Wednesday, April 18, 2012

The Ethiopian Commercial Bank That Was the First African Bank

Many are going to find it hard to believe that it was an Ethiopian commercial bank that was the first indigenous bank to be established in Africa. It was created, established, managed and owned by Ethiopians. The bank’s name: Bank of Ethiopia. But let’s not get ahead of ourselves, and let’s start from the beginning of the proud African story entitled “Ethiopia Bank History”.

Bank of Abyssinia

The first Ethiopian bank to open its doors was the Bank of Abyssinia. It was inaugurated by Emperor Menilik II on February 16, 1906.   Although it was the first one in the long Ethiopia bank sequence, it was actually a branch of the National Bank of Egypt, a British bank, and totally managed by them. An agreement had been reached between Emperor Menilik and the bank officials to introduce modern banking to Ethiopia and it was given a lot of concessions and leeway.

For example, the Bank of Abyssinia was guaranteed to no competition from any Ethiopian bank or otherwise for a concession period of 50 years. And during those fifty years it had the full right to issue currency notes and coins. In short it had full control on the country’s currency exchange, both locally and internationally. Add to this the fact that it kept all profits and was allowed to exchange money for gold and silver freely meant that it was a sure thing that it would be making a money hand over fist.

But that wasn’t true. Ethiopians being new to the banking concept didn’t appreciate the culture of having to give one’s hard earned money to another for safekeeping. And even when the Bank of Abyssinia had opened branches in several other Ethiopian cities, it couldn’t make a profit until 1914 and in 1919, 1920 and from 1924 onwards because it only increased the cost that was incurred by the bank’s administrative personnel.

After staggering along for a few more years, the Bank of Abyssinia was officially liquidated in 1931.

Bank of Ethiopia

That same year heralded the birth of the first Ethiopian national bank, the Bank of Ethiopia. It was established August 29th, 1931 by official decree shortly after Emperor Hailesellasie I’s ascent to the throne. It became the first African bank that was truly African as it was owned and managed by Ethiopia and Ethiopians. It took over all the activities of the Bank of Abyssinia and was performing strongly right up to the Italian invasion in 1935.

Sadly very little has been documented about this bank, and a lot needs to be done before this proud Ethiopian and African history is forgotten.

Foreign Banks

With the Italian troops came Italian banks, and with their withdrawal in 1941 came another foreign bank, Barclays Bank that was to cater to the British troops that had helped liberate Ethiopia.

State Bank of Ethiopia

The second Ethiopian national bank started its work on April 15th, 1945. It was called the State Bank of Ethiopia. This bank also had to cease to exist as it was deemed necessary to split the functions of the bank.

Commercial Bank of Ethiopia, Addis Ababa

Commercial Bank of Ethiopia, National Bank of Ethiopia et al

It was therefore with the introduction of the 1963 Ethiopian Monetary Law that the first Ethiopian commercial bank was established: Commercial Bank of Ethiopia. The role of a central bank was given to the National Bank of Ethiopia. These two banks exist to date and have been joined by a multitude of private and government owned banks.


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