         inconvenience, Melaku finds that                 encounter most clients unwilling
The directive, issued last August,      Desta, vice governor of financial    task for the banks.                    the information gathered in the                  to share personal information such
commits commercial banks,               institutions at the NBE. Other                                              process is vital to determine the                as income.
microfinance institutions, and          requirements have to be fulfilled    The absence of a national ID           size of the unbanked segment of
payment instrument issuers              immediately, he told Fortune.        system and biometric data make it      the population.                                  "We're having a difficult time filling
to include a tax identification                                              challenging to identify duplicates,                                                     in the information," said a sales
number (TIN), average monthly           "If there are indeed issues that     according to Melaku Kebede,            "The data can be used to study                   officer at one of the commercial
income, and occupation under all        require more than six months         president of Hibret Bank.              banking and spending patterns,”                  banks.
client account information. The         to finalise and we find them
requirements also apply when                                                                                                                                         At the end of last month, the
opening new accounts. Banks and                                                                                                                                      central bank issued a circular
microfinance institutions have been                                                                                                                                  that introduced adjustments to
given a six-month window to set up                                                                                                                                   the directive. Signed by Vice
a Know Your Customer (KYC) unit                                                                                                                                      Governor Solomon, it allows banks
at their headquarters, to update                                                                                                                                     to accommodate and include
customer information and set up                                                                                                                                      low-income and undocumented
a system to monitor transactions                                                                                                                                     nationals who do not possess
deemed "suspicious."                                                                                                                                                 identification documents, instead
                                                                                                                                                                     using biometric data (photographs
Commercial banks have been                                                                                                                                           and fingerprints). However, these
instructed to strengthen fraud                                                                                                                                       accounts cannot be opened
monitoring activities and submit                                                                                                                                     through a proxy while maximum
daily reports to the central bank.                                                                                                                                   deposits are limited to 300,000 Br.
These reports were previously                                                                                                                                        Neither can such accounts be used
reviewed quarterly.                                                                                                                                                  to make any incoming or outgoing
                                                                                                                                                                     transfers.
The central bank has also
compelled banks to review and           Vehicle License Plate Production to Go Private
authorise all new accounts at these
units within five days of receiving           There are 1.3 million vehicles on the country's roads
clients' requests. Deposits made
before authorisation are to be kept          By SAMUEL BOGALE                Shemsu, deputy head of the former      5,000 Br for the provision of                    “It should focus on logistics,” said
in a temporary account. However,                                             Federal Transport Authority.           new plates, deeds, third party                   Matiwos.
banks are not required to demand          FORTUNE STAFF WRITER                                                      insurance, and for issuing annual
supporting documents from their                                              “The Ministry will focus on            vehicle inspection certificates.                 Dagmawit Moges, minister of
customers for verification. If          The Ministry of Transport &          regulatory services,” he told                                                           Transport & Logistics, echoed the
customers are unwilling or the          Logistics is to delegate part of     Fortune.                               The Public Transport Service has                 same view last week while briefing
banks cannot update depositor           its roles to the private sector,                                            prepared nearly 5,000 plates                     the media.
information within six months, the      including vehicle license plate      Officials of the Ministry want         after the mandate was temporarily
account will be deactivated until the   production and distribution to       to continue to oversee fees            transferred to it recently. The                  “The government shouldn’t engage
data is completed.                      regional offices.                    vehicle owners are charged for         Ministry says sufficient materials               in every activity,” she said.
                                                                             the outsourced services and            are available to produce around
Banks have started contacting           Issuing licence plates was           retain the assignment of license       1.5 million license plates. Close                More services handled by the
their clients by phone to gather        interrupted after the Federal        plate numbers. The Ministry has        to 1.3 million vehicles are on the               Ministry will be outsourced
details and create a comprehensive      Transport Authority, an executive    temporarily delegated the duties       country's roads, according to the                shortly, disclosed the Minister.
customer database. Among them is        organ under the Ministry, dissolved  to one of its four remaining           latest data from the Ministry.                   These include certification of
Zemen Bank, which serves 180,000        in October as part of a government   executive organs - the Public                                                           technician competency and
account holders.                        restructuring. The restructuring     Service Transport Service.             Haile of the Association hopes                   provision of temporary vehicle
                                        includes folding and reassigning                                            to see the private sector do a                   plate registration, renewal, and
"It's hard to comply with this in the   six of the 10 federal agencies       Vehicle owners, however, are not       better and more efficient job in                 replacement.
Ethiopian context," said a senior       that used to operate under the       to directly approach the Service       license plate production. It will
manager at Zemen. "But it's a           auspices of the former Ministry      but their respective regional and      end malpractices at government                   The liberalisation of services such
relatively easy task for banks with     of Transport.                        city administration transport          offices, according to him.                       as license plate manufacturing is
a small customer base."                                                      bureaus, which then charge                                                              only a small step compared with the
                                        Several vehicle owners have been     the drivers fees after adding          "The sector has a reputation for                 government's actions to empower
Compliance with the "know your          inconvenienced by the disruptions,   administrative costs. The Authority    rent-seeking," he said.                          the private sector and limit itself to
customer" rule will challenge           according to Haile Belay, head of    used to charge the bureaus                                                              regulatory activities, according to
industry giants such as the state-      Unique Cross-Country Vehicle         between 574 Br and 677 Br for the      The Ministry should be a regulatory              Birhanu Zeleke (PhD), a transport
owned Commercial Bank of                Owners' Association.                 aluminium plates depending on          body that should not involve                     management expert teaching at
Ethiopia (CBE), with over 30                                                 size. The Addis Abeba Transport        in service provision, according                  Kotebe Metropolitan University.
million accounts active. The CBE        The production of plate numbers      Bureau, through its branches           to Matiwos Ensermu (PhD),
has not been calling clients to gather  is being transferred to the          in the districts, charges vehicle      associate professor of logistics                 “Beyond the small services like
information, choosing instead to        private sector once structural       owners a combined fee of around        and supply chain management at                   these, the private sector is capable
compile existing documents and          reorganisation at the Ministry is                                           Addis Abeba University.                          of handling bigger activities,” he
request additional details when         completed, disclosed Abdulber                                                                                                said.
clients visit one of the nearly 1,800
branches it operates.

"It's impossible to finalise the
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