Priya Jaiswal joins us to discuss the strategic maneuvers of Zemen Bank as it navigates a transformative era in the Ethiopian financial landscape. With a specific focus on the burgeoning sector of women-led small and medium enterprises, the bank is redefining how institutional support translates into grassroots economic empowerment. This conversation explores the deliberate integration of financial literacy with capital disbursement, the resilience of balance sheets under tight monetary ceilings, and the bank’s impressive performance amid sweeping regulatory reforms. We analyze how Zemen is balancing a 31.9 percent surge in total assets with a disciplined approach to risk, particularly through its commitment to fostering the next generation of female entrepreneurs.
Why is providing comprehensive training on banking regulations and market linkages prioritized so heavily before the actual release of financial support to these enterprises?
In our experience, simply injecting capital into a business without a solid structural foundation often leads to inefficiencies rather than growth. By focusing on training first, we ensure that the 150 women-led SMEs we are targeting for the 2026/27 budget year are fully equipped to navigate complex trade laws and financial management hurdles. Many of these entrepreneurs have expressed a dire need for collateral-free financing and foreign currency access, but accessing those tools requires a deep understanding of the regulatory environment. We are teaching them how to build robust business plans and establish market linkages that will sustain them long after the initial loan is disbursed. It is a strategic move to ensure that when we do extend financial services, the capital is utilized effectively to overcome the specific financial challenges Asrat Tadesse and his team have identified in the current market.
How has the bank managed to achieve a 15 percent rise in net profit and a significant expansion of its credit portfolio despite the National Bank of Ethiopia’s strict 24 percent ceiling on credit growth?
It has certainly been a delicate balancing act, especially with the policy interest rate held at a firm 15 percent. We managed to grow our total credit portfolio by 24.6 percent, reaching 51.7 billion birr, which demonstrates our ability to maximize lending within the razor-thin margins of regulatory compliance. Our net profit reached 6.75 billion birr because we focused on high-quality operating income, which climbed to 14.24 billion birr from the previous year’s 12.13 billion. We leaned heavily into service charges and commissions, which generated 5.04 billion birr, complementing our net interest income of 6.57 billion birr. This diversified revenue stream allowed us to expand our balance sheet to 116.5 billion birr without overextending ourselves in a tight monetary environment.
With the bank’s paid-up capital increasing by 52 percent, how does this fortified capital position influence your ability to support higher-risk SME segments?
Our capital position has never been stronger, with paid-up capital hitting 14.29 billion birr and total capital rising to 25.9 billion birr. This gives us a capital adequacy ratio of 40 percent, which is remarkably high when you consider the regulatory minimum is only 8 percent. This massive buffer provides the confidence necessary to explore more flexible financing options for women-owned businesses that may lack traditional collateral. Furthermore, maintaining a non-performing loan ratio of just 2.48 percent—well below our internal 4 percent threshold—proves that our rigorous preparatory work and training programs are working. We are leveraging this stability to offer more than just basic banking; we are offering a secure partnership to enterprises that were previously overlooked by the broader financial system.
How has the removal of the mandatory 7 percent minimum deposit interest rate changed the way the bank interacts with its depositors and manages its overall liquidity?
The shift to market-driven interest rates has been a breath of fresh air for our liquidity management strategies, allowing us to be much more responsive to the actual economic climate. We saw total deposits surge by 32 percent to reach 85 billion birr, which is a clear indicator that customers value the competitive rates and services we can now offer. Without the 7 percent floor, we have the flexibility to price our products in a way that reflects the current 15 percent policy rate and our own operational needs. This change helped us achieve a return on average equity of 37.8 percent, as we could more efficiently manage the cost of funds. It has essentially empowered us to align our deposit growth with our ambitious lending targets for the upcoming fiscal year.
What is your forecast for the SME sector and its impact on the bank’s performance over the next year?
I anticipate a significant surge in productivity from the SME sector as these 150 women-led businesses begin to leverage the specific financial products we are currently developing. By the end of the 2026/27 budget year, the integration of affordable, collateral-free loans with the market linkages we’ve established will likely result in a new wave of industrial growth. For the bank, this means we will see our earnings per share, which currently stands at 539 birr, continue to provide excellent value for our shareholders as we tap into this underserved market. As we continue to operate with a return on average assets of 6.6 percent, our focus will remain on converting this educational initiative into a permanent, profitable segment of our credit portfolio. We are moving toward a future where financial inclusion is the primary engine behind our goal to maintain a dominant and stable presence in the Ethiopian banking sector.
