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Cooperative Bank of Oromia: Annual Report 2020-2021

IM Insights
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2 months ago
Cooperative Bank of Oromia: Annual Report 2020-2021

Mudaraba, Wadia

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  1. PERFORMANCE DASHBOARD DEPOSITS 71 .12 Billion by 56% DEPOSIT ACCOUNTS LOANS AND ADVANCES 7.73 Million 54.5 Billion by 24% by 60% EARNING PER SHARE 40% by 15% TOTAL CAPITAL FCY Generation 7.1 Billion by 39% ATMs 186 344.1m USD ASSET by 71% COOPAY E-BIRR MERCHANTS Paidup Capital 81.32 Billion by 55% 18,046 by 2316% 4.65 Billion GROSS PROFIT 1.7 Billion by 19.2% NUMBER OF BRANCHES by 11% 469 COOPAY E-BIRR SUBSCRIBERS 1.74 by 360% EMPLOYEES 5,174 by 22% WHAT WE HAVE ACHIEVED 2020/21
  3. IN THIS R E P O R T 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Board Chairman 's remark Board of Directors Executive Management Deposits International Trade Loans and Advances Deposit Accounts Market Expansion Our People Our Brand and CSR Digital Banking Other Strategic Achievements Interest Free Banking Report SAC Members Comment on IFB Annual Report IFB Deposits IFB Deposit Accounts IFB Financing IFB Market Expansion Audit Report
  4. Annual Report 2020 /21 Board Chairman’s Message Dear Respected Shareholders, I am so pleased to present Coopyear 2020/21. During the year, both economic contraction and recovery situations were experienced throughout the globe mainly attributed to the Covid-19 Pandemic effects and the subsequent containment measures taken by nations around the globe. Though the level of contraction and momentum of recovery varies among the nations, the macro-economic growth of every nation was ic related experiences. The global economy is thus expected to expand by 5.6 percent in 2021 (World Bank, June 2021). The World Bank report further highlights that it is the fastest post-recession pace in 80 years, largely on strong rebounds from a few major economies. However, said the report, many emerging markets and developing economies continue to struggle with the COVID-19 pandemic and its aftermath. In this regard, the economic growth in low-income economies in 2021 is anticipated to be the slowest, with 2.9 percent, in the past 20 years other than 2020, of vaccination. 01 In the year 2020, the Ethiopian macroeconomy has shown a moderate growth of 6.1percent driven by the services and industry sectors despite the sluggish performance of the pandemic-hit sectors like hospitality, transport and others (ADB, 2021). Whereas, in the year 2021, different economic outlook reports indicate that Ethiopian macro-economic growth would be slowed down largely affected by the pandemic effects and other external challenges. Although these external factors severely affected the performance of the banking industry and our bank in particular, it was an important year for the bank during which an encouraging performances were achieved. In fact, during the period under review, the Ethiopian banking sector remained strong despite the prevailing severe external challenges. Coopbank’s performance in the FY 2020/21 has ensured value-creation for all stakeholders, including shareyear, the bank has registered an outstanding performance in most of the key performance indicators (KPIs). The bank’s balance sheet has grown from its baseline 2019/20 by 54.9 percent to reach ETB increment revealed in the bank’s liability by 56.7 percent or ETB 26.85 billion and the total capital of the bank has reached ETB 8 billion as of June 30, 2021. has managed to mobilize an additional share capital of ETB 1.65 billion raising the total paid up capital of the bank to ETB 4.65 billion. As a company committed to strategy and balanced growth, Coopbank is now positioning itself for better accomplishment and on a path to provide healthy and sustainable returns for year, the bank registered a gross billion. Earnings per share (EPS), therefore, showed a better picture at 40 percent. The result is mainly attributed to the synergy of our employees including management and board of directors, as well as a substantial increase in earnings. Committed to Breakthrough!
  5. Annual Report 2020 /21 ...Board Chairman’s Message The bank has also registered considerable achievements in the strategic considered as leading indicators for Regarding market outreaches, 49 new branches were opened to put the total number of branches at 469. Particularly, Coopbank remains one of the frontrunners in the opening of dedicated branches for the Interest-free banking segment demonstrating the bank’s strong commitment to delivering values to the target market. Accordingly, 13 dedicated interest-free banking branches were opened in different parts of the country. As regards to governance, the role of the Board was as crucial as ever in the year 2020/21 and we needed to ensure that the bank effectively implemented governance and risk models to respond to the challenging Finally, on behalf of all my fellow board members, I would like to take this opportunity to thank our stakeholders, mainly the shareholders of the bank, for their continued trust and support. Thank you to the leadership team and to all employees of the bank for their unwavering dedication and guidance. It is my candid hope and Senior Management team and the employees will take the bank to a new level of success in the upcoming years. Board Chairman Thank you, Fikru Deksisa (PhD) Chairman, Board of Directors As a company committed to strategy and balanced growth, Coopbank is now positioning itself for better accomplishment and on a path to provide healthy and sustainable returns for shareholders. year, the board of directors of the bank remained committed to improving the bank’s governance practices through better transparency, responsibility and accountability. Regarding the future, I believe, our long-term success and continued relevance depend on the support and trust of the people we serve and the well-being of the environment in which we operate. Hence, looking ahead, the bank shall work to have the right people, systems and processes to deliver improved results in the coming years. Committed to Breakthrough! 02
  6. Annual Report 2020 /21 REFLECTIONS FROM THE PRESIDENT The drive to provide digital products customers led us to improve our digital operations that have resulted in the improvement of digital transactions during the 03
  7. Annual Report 2020 /21 REFLECTIONS FROM THE PRESIDENT Dear valued Shareholders, In the midst of the current exigent times, our efforts were aimed at delivering maximum value to our esteemed stakeholders through we have demonstrated how we should continue to create sustainable growth and stakeholders’ value even in such periods. It was the year in which the bank has diligently focused on building its resiliency and strategically aligning itself in the dynamic business environment. 2020/21 was the year in which the bank has started to implement its new growth strategy. The strategic focus here is to continue expanding its core resources base, expanding its business channels and enriching Customers’ deposits grew by ETB 25.61 billion or 56.3 percent to ETB 71.12 billion ensuing to creating and maintaining relationships with our clients. The bank was also able to earn a total foreign currency of USD 344.1 million with export constituting the largest share of 58 percent. The bank’s outstanding loans and advances reached ETB 54.5 billion at the end of June 30, 2021, increasing by 59.7 percent from the previous year’s value. For this loan portfolio increment, the bank has made a fresh injection or disbursement of ETB 28.55 billion mainly to customers in export, domestic trade, service and manufacturing businesses. Moreover, the bank has managed to maintain its loan quality with an NPL ratio of 1.59 percent, keeping below a regulatory standard of 5 percent and our internal plan. the vision of the bank that enabled a strong move across all organs of the The bank has made tremendous bank and among our key stakeholders. progress in earnings with income of the bank reaching ETB 8.03 billion. Interest Our focus in this regard was to extenincome held the major portion of it, 67.5 sively leverage the available potential percent of the total revenue, being a sustainable source to yield sound intelligence to create synergies and unique value propositions across our customer segments. Accordingly, the On the other hand, the total operating bank enhanced its focus on reviewing expense was ETB 6.33 billion, increasand implementing its strategy that ing by 46.6 percent from the prior year’s enabled it improve its performances in balance of ETB 4.32 billion. Interest different indicators. expenses paid on customers’ deposit and personnel expenses jointly held a On the other hand, the efforts made to be extensively engaged in digital the expenses. banking operations led us to improve The bank’s regular growth of earning The drive to provide digital products assets, together with our unrelenting focus on optimization, enabled the bank customers led us to improve our digital operations that have resulted in the before tax is, therefore, ETB 1.7 billion, improvement of digital transactions a growth of 19.2 percent from the last year’s balance of 1.42 billion. Accordingly, the bank has recorded a year with its balance sheet size growing by 54.9 percent from ETB 52.49 billion in the last year to ETB 81.32 billion. have also accomplished a number of are just as important for our continued success. The bank is endeavoring to continuously be in the heart of the community and hence increased its retail branch network by 49 to 469 branches. Moreover, by recognizing the role of digital innovations to enrich customer offerings and improve the experience service, the bank laid important attention to the promotion of the digital ecosystem. Accordingly, the bank managed to recruit 17,092 additional merchants and 1.35 million subscribers to Coopay-Ebirr digital banking service. Since the bank’s commitment to value creation extends beyond creating committed to assisting local communities during this challenging time. Aligning with the bank’s Corporate Social Responsibility commitments, we implemented community support activities that aim to reach out and uplift the local economy in different areas of the country. Accordingly, the bank has supported different organizations working in the community. To name a few of our endeavors in this regard, our longstanding and continued support for Oromia Development Association (ODA) to help provide quality education and encourage highly performing students can be noted. Additionally, the bank has sponsored several books, literatures and supported several humanitarian organizations. Finally, as we look ahead, I would like to restate our continued commitment to deliver the expectation of our shareholders, as well as our customers, communities and many partners as we all play our own important part in our country’s economic development. By congratulating all our stakeholders for the success gained, it’s an opportune time to extend my appreciation for our hard working employees, our customers and business partners, NBE, and all other stakeholders for your continued commitment. Thank you, Committed to Breakthrough! Deribie Asfaw 04 President
  8. BOARD OF DIRECTORS Fikru Deksisa (PhD) Kebede Asefa Abera Hailu Tefera Anbessa Fekadu Dugasa Tamiru Takele Teshome Abera Oumar Wabe Board Chairperson Board Director Board Director Alemu Sime (PhD) Board Director 05 Deputy Chairperson Board Director Board Director Board Director Board Director Board Director Teshome Argeta Board Secretary Committed to Breakthrough!
  9. From Left to Right BOTTOM ROW 2ND ROW TOP ROW 06 President Deribie Asfaw VP , Corporate Banking Ahmed Hassen VP, Information System Gutema Dibaba VP, Finance and Facilities Management Aman Semir Tafesse Fana VP, Cooperative Banking Gemeda Miessa Gadissa Mamo Chief internal auditor Chief Risk & Compliance Tadele Tilahun Senior Director, Strategy & Business Communications Godana Kabato VP, Interest Free Banking Liko Tolesa VP, Human Capital and Projects Management Desalegn Tadesse VP, Retail and SMEs Banking EXECUTIVE MANAGEMENT
  10. Annual Report 2020 /21 Deposits Deposit is key resource for the bank as it is the major source of funds for offering credit services to customers. As a result, the bank exerted maximum efforts to mobilize deposit from different customer segments through strengthening customer relationship management, expanding customer base, and implementing different resource mobilization strategies. Furthermore, the bank has expanded its touch points, introduced different deposit products to the market, and put in place effective monitoring and evaluation system. During the year, the bank attained remarkable performance in incremental deposit mobilization by depicting a growth rate of 56.3 percent (ETB 25.61). By the end of June 2021, the aggregate deposit of the bank stood at ETB 71.12 billion. Composition wise, demand deposit registered utmost growth of 79.1 percent and reached ETB 23.79 billion, whereas savings deposit grew by 49.4 percent to ETB 42.58 boosted by 27.8 percent and stood at ETB 4.75 billion. Deposit by Type (in billions of ETB) 2020/21 2019/20 2018/19 Demand 23.79 13.29 11.71 Saving 42.58 28.51 22.95 4.75 3.72 1.42 71.12 45.51 36.10 Fixed Time Total Total Deposit (in billions of ETB) During the period under review, saving deposits took the sizable share of 60% followed by demand deposits of 33% and time deposits. 2020/21 2019/20 2018/19 Deposit Growth Trends (in billions of ETB) 71.12 75 65 45.51 55 36.10 45 35 25.77 25 2017/18 2018/19 2019/20 2020/21 Our Customers after opening savings accounts 07 Committed to Breakthrough!
  11. Annual Report 2020 /21 International Trade million which depicted shortfall by -5.3 percent from the prior The foreign currency earned from export had declined as compared to the last year, but still, contributed the lion’s share of what the bank had earned with 58 percent from aggregate foreign currency payment with 74.6 percent was effected for facilitating import LC, followed by CAD with 13.1 percent and the remaining 12.3 percent goes to Outgoing TT and others. SWIFT 28% Remittance 13% Export 58% % The bank has effectively utilized the foreign currency earned for transacting various international business opera- partnerships with key stakeholders as well as implementing actionable strategies so as to improve the bank’s foreign currency earnings. e1 bank. In the year under review, the bank earned total foreign In the forthcoming periods, great attention shall be given for mobilizing foreign currency as The earnings from private transfers (remittance and SWIFT) showed positive progress from the last budget year by demonstrating the share of 40.4 percent as compared to the share of 22.3 percent from Pu rc h International trade is being realized as one of the key focus areas of our banking operations. During the year, the Covid-19 pandemic had profound impact on global businesses that in turn resulted in weaker performance in Share of Foreign Currency Earnings by Sources Foreign Currency Earnings (in million of USD) 363.42 344.06 310.4 2018/19 2018/19 2019/20 2019/20 2020/21 2020/21 Committed to Breakthrough! Remittance Lotto Prize Winners 08
  12. Annual Report 2020 /21 Loans and Advances The largest portion of loan portfolio goes to domestic trade and service, constituting 36 percent from the total loans and advances of the bank. In line with the bank’s objective of supporting its customers engaged in various businesses through creating appropriate value propositions, we injected fresh loan amounting to ETB Subsequently, international trade accounts for 28.9 percent followed by manufacturing with share of 21.7 percent. The remaining sectors, on aggregate, constitute 21.1 percent from the total credit portfolio of the bank. various economic endeavors. For the year ended 30th June, 2021, the total outstanding loan of the bank stood at ETB 54.5 billion. From the preceding budget year, our loan book grew by 59.7 percent, with an upsurge of ETB 20.37 billion. With due emphasis given to asset quality management, the bank’s NPLs ratio as at June 30, 2021 was maintained at 1.59 percent and this is lower than the bank’s previous year ratio of 2.35 percent as well as the threshold set by the regulatory organ of 5.0 percent. Outstanding Loans and Advances (in billions of ETB) 7.64 Others 11.51 Manufacturing 15.75 International Trade 19.60 DTS Adama Steel Factory Financed by Coopbank Loans and Advances Trend ( in billions of ETB) 54.50 50 34.21 40 24.36 30 15.55 20 100 2018 2019 2020 2021 Financed by Coopbank 09 Committed to Breakthrough!
  13. Annual Report 2020 /21 With the aim of achieving commendable earnings for our shareholders, the bank registered positive growth trends year on year basis. As regards to expenses incurred, the total operating expenses of the bank stood to ETB 6.33 billion, which is higher by ETB 2.01 billion (46.6 Achieving greater return for shareholders require maximizing income generated from the business operations and rationally managing costs so as to year. ly, the bank’s earnings per share (EPS) became 40 percent for the year ended 30th June 2021. Income by Source ( in billions of ETB) 8.03 8.00 5.42 5.74 4.16 3.71 2.81 1.45 Interest Income Fees and Commission Income Other Operating Income 2018/19 2019/20 0.36 2020/21 2019/20 2020/21 2018/19 1.00 0.82 0.54 2018/19 0.76 2019/20 1.17 1.04 2020/21 2.00 2018/19 3.00 2019/20 2.29 billion (39.8 percent) mainly attributed to the rise in loan portfolio of the bank. Interest income accounted for 67.5 percent of the aggregate income from the total income the bank was able to generate during the year. The combined non-interest income of the bank grew to ETB 2.61 billion, depicting rise of 65.1 percent 2020/21 the year under review, we were able to earn total income of ETB 8.03 billion, surpassing Looking by category, interest expense shares 32 percent, personnel expense accounted for 25.5 percent and the remaining (42.4 percent) goes to other operating expenses. therefore, ETB 1.7 billion, portraying an increase of ETB 273.44 million or 19.2 percent Total Income Expense Trend by Source ( in billions of ETB) ( in billions of ETB) 6.33 1.7 Billion 3.00 Interest Expense Committed to Breakthrough! 1.68 Operating Expense 2018/19 2019/20 2020/21 0.95 0.96 2018/19 1.09 2019/20 1.62 2018/19 2021 1.04 2019/20 1.54 2019/20 2020/21 2020 2020/21 2019/20 2019 2.95 2.69 1.00 670 Million 2018 2018/19 2.03 2020/21 2.00 2020/21 1.4 Billion 2018/19 767 Million 4.32 Total Expense 10
  14. Annual Report 2020 /21 Deposit Accounts Derived by our mission that intends to root in the mass community, expanding customer base remains one of the major strategic directions of the bank. cial inclusion in the country inclusion strategy which is aimed at promoting banking services to a considerable portion of Ethiopia’s As a result, total deposit account of the bank reached 7.73 million at the end of June 2021 that makes Coopbank to maintain its leading position in total deposit customers from private banks. In view of the deposit account category, 75.89% (5.87 million) is conventional type and the remaining 24.11% (1.86 million) goes to Interest Free Banking category. Customer Base Growth Trends ( in millions ) 9.00 8.00 services derives our bank to take various initiatives for expanding its customer base. managed to recruit 1.48 million additional deposit customers, which shows an expansion of 24 year. 11 gic importance and the bank’s mission to reach the mass unbanked community, customer base expansion remains one of our strategic directions by applying enabling digital initiatives, implementing customer recruitment strategies as well as introducing new products and services. 7.00 7.73 6.00 6.25 5.00 4.00 5.28 3.00 2.00 1.00 2018/19 2018/19 Committed to Breakthrough! Farmers’ Savings Account Opening 2019/20 2019/20 2020/21 2020/21
  15. Annual Report 2020 /21 49 New Branches 469 Total Branches 361 Located in Outlying Areas Market Expansion As a company striving to create a greater customer experience, we clearly understood future banking will be dominated by digital platforms. Thus, the traditional bricks and mortars approach shall not be our main strategic concern eventually. Nonetheless, considering our societies’ digital transformation readiness and to enhance the bank’s presence in the capital city and other big towns, as well as to widen our dedicated interest-free banking branches at potential areas, opening of physical branches was found important. Hence, the total branch network of the bank reached 469 by the end of June 2021. About 77.20 percent of our branches are located in outlying areas, making us the bank with the largest branch network in outlying areas from private banks. Likewise, we remain committed to our mission of rooting our foundation in communities and promoting agriculture and rural development through all possible interventions. With regard to the productivity of the newly opened branches bank was able to mobilize total deposits of ETB 898.70 million, demonstrating 3.51 percent contribution to the total incremental deposit of the bank. In the upcoming years, we will continue our efforts to reach the mass and local communities by applying proper banking channels mainly focusing on digital outlets. Accordingly, 49 new branches were opened, out of which 13 branches are dedicated IFB branches. Committed to Breakthrough! 12
  16. Annual Report 2020 /21 Our People During this highly dynamic environment, we understand that the key to success and win the competitive edge lies in the hands of human capital management. Our bank believes that the source of its growth depends on the proper utilization of its human capital along with the utilization of up to date technologies. Accordingly, we have developed and started implementing human capital management (HCM) strategy in a way that drives business value towards a realization of the bank’s vision. The bank had also conducted different developmental and technical trainings for enhancing its employee competence and strategic awareness. Among training/development areas which were given atten- In the upcoming periods, due attention shall be given to fully implement the strategy which among others include; introducing objective employee’s performance framework and gap based technical and developmental interventions. growth strategy and HCM strategy of the bank, leadership and other operational areas. businesses of HCM including; talent acquisition and onboarding, talent development, succession planning and management as well as employee engagement will be managed so as to successfully achieve the bank’s vision. The bank had also executed other major key human capital management activities to enhance on-boarding, development and effective utilization of its employees. Accordingly, Woman’s Training Induction Session new employees were recruited. This puts total Human Resource strength of the bank to 5,174 as of June 30 of 2021 which depicts an increment of 22 percent from last budget year. 13 Women Empowerment: The Ultimate Way Forward Workshop
  17. Annual Report 2020 /21 Our Brand and Corporate Social Responsibility At Coopbank, we believe that being a part of the community is more than our physical location. We feel responsible for the community in which we do business. We take pride in how we strengthen and serve our communities, as these relationships are the core of our business model. We are committed to making business decisions that have a positive societal impact. The bank has formed lasting partnerships order to enhance health, social and educational opportunities, and others that have positive societal impact. Accordingly, the bank has supported local and international NGOs like Deborah Foundations, founded to support children with down syndrome, and the Ethiopian Red Cross Society that upholds the values of humanity globally. Besides, as we root ourselves in the farming and pastoral community, we’ve backed different community apart from introducing new and suited Farmers’ Savings Account. We have also We took further steps in deepening our roots through working on product and service communication, brand standardization and involving in socially responsible engagements, and ardently interacting with the community. For we believe that any commuknowledge is invested, we have consistently been supporting Oromia Development Association in its endeavor to provide quality education for the young generation. In the year, we are able to sponsor outstanding students that were able to complete their preparatory school with great distinction. Moreover, in order to enlighten the community with knowledge, we have sponsored books and artworks written and produced by different authors. Furthermore, our employees at various levels have publicly made in-kind supports to local committees affected by famine and local challenges. Generally speaking, in the course of challenging time, we have further strengthened our solid philosophy of being a socially responsible corporate company that continues to serve as a bridge to societal advancement and shield at times of hardships. Finally, we have continued supporting art and culture, environmental, humanitarian, and various social ends as deemed necessary. We took further steps in deepening our root through working on product and service communication, brand standardization and involving in socially responsible engagements and ardently interacting with the community we have established in. model farmers. Committed to Breakthrough! 14
  18. Annual Report 2020 /21 ...Our Brand and CSR Book Books Sponsorship ODA Boarding School Sponsorship Top Depositors & Model Farmers Award 15 Series Drama Sponsorship IFB TV Sponsership ONE-KOO Coffee Factory Inauguration Event Sponsorship Athlete Derartu Tullu’s Recognition Program Sponsorship Committed to Breakthrough!
  19. Annual Report 2020 /21 Digital Banking By considering the digital dominance of the future banking, digital transformation is made one of the strategic pillars of the bank. On that account, to enhance the functionality and marketing of our digital platform “Coopay-Ebirr” ecosystem, considerable activities and achievements were registered. Awareness creations, trainings and public campaigns were made to promote the products and services to the mass. Additionally, integrating the system with key institutional customers like utility providers, During the year, 1,393 agents, 17,092 merchants and 1.35 million subscribers were recruited. This puts total agent, merchant and Coopay account subscribers of the product to 1,408, 18,046 and 1.74 million respectively. On the other hand, 11,826 debit cards were distributed to customers which puts the total number of card banking clients to 279,593. Coopay E-birr Digital Ecosystem Performance Merchants 18,046 Agents 1,408 Coopay account subscribers TITLE HERE 1.74 million others was executed during the year. In this regard, the bank have managed to integrate its system with Addis Ababa penality payment which is the Committed to Breakthrough! 16
  20. Annual Report 2020 /21 Other Strategic Achievements As per our mission, we are striving to extend our roots into the community so as to transform their livelihoods. Therefore, besides rendering credit services to cooperatives and farmers, the bank has developed Farmers Savings and loan products with unique features and incentives to reach the unbanked societies and transform farmers. Accord- On the other hand, the bank has created strategic partnership and collaboration with various stakeholders including corporate institutions, non-governmental organizations, and civil societies that are understood to being actively involved managed to open more than 137,000 farmers account and able to mobilize a deposit amount of ETB 806.00 million. To strengthen the corporate governance of the bank, we had also done various activities in the area of risk management and internal audit. Operational compliance , AML/CFT and compliance regulatory requirements training were provided to more than 200 branch controllers. Additionally, activities such as organizing risk monitoring data, managing compliance irregularities, AML/CFT compliance on-site review, and regular auditing were made. So as Loans were given to individual farmers on poultry, dairy farm, mechanization and for working capital. During the year, the 220 tractors for model farmers. Moreover, the bank has rendered training to more than 6000 model farmers by focusing on entrepreneurship (busiagement, governance and other related areas. The bank is continuously working on transformation of cooperatives and farmers through supporting manufacturing, mechanized farming and export businesses. 17 society whose interests and concerns are related to our mission. ized operations, various operating policies, procedures, standards, and manuals were also developed and revised. In a bid to create common strategic consensus and working towards the effective implementation of the strategy, strategic awareness workshop was prepared and training was provided to all employees of the bank at each level. Further, operating model of the bank was revisited and new organizational structure was crafted. 2020/21, various construction and pre-construction activities were made. For the already acquired land for main headquarters at the area, pre-construction activities have already started. Though its construction is disrupted with the advents of of transitional headquarters around Bole Rwanda is in progress and will be ready by Similarly, the bank has also reached 90 percent of its G+3 building construction in Waliso town. In the same fashion, in major cities such as Adama, Dire Dawa, Hawassa, Shashamenne, and Jimma the bank is on the move for the construction of own buildings. Committed to Breakthrough!
  21. INTEREST FREE Annual Report 2020 /21 BANKING REPORT Committed to Breakthrough! 18
  22. Annual Report 2020 /21 Shaikh Salih Nur Ahmed SAC CHAIRPERSON Ustaz Kamil Shemsu Siraj SAC DEPUTY CHAIRPERSON Shaikh Alfadil Ali Mustefa Dr. Mohammed Salih Jamal SAC MEMBER Dr. Jibril Qamar Adam SAC MEMBER SAC MEMBER Sharia Advisory Committee’s (SAC) Remarks Dear Esteemed Shareholders, In carrying out the roles and the responsibility of the sharia advisory committee of the bank, as prescribed in the framework of SAC charter issued by the bank and in compliance with our terms of appointment, we hereunder submit the sharia advisory committee’s June 30, 2021. As well understood, the sharia advisory committee shall be responsible to form an independent sharia opinion based on review of operations, business affairs and activities in relation to interest free banking business of the bank. Generally, the roles of this function include providing sharia advisory, managing sharia non-compliance risk, delivering sharia opinion/fatwa and conducting sharia review. Among the key developments and given the bank’s due focus on cooperative societies and farmers, we approved new products namely, Farmers wadia saving account and Farmers Mudaraba saving account to address the needs of the marginalized segment of our community. 19 approved a penalty fund which the bank collected from late repayment charities and eligible recipients. The bank has also made a substantial progress with the opening of 13 dedicated Interest Free Banking branches in different areas of the country putting total number of such branches to 25. Regarding to the operational aspects, we have reviewed the IFB Financing contracts, provided sharia opinions on issues that requires sharia matters and visited the bank’s branches of IFB windows to check the operational correctness (segregations), on a sample basis. The fiscal year also showed a continuation of the bank’s remarkable performance in terms of major performance indicators, displaying a continued growth in the market share. The bank’s balance sheet of Interest Free Banking Window reached ETB 11.98 billion, and a profit of ETB 552 million was also recorded, during the fiscal year. The total IFB deposit accounts (custom- er base) of the bank has also reached 1.86 million. To the best of our knowledge, based on the information provided and disclosed to us during discussions and meetings, we year ended 30 June 2021 have been conducted in conformity with the Shari’ah principles. We want to conclude our remark saying thank you to each and every member of the bank including the leadership of the bank and employees for placing the bank at this position in the Looking forward, we aspire and urge, the bank should keep its momentum by periodically reviewing its IFB business model, introducing new products, and creating awareness. Committed to Breakthrough!
  23. Annual Report 2020 /21 IFB Deposits Reinforced by customer relationship management, expanding dedicated branches networks and conducting public awareness creations, we were able to achieve high growth in mobilizing deposits from IFB segments. As a result, an incremental deposit amount of ETB 5.57 billion was mobilized during the year that depicted a remarkable growth of 86.9 percent from the preceding year. Structure wise, deposits mobilized from Wadia cant share of 78.7 percent followed by Wadia current with 20 percent and Mudaraba accounts 1.3 percent only. IFB Deposits Mobilization Trends (in millions ) 2020/21 Wadia Current Wadia Saving Mudaraba Accounts Total 2019/20 2018/19 2,394.38 921.32 861.37 9,429.27 5,477.77 4,138.99 154.98 11,978.63 10.00 6,409.09 5,000.36 For the year ended 30th June 2021, the IFB deposits position of the bank reached ETB 11.98 billion, holding a 16.8 percent share from the bank’s aggregate deposits; and also puts the bank at the leading position from private banks operating in the country. Wadi’ah Farmers' Savings Account ‫لبیك‬ Wadi’aa Herreega Qusannaa Qonnaan Bulaa Committed to Breakthrough! 20
  24. Annual Report 2020 /21 Deposit Accounts strategy of the country and the bank’s endeavor to enhance its deposit mobilization endeavor, recruitment of new IFB customers is still a key focus area of the bank. Accordingly, a total of 501,788 new IFB deposit accounts were recruited during As at June 30, 2021, the total IFB deposit accounts of the bank reached 1.86 million. The total deposit account exhibited a growth by 36.8 percent from the prior year and share of 24.1 percent from the total deposit accounts of the bank. Trend of Deposit Account Opening (in millions) 1.86 1.36 1.07 2018/19 21 2019/20 Committed to Breakthrough! 2020/21
  25. Annual Report 2020 /21 IFB Financing In order to meet the demand of our Sharia compliant customprojects and businesses during the year under review. Consequently, the bank has made additional ETB 5.46 billion to various sectors of the economy. At the end of June, 2021, the segment stood at ETB 7.82 billion, recording an impressive growth of 98 percent from the prior budget year. Composition wise, the lio goes to manufacturing sector with a total amount of ETB 2.42 billion followed by International trade with ETB 1.89 billion and domestic trade and services with ETB 1.87 billion. Furthermore, the of the segment was only 0.44 percent. Committed to Breakthrough! IFB Financing by Sector (in billions) Others 0.02 Agriculture 0.09 Building & Construction 1.51 Domestic Trade & Service 1.87 International Trade 1.89 Manufacturing 2.42 22
  26. Annual Report 2020 /21 bank has been registering a from the income gained trade service facilities. In view of that, the bank generated ETB 552.34 million revenue from IFB segment registering a growth of 112.8 percent from total income generated from this segment, ETB 426.71 million was generated from IFB Murabaha remaining ETB 125.63 million was collected from commission and service charges. Lorem ipsum ed from the business segment was therefore ETB 529.43 showing a growth of 116.3 percent Trend of IFB Income (in millions of ETB) 552.34 529.43 370.60 259.55 244.82 Total Operating Income 23 Operating Expenses Tax 2019/20 2020/21 2019/20 2020/21 14.73 2019/20 2020/21 2019/20 2020/21 22.91 225.09 Tax Committed to Breakthrough!
  27. Annual Report 2020 /21 Market Expansion With the ever-growing demand of the Sharia compliant customers, the bank kept on expanding its accessibility beyond providing services via window model. During the review dedicated branches were opened in different areas of the country. In the years to come, the bank will expand its accessibility channels making the customers’ demands at the core of its business operations. Committed to Breakthrough! 24