Zemen : A Bank Blossoming Through Challenges

Zemen Bank Share Company is all about giving customers choices and convenience. For Zemen, banking is not limited to just branches and it sees it as “something customers do, not somewhere they go.”

The Company abides strictly by the laws and regulations of the jurisdiction where it operates, and observes the guidelines and rules issued by regulatory authorities of Ethiopia. It also keeps its corporate governance system under constant review to ensure that it is in line with international and local best practices since the first day of operation October 2008.

The Bank’s profits have been surging. In 2020/2021 financial year, it registered the record gross profit of 1.4 billion Birr.  Zemen’s performances surpassed expectation which was designed for the financial firm at the beginning of the financial year.

On the stated financial year, the bank had projected to earn 2.54 billion Birr in revenue from different banking services, while the actual performance hovered around 2.9 billion Birr which was almost 13 percent higher than the projection set at the beginning of the year. Similarly, the revenue performance has climbed by 34 percent compared with the 2019/20 financial year.

The Bank has been registering growth despite the challenges the economy has been facing. Kaleyesus Bekele of Origins Media sat down with Dereje Zebene, President & CEO of Zemen Bank Share Company; excerpts;

Though it has encountered with various ups and downs, Zemen Bank’s overall performance in the 2020/2021 fiscal year was a promising one. “Registering such a success through the presence of Covid-19 pandemic and other challenges was not an easy task,” Dereje Zebene, President and CEO of Zemen Bank Share told Origins Media.

He recalls that compromising certain issues and crafting plans accordingly had necessitated. For the first time, Zemen Bank passed over 1 billion Birr gross profit in 2019/2020 fiscal year. In 2020/2021, it registered the record gross profit of 1.4 billion Birr.

The balance sheet has been grown to 25 billion Birr. Zemen bank has moved to raise its paid up capital to 5 billion Birr prior to the National Bank of Ethiopia (NBE) order to all the Banks to do so.

“We have been working to surpass that figure and encouraging results have been registered even before two years of the deadline,” Dereje said.

Zemen has close to 3.5 billion Birr paid up capital including its legal reserve that figure reached 4.5 billion Birr. “In that case, Zemen is working to fulfill the mandatory paid up capital requirement in a year,” he assures.

NBE has set a deadline of five years for the banks to raise their paid up capital to 5 billion Birr. Though the economy has been battering due to the Covid-19 pandemic and ongoing war in the northern parts of Ethiopia, the banking industry has registered a good performance. “In that sense, I believe Zemen Bank has registered massive successes,” as Dereje puts it.

Expanding banking technologies

Zemen Bank Share Company is a champion and pioneer of banking technology through launching a single branch business model. Through time, however, the growing number of banking service clients and expansion of businesses, the Bank has been forced to expand its branches.

Technology is not a one-time issue—it should be checked and updated every time, he said. Customers need and technological improvement every time, which necessitates its continuous alteration.

Mobile and internet banking services by Zemen is one of the world-class services including the Omni-channel service, which is a multichannel approach, according to Dereje.

Contactless payment technologies have also been expanded especially due to the Covid-19 pandemic. That’s mainly aims to dwindle human-assisted banking transactions.

Zemen’s business philosophy

On the basis of what I will choose my business philosophy is a basic thing.  “We’ve to think in such a way—should we accomplish all the tasks?” Or prioritizing our tasks and assigning other tasks for those who are eligible. Identifying your tasks which you’re about to be successful is the forefront to do list. “Therefore, Zemen Bank clearly identified its target customers. We can appraise the journey of Zemen Bank through the last 12 years,” said Zebene.

“I understand that there is complain on Zemen Bank as it’s not considering the lower-incomers,” he assures, and replies: “That’s not the fact on the ground. The minimum deposit is 5,000 Birr because our branches are very few.”

“If we bundle together all potential customers in one, there would more likely to be a dissatisfaction due to delayed services. And, we are trying to accommodate such things as our branches expand,” he pledges.

“For instance, we pay interest rate every day for each customer who deposits 5000 Birr. We are paying daily interest rate not in a monthly basis,” he said, adding, “In my opinion, the business model that we have pursued has profited Zemen Bank so far”.

Zemen Bank inked a deal with China Wu Yi Limited Company, a Chinese company, to construct its headquarters at Senga Tera, at the heart of Ethiopia’s financial district in August 2016.

Dereje said in this regard, “Construction of the new headquarters reached at 85 percent. Due to the Covid-19 pandemic and delay in imported construction materials its construction was stalled”.

“We are planning to enter into the new headquarters until March 2022,” as he puts it.

The new headquarters has 3 underground basements and 33 storeys. It has been constructed at a total cost of over 1 billion Birr.

Crafting 10 years of strategic plan

In its 12 year journey Zemen has implemented two different five year strategic plans. While due to the effect of Covid-19, it has been delayed in engaging or hiring of another strategic planner that is to be conducted by an independent consultant.

Zemen Bank awarded a global giant PricewaterhouseCoopers (PwC) to design a ten year strategic plan in December 2020.

Based in London, PwC has offices in more than 155 countries and is one of the leading global professional service providers. It is however, its first time to offer a strategic plan in the financial sector support in Ethiopia.

“We have to be aware of the current scenarios in the banking industry to predict future advancements,” he said. “Whether to extend the current business model or altering it has been scrutinized.”

“By so doing, we are planning ahead to make Zemen Bank a strong competitor in the market,” he stressed.

“To that end, PwC has given a responsibility to conduct a survey regarding the local global dynamic situations and coming up with a sound business model, and they are about to finalize their duties,” Dereje explained.

He further elaborated: “The only thing remaining is synergizing the strategic objectives, business model and initiatives with the structure of the Bank”. “That would be completed either in a month or two months.”

Blossoming through challenges

The pandemic has had a more severe impact on the performance of the banking industry, he says, adding, “We have to carefully examine its impacts and the ongoing war now, the only thing we should be scrutinizing is that impacts of these challenges in figures.”

The hotel and tourism industry almost ceased providing much of its services for two years due to the Covid-19 pandemic. Firms like factories importing raw materials for their production suffered from a devastating impact due to the pandemic.

“The aforementioned firms are working with banks and currently they have been through a difficulty of repaying their loan,” Dereje explained. The longer the repay back period become, the worse it would be for the banks.

Regarding the ongoing war, banks have branches across the country, they have to deeply examine the amount of their damages, he opines.

Non-Performing Loans (NPL) are high and the collateral’s such as houses and buildings located at the war fronts/areas are at stake.  “The devastating impacts of these dilemmas against the banking sector are yet to be observed,” he argued.

There’s a demand and supply gap in Ethiopia. “That supply gap such as loan disbursement has been provided by the banks,” he said, adding, “There’s no mystery for profit of banks in challenging times; they offer resources such as loans, dictate prices and get profitable.”

Protection of local banks from foreign banks competition has some contribution for their profits, according to Dereje.

He further delved into the entry of overseas banks into Ethiopia, “I am in favor of their entry, what I differ is by their level of involvement.”

Once they enter, they will bring a competition, technology, human resource development.

They are a motivational factor for local banks, he says.

“But, we have to be careful about our country’s local context,” he warns. “They will focus on few targeted areas instead of expansion of their businesses to rural areas”.

He went on saying, “They will prefer buying shares from banks and working on cities with having a good business potential. Therefore, they can enter the Ethiopian market but we have to be careful on how they will join the local market—we can’t afford to open fully open our door to them.”

“We have to be meticulous in evaluating their impacts of entering our market.”