Page 4 - Print Version Volume 22 - Number 1126

Fortune Vol. 22 No. 1126 Nov. 28, 2021
Banks Scramble to KnowPage4
Clients in More Depth
By HAWI DADHI
FORTUNE STAFF WRITER
Financial institutions are
scrambling to get a hold of account
holders' personal information in
the wake of a directive from the
National Bank of Ethiopia (NBE)
requiring them to compile data
before the deadline comes to pass
in February next year.
The directive, issued last August,
commits commercial banks,
microfinance institutions, and
payment instrument issuers
to include a tax identification
number (TIN), average monthly
income, and occupation under all
client account information. The
requirements also apply when
opening new accounts. Banks and
microfinance institutions have been
given a six-month window to set up
a Know Your Customer (KYC) unit
at their headquarters, to update
customer information and set up
a system to monitor transactions
deemed "suspicious."
Commercial banks have been
instructed to strengthen fraud
monitoring activities and submit
daily reports to the central bank.
These reports were previously
reviewed quarterly.
The central bank has also
compelled banks to review and
authorise all new accounts at these
units within five days of receiving
clients' requests. Deposits made
before authorisation are to be kept
in a temporary account. However,
banks are not required to demand
supporting documents from their
customers for verification. If
customers are unwilling or the
banks cannot update depositor
information within six months, the
account will be deactivated until the
data is completed.
Banks have started contacting
their clients by phone to gather
details and create a comprehensive
customer database. Among them is
Zemen Bank, which serves 180,000
account holders.
"It's hard to comply with this in the
Ethiopian context," said a senior
manager at Zemen. "But it's a
relatively easy task for banks with
a small customer base."
Compliance with the "know your
customer" rule will challenge
industry giants such as the state-
owned Commercial Bank of
Ethiopia (CBE), with over 30
million accounts active. The CBE
has not been calling clients to gather is being transferred to the
information, choosing instead to
compile existing documents and
request additional details when
clients visit one of the nearly 1,800
branches it operates.
"It's impossible to finalise the
NEWS
The deadline to transition is in less than three months
Banks and microfinance institutions will have until February 2022 to compile customer data unless regulators
process in the time left," said an
executive at the CBE. "The central
bank should give us an extension."
Regulators at the central bank
are willing to consider such
requests. The six-month transition
was provided for the financial
institutions to implement certain
systems, according to Solomon
Desta, vice governor of financial
institutions at the NBE. Other
requirements have to be fulfilled
immediately, he told Fortune.
"If there are indeed issues that
require more than six months
to finalise and we find them
Vehicle License Plate Production to Go Private
There are 1.3 million vehicles on the country's roads
By SAMUEL BOGALE
FORTUNE STAFF WRITER
The Ministry of Transport &
Logistics is to delegate part of
its roles to the private sector,
including vehicle license plate
production and distribution to
regional offices.
Issuing licence plates was
interrupted after the Federal
Transport Authority, an executive
organ under the Ministry, dissolved to one of its four remaining
in October as part of a government
restructuring. The restructuring
includes folding and reassigning
six of the 10 federal agencies
that used to operate under the
auspices of the former Ministry
of Transport.
Several vehicle owners have been
inconvenienced by the disruptions,
according to Haile Belay, head of
Unique Cross-Country Vehicle
Owners' Association.
The production of plate numbers
private sector once structural
reorganisation at the Ministry is
completed, disclosed Abdulber
at the central bank deem it fit to grant an extension.
reasonable, we'll extend the
deadline," said the Vice Governor.
The directive requires banks
to assign unique identification
numbers (ID) to their clients and
list all accounts by the client under a client. The Bank operates a tool
the designated ID. In the absence
of a national digital ID system,
compliance has been a daunting
task for the banks.
The absence of a national ID
system and biometric data make it
challenging to identify duplicates,
according to Melaku Kebede,
president of Hibret Bank.
Shemsu, deputy head of the former
Federal Transport Authority.
“The Ministry will focus on
regulatory services,” he told
Fortune.
Officials of the Ministry want
to continue to oversee fees
vehicle owners are charged for
the outsourced services and
retain the assignment of license
plate numbers. The Ministry has
temporarily delegated the duties
executive organs - the Public
Service Transport Service.
Vehicle owners, however, are not
to directly approach the Service
but their respective regional and
city administration transport
bureaus, which then charge
the drivers fees after adding
administrative costs. The Authority
used to charge the bureaus
between 574 Br and 677 Br for the
aluminium plates depending on
size. The Addis Abeba Transport
Bureau, through its branches
in the districts, charges vehicle
owners a combined fee of around
Hibret Bank uses a core banking
system from Oracle, which creates
a unique ID for account holders.
However, clients do not use the ID
when opening additional accounts,
leading to multiple IDs assigned to
to filter and aggregate accounts
under the same name. Despite the
inconvenience, Melaku finds that
the information gathered in the
process is vital to determine the
size of the unbanked segment of
the population.
"The data can be used to study
banking and spending patterns,”
5,000 Br for the provision of
new plates, deeds, third party
insurance, and for issuing annual
vehicle inspection certificates.
The Public Transport Service has
prepared nearly 5,000 plates
after the mandate was temporarily
transferred to it recently. The
Ministry says sufficient materials
are available to produce around
1.5 million license plates. Close
to 1.3 million vehicles are on the
country's roads, according to the
latest data from the Ministry.
Haile of the Association hopes
to see the private sector do a
better and more efficient job in
license plate production. It will
end malpractices at government
offices, according to him.
"The sector has a reputation for
rent-seeking," he said.
The Ministry should be a regulatory
body that should not involve
in service provision, according
to Matiwos Ensermu (PhD),
associate professor of logistics
and supply chain management at
Addis Abeba University.
he said.
Regulators at the central bank
argue the directive is key to
monitoring transactions. Financial
institutions have been advised to
look out for clients who provide
false information and make
frequent transactions that do not
match their income.
However, bank employees
encounter most clients unwilling
to share personal information such
as income.
"We're having a difficult time filling
in the information," said a sales
officer at one of the commercial
banks.
At the end of last month, the
central bank issued a circular
that introduced adjustments to
the directive. Signed by Vice
Governor Solomon, it allows banks
to accommodate and include
low-income and undocumented
nationals who do not possess
identification documents, instead
using biometric data (photographs
and fingerprints). However, these
accounts cannot be opened
through a proxy while maximum
deposits are limited to 300,000 Br.
Neither can such accounts be used
to make any incoming or outgoing
transfers.
“It should focus on logistics,” said
Matiwos.
Dagmawit Moges, minister of
Transport & Logistics, echoed the
same view last week while briefing
the media.
“The government shouldn’t engage
in every activity,” she said.
More services handled by the
Ministry will be outsourced
shortly, disclosed the Minister.
These include certification of
technician competency and
provision of temporary vehicle
plate registration, renewal, and
replacement.
The liberalisation of services such
as license plate manufacturing is
only a small step compared with the
government's actions to empower
the private sector and limit itself to
regulatory activities, according to
Birhanu Zeleke (PhD), a transport
management expert teaching at
Kotebe Metropolitan University.
“Beyond the small services like
these, the private sector is capable
of handling bigger activities,” he
said.