Ethiopia: Dashen Embarks On Interest-Free Banking Service

Nov 08, 2017 | Addis Fortune; All Africa

Following the finalisation of its headquarters, Dashen Bank is to embark on interest-free banking (IFB) services after getting approval from the National Bank of Ethiopia (NBE) on October 25, 2017.

The service involves payments without interest and will be available on separate counters at the bank's branches. It aims to grab the attention of individuals, companies, enterprises and non-governmental institutions. IFB was announced concurrently with the inauguration of the Bank's newly constructed 24-storey headquarters, costing a little over a billion Birr. Sprawled on 3,495sqm of land, the finishing works of the building were executed by MIDROC Construction. IFB service is an option similar to conventional banking systems except differing on the concepts of interest rates and exclusion of businesses engaged in gambling, sales or production of pork and alcohol. Dashen's IFB service, known as Sharik, will be implemented in one-third of the Bank's branches, which has reached 329 to date, unlike Bank of Abyssinia that got the green light from the central bank to execute the service in all of its branches. "We want the service to grow naturally," said Mesfin Bezu, IFB director at the Bank, explaining the reason for the service being limited to a few branches. Services that are provided under IFB include deposits, loans, foreign exchange and remittance. The services of the Bank under IFB are four: Amanah- keeping money safe on trust, Qerd- a current account that allows transactions with cheques, Mudaraba- an investment account, and Mudaraba Time Deposit Account- where the customer saves money for a fixed period and withdrawal is done on notice, not on demand. Upon starting the service in this fiscal year, Dashen will be the tenth bank to do so. "The Bank's management has been assessing the market and preparing for the launch for the past three years," said Mesfin. The history of interest-free banking services in Ethiopia dates back to 2010, during the initiation of the unrealised bank, Zemzem. Three years later, following the introduction of a new directive to govern the IFB, Commercial Bank of Ethiopia (CBE) pioneered to provide such services- having a customer base of close to half a million so far. CBE was followed by Oromia International Bank that has 135,000 IFB service users. Read more on All Africa. Source: All Africa