The National Bank of Ethiopia (NBE), a federal agency responsible to regulate the financial sector, has given a green light for promoters of two commercial banks under formation, Oromia International Bank and Access Bank. When they become fully operational, these banks will be additions to the eight private banks active in the market today.
 

Promoters of the two banks are now marketing their respective projects, raising capital from the public. If successful, they could increase the 30pc deposit mobilisation private banks have today.

The latest in this effort is Access Bank, an offspring of a broader 100 million Br private equity fund concept promoted under Access Capital Services SC. Promoters of this idea, led by Ermias Tekle Amelga, claim forming a bank is only one of the many projects they have in the pipeline.
 

Promoters would like to raise 300 million Br in subscribed capital from the public that has each 1,000 Br par value. Prospective investors are required to buy a minimum of 25 shares worth 26,250 Br (which includes a five per cent fee); it is also the first bank to limit the maximum shareholding to 5,000 or 5.25 million Br. Interested buyers could deposit their contribution in any of three banks: Bank of Abyssinia, Dashen or the Commercial Bank of Ethiopia (CBE), according to a prospectus distributed at the Sheraton on Friday, May 4, 2007, to close to 100 potential investors.
 

Housed in a building on the Ethio-China Friendship Road (Wollo Sefer), promoters of Access Bank hope they will raise enough capital from the public by May 31, 2007.
 

The central bank requires a newly formed commercial bank to have a minimum of 75 million Br before being allowed to operate in the market. Promoters, which include Tecle, former top official of the Bank of Abyssinia, and Haileluel Tamru, one of the three partners at HST audit firm, claim in the prospectus to be paid 10pc of the annual profits for the first three years.

It was not clear, however, who the potential investors they have put in their list so far are. Neither have they disclosed how much capital they have managed to raise to date.
 

Reliable sources disclosed to Fortune, however, promoters of the other commercial bank under formation, Oromia International Bank, has managed to raise close to 110 million Br, surpassing the minimum capital requirement by 35 million Br.
 

With its headquarters located inside Dembel City Centre, on Africa Avenue (Bole Road), this Bank is chiefly promoted by Yemiru Nega, developer of Dembel and majority shareholder and general manager of Yencomad Construction. Other shareholders in the new bank include Dhuguma Hunde, major shareholder of DH Geda Plc, Getu Gelete, major shareholder of Get-As International, and Derartu Tulu, a prominent athlete.
 

Promoters held a meeting with around 200 prospective shareholders two weeks ago, at the Addis Abeba Hilton, where they announced the completion of preparations for the Bank’s official launching. The announcement was brightened with live performances from singers such as Getachew Hailemariam, Tadele Gemechu and Tsegaye Dandena, according to those who attended the meeting.
 

Promoters will have a final meeting on Monday, May 7, before submitting final application, article of association and memorandum of understanding of the Bank to the regulatory agency within a month and a half, according to sources.
 

A would-be major shareholder, who asked for anonymity, told Fortune that Oromia International Bank plans to launch the youngest bank, following the founding of Lion International Bank, initially opening seven branches in Addis Abeba and major towns in the Oromia Regional State.
 

For now, the private banking sector in Ethiopia is fully profitable, even during the first year of operation, according to a study conducted by BKP Development, a research and consulting firm commissioned by the government to study the impact of Ethiopia’s potential membership to the World Trade Organisation (WTO) on the financial sector.
 

“But, nevertheless, the profits of the private banks have shown notable increases only for the past three years,” said the study released last month.
 

The current trends that are seen in the private banking sector are quite positive, an expert in the financial sector told Fortune.
 

“The market has the capacity to expand, which would mean an overall growth as well,” the expert said.
 

Others in the industry, however, caution the fragmentation of capital due to the mushrooming of private commercial banks and instead advise merger in order to challenge the dominant player in the industry, CBE.
 

Advocates of the opening of additional commercial banks could find solace with the study conducted by BKP Development. It found the coverage of financial services in Ethiopia has a population to branch ratio of 166,000 people, which is far below even the African standard: Ghana’s is 54,000 people, while the ratio in Namibia is 20,074.