ZamZam Bank, an Emerging Bank, Weighs In on What Foreign Bank Entry Means for Ethiopia

This year, Ethiopia’s economy will invite optimistic phenomena as the nation takes bold steps to reshape its financial landscape. The shift to a floating exchange rate marks a pivotal moment, fostering transparency and encouraging investor confidence. Alongside this, the establishment of the Ethiopian Securities Exchange is set to open new doors for businesses and investors, providing a platform for capital growth and economic dynamism. Adding to this momentum, the entry of foreign banks promises to bring global expertise, increased competition, and a fresh influx of capital, positioning Ethiopia’s economy for a transformative leap forward. However, while the capital market presents immense opportunities, experts warn that the entry of foreign banks could pose significant challenges to young and emerging banks.

ZamZam Bank, one of Ethiopia’s pioneering interest-free banks, was officially established in 2020, making history as the country’s first full-fledged Islamic bank. As Ethiopia opens its doors to foreign banks, ZamZam is among the emerging banks likely to feel the impact of increased competition, facing pressure to innovate and solidify its market share amidst a rapidly evolving financial landscape.

“When we talk about foreign banks entering the Ethiopian market, they will primarily come from neighboring Central Eastern countries,” said Melika Bedri, CEO of ZamZam Bank. “We are currently investigating which banks will enter, with the intention of forming partnerships and working together.”

In its first year, ZamZam Bank faced a loss of 145.42 million Birr due to economic adversities. However, the bank’s strategy of boosting income through financing and investment activities ultimately turned its fortunes around.

She added that the strengths of foreign banks lie in their human capital, financial resources, and advanced technology. “Just as our shareholders have supported us in the past, they will continue to strengthen ZamZam’s financial base,” she said. “With our focus on innovative technology, we are committed to developing impactful products that will enable us to compete with international banks”

According to her, ZamZam Bank is one of the beneficiaries of the floating foreign currency system. “Thanks to our prompt service in approving foreign currency, supporting businesses and travel, and successfully participating in the auction organized by the NBE, as well as partnering with international banks and local companies, ZamZam has been able to secure higher foreign currency generations,” she said.

ZamZam Bank maintains the highest reserve ratio among all banks in Ethiopia, according to her. “This can be supported with evidence; we’ve implemented this measure to ensure the safety of our customers,” she said.

To align with the growing trend, including the entry of foreign banks, ZamZam Bank is revising its five-year strategy. The CEO said that previously, banking was the only option in finance, but now the capital market is emerging. ZamZam bank is actively working with the Ethiopian Capital Market Authority to secure a leading position in Sharia-compliant products.

Moreover, she mentioned that the bank is strengthening its relationships with international financial institutions, including the World Bank.