The third interest free banking (IFB) provider, Shabelle Bank, is to commence operation with dual head quarter concept.
The bank which was formed with the merger of one of the strongest micro finance institutions, Somali Micro Finance Institution (SMFI) and the under formation Shabelle Bank, has officially received its commercial banking license to boost its operation under full-scale financial scheme.
SMFI jointly with the under formation IFB, filed its application in May last year to the National Bank of Ethiopia (NBE) to evolve itself to become a bank under the brand name Shabelle.
During the license receiving ceremony which was held on Sunday January 30, the bank announced that its fresh share selling which has recently been floated will play a huge role to boost its paid up capital by five folds, from its current about half a billion birr mark.
The bank that drew its name from one of the longest rivers in the Horn of Africa, Wabi Shabelle, a river that runs across the river basin of southern Ethiopia through Somali region flowing to the Indian Ocean via Somalia, said that it will commence commercial banking operation in less than two months time.
Khadar Ahmed, President of Shabelle said that his bank has set a target to introduce inclusive service within 45 days.
Khadar, who is the former General Manager of SMFI, formed in 2011, said that the bank will continue its micro finance operation like in past times, while the banking operation which may include different services such as international banking, shall be introduced in the near future.
He said that the bank has continued providing its MFI services through its 42 branches which includes one each at Dire Dawa and Addis Ababa.
The President told Capital that the bank is currently under preparation to commence operation from its one of the two head quarter in Addis Ababa, “we have already leased a building around Wollo Sefer at Bole to open our main branch and head office.”
“We have a plan to operate within a twin head office concept from Addis Ababa and Jigjiga, which is the capital of Somali region,” he added.
Even though it is not mandatory by the regulatory body to operate the head office at Addis Ababa, most of the relation that is highly frequent with NBE has made requisite for Shabelle to open its head office in the nation’s capital.
Khadar said that the bank should have a head office at Addis Ababa to keep the harmony and run regular communications with the regulation body.
“It’s safe to say, the business headquarter of our bank is Addis Ababa and the political head office at Jigjiga, though the final decision may be seen in future,” he explained.
According to the plan, the bank will aggressively expand its branches throughout the country in the near future.
Regarding capital expansion, the bank has targeted to sell additional two billion birr worth of shares for interested share buyers from locals and the diaspora in the coming six months time.
Currently, the bank’s paid up capital is 513 million birr which will surge by five folds in the coming six months’ time, when the shares floated are bought.
The under formation IFB, that is now merged as Shabelle, boasts of a diaspora community who have already bought shares of the bank. “The new shares being floated is expected to receive a boost from their contributions,” Khadar remarked.
The access to finance in Somali region is very low due to religious issues which have now recently been eased by the government.
The under formation IFB was handled by the Somali community to narrow the gap to access to finance under Sharia law in the region.
Since the government allowed the operation of full-fledged IFB, so far Zamzam and Hijra banks are the two banks that have opened their door. Shabelle now is to become the third to get the license, while Ramis is also expected to get its business license in the near future as the fourth and last IFB bank that will be formed under former minimum paid up capital requirement of 500 million birr.
SMFI under Sharia compliant has provided financial service in Somali region and other places like Dire Dawa and Addis Ababa. It has registered extraordinary achievement on mobile banking that is power by Bel Cash.
Few months ago Khadar expressed, “we are confident that our hello cash mobile money service is the leading in the country since we have 750,000 users from urban to rural transactions starting from 2015.”
In a directive issued August 2020, NBE allowed microfinance institutions to upgrade into full-fledged banks. So far the two giant, Amhara and Oromia MFIs, have upgraded to a bank under the name of Tsedey and Sinqe respectably.
Under the revised directive of NBE for banks minimum capital requirement that was issued in the second week of April 2021, the newly coming Shebele Bank will fulfill its minimum paid up capital to 5 billion birr in seven years time.