The Toll of Unrealistic Targets and Money Woes
The frustrations faced by bankers in Ethiopia’s private banking sector have been building for years. However, it was a resignation letter circulating online last week that really shone a light on the immense pressures employees are under.
The letter, written by a branch manager at one of Ethiopia’s private banks, pulled no punches in describing the challenges they face on a daily basis.
Targets to mobilize deposits that are virtually impossible to meet given the liquidity shortage plaguing the industry. Constant pressure from district managers to bring in more money, without regard for the realities on the ground. Sleepless nights worrying that a client may withdraw funds and further deteriorate the branch’s balance sheet.
This story is far from unique.
Speaking to bankers across different private banks reveals a workforce that is overworked, stressed, and increasingly disillusioned with their careers. Once a prestigious profession, banking has lost much of its appeal over the past year due to issues largely out of employees’ control.
The root causes can be traced back years. Private banks eagerly dished out loans, often driven more by personal connections than sound risk analysis. This inflated their loan books far beyond sustainable levels given the limited deposit base. Shareholders and management turned a blind eye as profits rolled in.
Then liquidity suddenly dried up as the National Bank of Ethiopia (NBE) moved to rein in credit growth and bring order to the chaotic monetary environment. Banks were left with giant asset-liability mismatches as depositors pulled funds and the cash crunch set in. Harsh new limits on withdrawals and transfers only angered customers more.
Now branch staff are stuck holding the bag. Forced to fight over the few deposits remaining in an economy where over 200 billion birr sits outside the banking system. Meet unrealistic collection targets or face discipline from district managers under similar pressure from head office. Work longer hours for less reward and more stress, worrying any day could see queues forming to empty accounts.
The needs of shareholders and top management are clear – sustain profitability at all costs. But this comes at the expense of those working tirelessly on the frontlines. Little consideration is given to creating a sustainable business model, only short-term fixes and superficial measures that fail to address deep-rooted problems.
The banking industry won’t fix itself overnight. But recognizing signs of distress within the workforce is an important first step. Listening to concerns raised and addressing root causes, not symptoms, will go some way in stemming the growing tide of resignations.
Deposit mobilization goals must be grounded in reality, not wishful thinking. Management must take responsibility for the liquidity crisis they facilitated through reckless lending. And the psychological well-being of employees pushed to the brink needs to be prioritized over chasing unattainable targets.
Ongoing reforms at the central bank level provide hope that structural changes may finally relieve pressures on commercial banks and their employees. The new Governor has taken important initial steps to strengthen regulation and stabilize liquidity. However, much work remains within individual banks themselves.
Looking ahead, private banks must undertake wholesale reviews of their business models. Sustainable approaches focused on serving real sectors of the economy, rather than quick profits, are needed. This means reevaluating lending policies and prioritizing financially viable projects, not political connections. It means diversifying funding sources beyond overreliance on deposits and investing in long-term stakeholder relationships rather than short-term gimmicks to attract deposits.
Banks also need to place far greater value on human capital management. This involves resetting realistic targets set through consultation rather than dictate. It means incentivizing hard work through fair compensation and benefits rather than unrealistic threats. It means empowering branch managers with autonomy balanced with oversight rather than suffocating control from above. And it means prioritizing staff wellbeing through better work-life balance, recognition programs, and mental health support.
Addressing deep-seated organizational culture issues will be challenging with vested interests to consider. But the rising tensions signify change can no longer be avoided if private banks hope to retain their strongest employees and rebuild trust with the public. The future stability of Ethiopia’s financial system may depend on internal reforms matching the progressive steps now seen from the central bank.
Failure to change course risks permanently damaging morale across the sector and losing the skilled people necessary to steer Ethiopia’s financial system into calmer waters.
(Zelalem Tamir is an economist. He can be reached at [email protected].)
Contributed by Zelalem Tamir