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The Crawling Banking in Eritrea

The Bank of Eritrea in Asmara

The Crawling Banking in Eritrea 

by Kidane Tekle

1. Background:

The purpose of this article is to review the banking sector in Eritrea. I used crawling because there are not much changes in the way the banks operated in Eritrea. Banking started in Eritrea over a century ago and the changes it made in its operation with advent of new technologies, softwares and internet banking is negligible. The progress made in Eritrean banking sector is noted to be of a linear growth and not an upward sloping curve.

Banking is among the money stimulants of economic development in any country. It mobilizes deposits from its customers and advances the deposits as a loan to businesses. It undertakes import and export trade by opening letter of credit and settling bills through its correspondent banks. It handles domestic and foreign remittances. The list is not only these few but much more. In many studies, it is ascertained that there is a positive relationship between financial development and economic growth. Private investment can be enhanced by banks through provision of credit and international banking services.

Banking has not grown ever since it started in Eritrea. During the 100 years, the banks still serve using their old systems. In this perspective, it is worth reviewing the ‘tortoise and hare’ digital banking transformation around the world. Because, there is much talk about it in Eritrea. This widely known fabled story can serve as an excellent primer for examining the pros and cons of seemingly opposing forces in a familiar format utilizing a compare and contrast context. There certainly have been several perspectives offered on the why and how of the winner's result and the lessons to be learned and carried forward. From a traditional interpretation perspective, the old adage of "slow and steady wins the race" while acknowledging the value of stability and perseverance simply can no longer apply universally in today's fast paced digital customer experience race. Not when the parameters, rules, technology of the race course are constantly changing mid-lap.

Alternatively, a "push the pedal to the metal" approach in an effort to exceed the exponentially growing customer demand, establish market differentiation against an ever-changing competitive baseline all the while maintaining the highest standards of performance, stability and security is not necessarily the ready answer. Meaning, financial Institutions cannot afford a new shiny awesome front-end to run the wheels off the back-end as a number of recent global bank news events can attest.

Banking has changed from a traditional one to a digital banking in the world. Given the forces and changes, it is conceivable that leadership in banking services could be taken up by a new generation of customer-focused, technology-savvy enterprises. Although the field is open to incumbents and challengers alike, without investment and adaptation in customer service, operational efficiency and agility, some of the present incumbents could find that they are not among the winners. As part of this reshaping, we could see a new era of specialization where customer service and operational specialists are connected through a network of alliances and business-to-business service provision, replacing the traditional vertically integrated model. This scenario presents both opportunities and threats for incumbent banks, depending partly on whether their instinct is to embrace and lead this transformation or resist it. Either way, the decision will shape their future.

2. History of Banking in Eritrea:

In 1914, the Italian government authorized the Banca d'Italia, which is the the Italian central bank, to operate under special regime to carry out commercial banking in the colonies operations that were not allowed in Italy. The Banca d’Italia established its first two branches in Asmara and Massawa. Then, Banca Cooperativa Popolare Eritrea with its headquarters in Asmara was established in 1915. Banca per l'Africa Orientale was established in 1917, with its head office in Massawa. These, latter mentioned, two private banks however collapsed just few years later.

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