New bank set to enter Ethiopia market

Goh Betoch Bank, a new financial institution that aims to reintroduce mortgage banking (loan for housing construction) in Ethiopia, offers its share to the public.

“Currently there is 1.2 million housing shortages in Ethiopia. In addition the country needs to provide additional 100,000 houses every year in order to meet the growing demand for housing, according to Getahun Nana, the former VP of the central bank of the country, who now is one of the founding members of Goh Betoch Bank.

In Ethiopia only less than 4% of all loans goes to housing construction for both individuals and real estate developers, according to Getahun, who briefed potential investors I the new bank last night in Addis Ababa at the Sky Light Hotel.

Speaking at the ceremony, Eng. Aisha Mohammed, Minister of Minister of Construction and Urban Development of Ethiopia, expressed her hope that the new bank will significantly benefit those engaged in real estate and individuals who are interested to build their own houses.

“…This is more than business…It is a social service …like saving the country from housing crisis…Making a family a house owner is like supporting development of the country…The private public partnership scheme recently introduced by the government focusing on mega infrastructure projects is now including housing development as its priority,” she said.

When Goh Betoch Bank goes operational next year it aims to invest one billion birr in housing development projects, according to Mr. Eshetu Fantaye, who presented the prospectus of the new financial institution.

“We target to invest around 7 billion birr per year in housing development during the fifth year of our operation. The return on Investment of Goh Betoch Bank is foresee to be 32% after five years with profit of half a billion birr,” he said.

In his presentation Eshetu indicated that most Africa countries can’t even allocate 1% of their GDP in housing development, while Europe spends on average 60% of its GDP.

He stated that in urban Africa for the low and middle income group stands at 51 million plus houses in urban areas alone. The study he presented also shows that 17 countries have housing units backlog of over 1 million.

The total estimated finance to clear this backlog over 10 years period is $2.1 trillion and investing in housing development creates 280 million jobs across Africa.

In Ethiopia for a new bank to enter the market, it has to be able to raise the minimum initial capital of half a billion birr (around $17 million at the prevailing exchange rate) of which one shareholder is not allowed to own more than 5% of the total capital.

In Ethiopia currently there are close to 20 banks operational while about ten banks including six Islamic banks are under-formation. Baking business in Ethiopia is one of the safest and highly profitable businesses with stable return of investment ranging from 20% to 40%.

Unlike Goh Betoch Bank, which aims to address specific market gap, many of the private banks in Ethiopia have chosen to associate themselves with a specific ethic group, like that of the current politics of the country.