{"id":47979,"date":"2025-12-06T10:21:03","date_gmt":"2025-12-06T07:21:03","guid":{"rendered":"https:\/\/www.thereporterethiopia.com\/?p=47979"},"modified":"2025-12-06T10:21:03","modified_gmt":"2025-12-06T07:21:03","slug":"when-banks-are-treated-the-way-people-are","status":"publish","type":"post","link":"https:\/\/www.thereporterethiopia.com\/47979\/","title":{"rendered":"When Banks Are Treated the Way People Are"},"content":{"rendered":"

The Application <\/strong><\/p>\n

The subject line hit like a blow: Public Trust Licensing Framework.<\/em>\u00a0 Alemayu scanned the directive once, then again. It was unmistakably real: from now on, no bank in Ethiopia could accept a single birr in deposits without a Public Trust License.<\/em><\/p>\n

The application was two hundred pages of dense clauses, annexes, and declarations. Not a form\u2014an interrogation.<\/p>\n

The requirements were blunt:<\/p>\n

Demonstrate Community Benefit<\/em>:<\/strong> To collect deposits from a district, a bank had to prove that 80 percent of its lending flowed back to that same district. Fail to meet this \u201cgeographic alignment,\u201d and the application was rejected.<\/p>\n

Provide Institutional Collateral<\/em>: Banks were required to pledge physical assets\u2014headquarters, branches, vehicle fleets\u2014into a pooled fund that could be seized and liquidated if they failed depositor obligations.<\/p>\n

Submit Character References:<\/em> Two hundred testimonies from depositors across income levels, each confirming two years of faithful service. Any missing ID documentation invalidated the statement.<\/p>\n

Pay the Application Fee<\/em>: A non-refundable 50 million birr for \u201cverification and audit procedures.\u201d<\/p>\n

Incomplete applications were discarded without review.<\/p>\n

For weeks, branch managers and compliance teams became archivists of their own existence\u2014assembling audited statements, mapping \u201ccommunity benefit,\u201d photographing buildings, collecting sworn depositor declarations.<\/p>\n

On submission day, a silent queue stretched outside the National Bank. Alemayu stood among representatives from rival institutions, each holding a box containing their bank\u2019s life story in triplicate.<\/p>\n

For decades, banks had demanded collateral, proof of income, and character references from every household and small business seeking credit. Now the system had turned its own methods inward.<\/p>\n

There was no appeal, no negotiation. There was only the application.<\/p>\n

The Rejections<\/em><\/strong><\/p>\n

The results appeared without warning: a single PDF uploaded to the National Bank\u2019s website at 9:47 a.m. By noon, the industry stood still.<\/p>\n

Out of all the commercial banks in the country, only one received a provisional Public Trust License.<\/em> Every other institution received the same verdict: Application Denied.<\/p>\n

The reasons were listed in terse, bureaucratic lines:<\/p>\n

Awash Bank\u2014 Rejected:<\/em><\/strong> \u201cOver-concentration of depositor exposure.\u201d More than half its deposits came from 0.5% of clients. The NBE deemed this \u201csystemically unsafe\u201d and proof of \u201cinsufficient distribution of trust.\u201d<\/p>\n

Dashen Bank\u2014 Rejected:<\/em><\/strong> \u201cInadequate community embeddedness.\u201d Its loans were \u201coperationally sophisticated but socially remote from target districts.\u201d<\/p>\n

Bank of Abyssinia\u2014 Rejected:<\/em><\/strong> \u201cWeak enforcement capacity.\u201d Recovery mechanisms were \u201ctoo slow and too costly to safeguard depositor funds.\u201d<\/p>\n

Others failed for reasons so technical they felt surreal: Insufficient geographic benefit alignment, Incomplete testimonial diversity; Unverifiable pledged assets, and Benefit footprint mismatch.<\/p>\n

Some were rejected for missing signatures. Others because testimonial letters came from the wrong kebeles. A handful because their \u201ccommunity-benefit maps\u201d did not meet new formatting standards. By the end of the workday, 99.5 percent of the banking sector was legally barred from accepting new deposits.<\/p>\n

Banks issued statements expressing \u201csurprise\u201d and \u201cconcern.\u201d None of it mattered. Branches could process withdrawals, close accounts, settle transactions\u2014but they could not accept a single birr from the public. There was no appeal mechanism. No temporary waivers. No transitional period. Only the next application window, six months away.<\/p>\n

The Liquidity Crisis <\/strong><\/p>\n

The first week brought confusion. The second brought movement. Households with modest balances closed their accounts. Banks quietly encouraged it, directing people to \u201cseek alternative arrangements.\u201d Small businesses followed. Associations and cooperatives withdrew what they had and left.<\/p>\n

But not all money disappeared. A narrow segment remained untouched\u2014the wealthy 0.5 percent whose accounts satisfied every requirement of the new framework. Their deposits still flowed. Their privileges remained intact. Banks competed for them with preferential rates, dedicated desks, and velvet-service queues. The system now had its \u201cqualified depositors.\u201d<\/p>\n

With millions of small, steady accounts gone, the rhythm of banking broke. Liquidity stopped behaving like a river fed by countless springs and began behaving like a reservoir controlled by the moods and movements of a few.<\/p>\n

Banks adjusted quickly. Branches in rural areas and low-income neighborhoods shut down. These branches had never relied on the ultra-wealthy; without ordinary savers, they were empty rooms. Lending was narrowed to the top-tier clients whose balances could stabilize a balance sheet. Interbank lending grew erratic\u2014large transfers cleared instantly; smaller ones stalled for lack of buffers.<\/p>\n

Inside headquarters, departments reorganized overnight. Staff serving the mass market\u2014tellers, loan officers, branch assistants\u2014were laid off. Geographic coverage collapsed inward toward affluent districts and commercial centers. The system shrank to match the scale of its remaining depositors.<\/p>\n

On paper, banks were solvent.\u00a0 In practice, they had become custodians for a sliver of the public. Everyone else had quietly exited the system.<\/p>\n

With six months until the next licensing round, branches adapted, executives recalculated, and the crisis reshaped the sector in silence\u2014without explosions, without drama, just a slow contraction of what the formal system was able to be.<\/p>\n

The Bankers\u2019 Ekub <\/strong><\/p>\n

The elite 0.5 percent of depositors\u2014their accounts intact, their privileges untouched\u2014felt no crisis. But their narrow stream of funds could not sustain a system built to run on millions of small, steady contributions.<\/p>\n

With public deposits sealed off, banks turned to each other. What began as discreet conversations between CEOs\u2014quiet meetings in hotel lounges, guarded phone calls\u2014solidified into an invitation-only consortium. They called it, without irony, the Liquidity Ekub.<\/em><\/p>\n

Each participating bank\u2014five at first, then seven\u2014contributed a fixed monthly sum into a rotating pool. A billion birr apiece. The payout moved from bank to bank according to a private schedule. Whoever drew that month used the funds to plug liquidity gaps, refinance a stressed corporate client, or stabilize a balance sheet shaken by a single large withdrawal.<\/p>\n

The mechanics were simple. They worked because the participants knew one another intimately: shared boards, overlapping auditors, years of reciprocal favors. Enforcement required no courts, no collateral registries, no regulatory process. A defaulter would face the one punishment banks truly feared\u2014exclusion from the circle.<\/p>\n

Reputation did the work. Relationships enforced the rules. Consequences were immediate. In a matter of weeks, the Liquidity Ekub solved the banks\u2019 most painful problem\u2014the lack of a reliable, low-cost enforcement mechanism.<\/p>\n

And in solving it, the banks rebuilt exactly what they had long dismissed in the public: a trust-based, low-overhead, high-compliance financial system. What they once labeled \u201cinformal\u201d had become their lifeline. They had recreated the architecture households use every day\u2014just scaled up, sealed off, and reserved for themselves.<\/p>\n

The Blame Game <\/strong><\/p>\n

By the second quarter, the crisis could no longer be contained inside boardrooms. Loan growth stalled. Branch networks shrank. The Liquidity Ekub kept a handful of large banks afloat, but it was no substitute for the millions who had once formed the system\u2019s foundation.<\/p>\n

The Ministry of Finance moved first. It declared a \u201cdeposit-mobilization emergency,\u201d warning that the public\u2019s retreat from banks threatened national development. Officials urged citizens to \u201cfulfill their civic duty\u201d and bring their savings back.<\/p>\n

The message confused nearly everyone. The same state that had demanded impossible proofs from the banks now asked the public to trust them anyway.<\/p>\n

The banks launched a parallel campaign. Billboards appeared across Addis Ababa\u2014
\n\u201cBanks Need Your Trust Too.\u201d<\/strong> Executives went on television to insist that the new licensing rules had been \u201cmisunderstood.\u201d They appealed for empathy, asking the public to consider \u201cthe risks banks face.\u201d<\/p>\n

Inside the sector, frustration turned to open anger. At an emergency meeting, CEOs accused the regulator of setting mathematically impossible criteria. The geographic-benefit rule was unworkable for any national institution. The 200-testimonial requirement was unheard of anywhere in global banking. They warned, bluntly, that the sector could not survive another round.<\/p>\n

The National Bank responded with a firm public report, placing responsibility back on the banks. They were, it said, \u201cover-dependent on a narrow elite,\u201d \u201cinsufficiently innovative,\u201d and \u201cculturally detached\u201d from the majority. Trust, the report argued, had to be earned<\/em>, not demanded.<\/p>\n

None of it changed public behavior. Most households had already shifted their savings into ekubs, edirs, cooperatives, cash boxes\u2014systems that required no forms, no pledges, no signatures. Systems that never failed. Systems that did not ask people to prove their worth.<\/p>\n

The formal banking sector\u2014once central, confident, and unquestioned\u2014found itself pushed to the margins. Not simply losing deposits. Losing relevance.<\/p>\n

Consequences <\/strong><\/p>\n

The consequences did not begin with collapse. They began with narrowing. A financial system dependent on a tiny elite could function, but only in a reduced form\u2014alive, but brittle.<\/p>\n

With the savings of the majority inaccessible, banks operated on a concentrated pool of wealthy depositors. The total money supply remained large, yet the flow became erratic. Liquidity no longer arrived in steady increments; it came in uneven surges determined by a handful of clients. A single transfer could upend a month\u2019s planning.<\/p>\n

Expansion stopped. New products were postponed. Technology upgrades shelved. Branch openings suspended. Treasury departments monitored balances with unfamiliar urgency. Volatility became a daily constraint, not an occasional risk.<\/p>\n

As liquidity grew irregular, the real economy tightened. Firms that had treated credit as a predictable tool now found it uncertain. Working-capital lines were paused \u201cpending review.\u201d Letters of credit moved from delayed to unpredictable. Supply chains thinned, then frayed. Businesses trimmed production, shortened cycles, and ran lean inventories.<\/p>\n

Nothing collapsed outright, but the economy shifted from initiative to caution. Companies that once planned for growth now planned for continuity.<\/p>\n

Households felt the tightening next. Overtime disappeared. Hiring froze. Rotating schedules replaced full weeks. Families that had maintained modest stability watched their margins evaporate. Rent negotiations stretched. School fees slid. A routine illness became a financial threat.<\/p>\n

As options narrowed, movement began quietly. A son left for Djibouti. A cousin for Nairobi. A neighbor for Metema. Migration became less about opportunity and more about escape\u2014an attempt to outrun instability rather than pursue prosperity.<\/p>\n

Institutional strain followed. Municipal revenues softened. Public services became irregular\u2014garbage collection skipped a week, then two; water outages lengthened. Not from neglect, but from fewer hands, tighter budgets, and rising uncertainty.<\/p>\n

Public frustration rose steadily. The image of banks as engines of development no longer matched lived experience. Government interventions\u2014emergency directives, rapid policy adjustments\u2014added pressure without restoring confidence.<\/p>\n

The shift was cumulative rather than explosive: firms unable to plan, workers without security, households beyond their limits, institutions stretched thin. In a fragile state, this kind of pressure does not need a spark. It only needs time.<\/p>\n

The Reveal <\/strong><\/p>\n

This story reverses the direction of the system. It feels like fiction only because we have swapped the protagonists. In reality, none of it is imaginary. Most Ethiopian households already live inside this architecture.<\/p>\n

They<\/em> already face forms they cannot navigate.<\/p>\n

They<\/em> already face rejections they cannot contest.<\/p>\n

They<\/em> already endure the tightening that follows exclusion.<\/p>\n

They<\/em> already absorb shocks\u2014through unstable work, migration, shrinking choices.<\/p>\n

Banks do not complete 200-page applications to earn deposits. People do. They are asked to meet criteria designed without them in mind\u2014collateral they do not own, references they cannot gather, evidence no institution recognizes. And when they cannot, the system calls it \u201crisk management,\u201d masking exclusion as neutrality.<\/p>\n

But exclusion today is no longer just exclusion. It has become a revenue source.<\/p>\n

Consider digital platforms. They now move trillions of birr in payments. Officials cite these numbers as proof of \u201cinclusion.\u201d But inclusion for whom?<\/p>\n

For platform providers\u2014yes: fee income.<\/p>\n

For banks\u2014yes: float, data, and steady revenue.<\/p>\n

For the system\u2014yes: a window into the daily financial lives of people it still refuses to lend to.<\/p>\n

And for the citizen?<\/strong><\/p>\n

They are included only as payers, never as partners. Their transactions generate profit. Their data enriches institutions. Yet when they seek the core benefit of inclusion\u2014credit, investment, upward mobility\u2014the same gates that opened for their data close for their needs.<\/p>\n

The architecture of exclusion is bad enough. Turning that exclusion into a profitable enterprise and calling it \u201cinclusion\u201d is its quiet, final logic.<\/p>\n

So the question is no longer whether people have earned the system\u2019s trust. It is whether the system has earned theirs\u2014and at what cost.<\/em><\/p>\n

That is where the conversation must begin.<\/p>\n

Tsegaye Nega (PhD) is a Professor Emeritus at Carleton College in the United States and the Founder and CEO of Anega Energies Manufacturing.<\/em><\/p>\n

Contributed by Tsegaye Nega (PhD)<\/p>\n","protected":false},"excerpt":{"rendered":"

The Application The subject line hit like a blow: Public Trust Licensing Framework.\u00a0 Alemayu scanned the directive once, then again. It was unmistakably real: from now on, no bank in Ethiopia could accept a single birr in deposits without a Public Trust License. The application was two hundred pages of dense clauses, annexes, and declarations. […]<\/p>\n","protected":false},"author":10,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"editor_plus_copied_stylings":"{}","ngg_post_thumbnail":0,"footnotes":""},"categories":[1937],"tags":[],"class_list":{"0":"post-47979","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-commentary"},"acf":[],"_links":{"self":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts\/47979","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/comments?post=47979"}],"version-history":[{"count":0,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/posts\/47979\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/media?parent=47979"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/categories?post=47979"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thereporterethiopia.com\/wp-json\/wp\/v2\/tags?post=47979"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}