Zemen Bank has lost two of its top-executive mangers, Helaway Tadesse and Sebhat Belayneh, senior vice president and vice-president for international banking respectively, based on the allegation that they have involved in loan approval process, in which they are believed to have a close relationship with the borrowing company.
The letter dated August 2nd, 2016 signed by Getahun Nana, vice-governor of the National Bank of Ethiopia (NBE) makes reference to two particular loan approval procedures close to six years ago.
The first case in which the Senior Vice President Helaway was implicated was the loan granted in 2010.
Helaway, prior to his engagement in Access Capital had experience in the macro-economic and close acquaintance with Ermias T. Amelga, major shareholder in pioneer agro industry. The letter came without citing any procedural trespass but rationale of conflict of interest. The same allegation is the ground for Sebhat’s suspension. Though in principle it is the same conflict of interest issue that revoked for his suspension, the case refers to a loan granted to FAME IMPEX trading plc .
He, according to the letter, has favored the company due to the personal relationship with its managing Director giving a preferential treatment when allocating hard currency. The country had no clear cut guideline on priority list for allocating forex, up until NBE released a directive in February 2016.
NBE earlier at the in end of 2015 took similar measure of suspending top management of Cooperative Bank of Oromia for mismanagement of Forex.
“As long as the loan review process strictly follows the procedures and policies of the Bank and NBE directives, invoking conflict of interest as a standalone factor should not go far,” a legal department head of one of the leading private banks commented on the case.
The two loans were approved through different mechanisms, as stricter rules and procedures were put in place after what seems to be the first bump of Zemen with the central bank two years after its establishment.
In the Pioneer Agro industries loan case, the ultimate decision and endorsement used to lie on the President.
A group of four including the senior vice president, Helaway Tadesse and three other department mangers used to review table a recommendation for the President approval, which is expected to ensure procedural adherence.
In the second case, where Sebaht is implicated the loan review boards a standing group of five. The president, two vice president and two department mangers make a collective decision.
“The approval on the particular loan request was unanimous,” Sebhat explained. “I see no reason why my personal relationship has to come to the forefront.”
Helaway on the other hands fully defends what took place as fully within the bounds of NBE’s directives and being typical to Zemen’s vision and peculiarity.
Zemen’s vision reads “… to bring a new dynamism to the financial sector and the banking business in Ethiopia, with values including being progressive and innovative.”
This is the line Helaway invokes in defending the out of the box processes of Zemen Bank as providing clean loan, without collateral, which in average reaches 30pc of the loan over the past years.
“We have proved to be successful in trying out this system common in the rest of the world, but pioneers in the industry” he argues.
The Bank’s profit has grown by an average of 27pc annually over the past three years, reaching over 200 million in 2014/15.
Shareholders reaction to the move stands out as mixed up.
Some call the action of removing “a great disservice to the Bank”, referring to the rich experience of the two vice Presidents.
Helaway, graduate of Princeton University (MPA, Economics & Public Policy) and Reed College (BA, Economics), joined Zemen Bank from the International Monetary Fund, since the establishment of the Bank in 2008. He has served the Bank as a senior vice president and a briefly as an acting President in 2010/11.
Sebhat joined the Bank later in 2010. Before he joined he has served as deputy manager for international Banking Department of Bank of Abyssinia.
Another group that claim to have been closely following on the Bank’s management loopholes still look forward to a follow-up serious measures.
Fortune’s effort to reach the board of directors and President of the Bank could not be successful.
The suspended bank mangers, not convinced by the decision are looking for possible ways of appeal.