Saturday, September 23, 2023
BusinessBanks limit withdrawals, businesses reel

Banks limit withdrawals, businesses reel

Cash-strapped banks in Ethiopia have reportedly reduced daily cash withdrawal limits due to constrained liquidity, according to businesses and customers who say they are struggling to access sufficient cash.

According to an assessment by The Reporter this week in Addis Ababa’s sprawling Mercato open market, nearly all private banks have capped daily withdrawals at 5,000 birr, far below the 50,000 birr limit set by the National Bank of Ethiopia (NBE). Only state-owned Commercial Bank of Ethiopia (CBE) approves withdrawals above 10,000 birr.

Merchants and wholesalers say they are struggling to obtain enough cash from banks to pay suppliers and employees, now that most private banks have slashed daily withdrawals to a paltry 5,000 birr – just a tenth of the official limit.

A wholesaler in Mercato said: “I needed 750,000 birr for new supplies but multiple banks couldn’t give even 25,000 birr daily. I withdrew the money in small amounts over two weeks using friends’ accounts.”

The liquidity crunch is hitting exporters hardest of all, leaving business owners high and dry as Ethiopia’s liquidity crisis worsens.

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Coffee exporter Tamru Tadesse lamented that “the cash shortage has been around for a while. The coffee market can’t operate without cash since digital payments aren’t fully supported for businesses – that’s a big problem.”

He says the shortage had improved in June but has gotten worse since then.

Several bank branch managers blamed the liquidity crunch on increased loan disbursements to exporters, low saving trends, the tax season and new banks competing for limited cash in the system.

One bank manager, speaking on condition of anonymity, blamed a newly founded bank for draining over one billion birr from their reserves by withdrawing share funds – “which drained our cash.”

Anbessa Bank president Daniel Tekeste says the severity of the shortage depends on customer types and branch resources.

“There are huge cash demands for loans and spending, with requests for daily withdrawals from half a million to 1.5 million birr. But supply is limited,” Daniel says.

Other bankers say central bank’s recent decision in suspending Tigray’s non-performing loan (NPL) has increased cash flows into the region as demand surges there.

However, Fikadu Digafe, deputy governor of the central bank, argues “the liquidity shortage was a while ago, but now the problem is solved.”

Commercial banks, according to him, are relatively liquid. “I don’t understand why banks refuse withdrawals when they have cash.”

According to NBE’s report, banking system liquidity more than doubled in the first half of the 2022–2023 fiscal year, driven by savings and improved loan collections.

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