The first quarter of 2007/08 showed that resources mobilized by the banking system, which consists of deposits, collection of loans and borrowings, reached 7.9 billion birr, 52.6 percent higher than the amount mobilized during the preceding quarter and 30.7 percent over the same quarter of last year.

The quarterly report of the National Bank of Ethiopia (NBE) indicated that about 86.5 percent rise in collection of loans and 34.8 percent increase in net deposits contributed to the quarterly growth in resource mobilization. Year-on-year basis, resources mobilized by the banking system surged by 30.7 percent.

The total deposit liabilities of the banking system reached 56.8 billion birr at the end of the first quarter of 2007/08, indicating quarterly and annual growth rates of 5.4 and 19.1 percent, respectively.

All types of deposits have increased. Demand deposits, which accounted for 48.9 percent of the total deposits, reached 27.8 billion birr, showing quarterly and annual growth rates of 5.7 and 19.6 percent, respectively. Saving deposits, with 44.0 percent share in total deposits increased by 5.4 and 16.1 percent on quarterly and annual basis to 25.0 billion birr.

Similarly, time deposits, which constituted 7.1 percent of the total deposit liabilities of the banking system, went up by 3.1 and 37.9 percent during the same period. The surge in all types of deposit presumably reflects improvements in the income level of the population and the steadily expanding financial intermediation.

According to NBE's report, the share of government-owned banks in total deposits declined to 67.6 percent at the end of September 2007 from 70.4 percent last year, while the share of private commercial banks increased from 29.6 percent to 32.4 percent.

Collection of loans by the banking system amounted to 5.0 billion birr during the first quarter of 2007/08, up by 86.5 and 76.3 percent vis-à-vis the preceding quarter and same quarter of last year, respectively. The upward trend in loan collection largely reflects increasing repayment and collection efforts on the part of creditors and debtors as the economy showed steady growth.

Of the total loan collection, private banks collected 1.7 billion birr (34.6 percent) and public banks the remaining balance. About 53.0 percent of the total loan collection was from cooperatives followed by the private sector (34.7 percent).

Total outstanding borrowing of the banking system reached 2.4 billion birr at the end of the first quarter, registering a marginal quarterly decline of less than 1.0 percent, but an annual growth rate of 17.4 percent. Of the total borrowing, 2.0 billion birr (82.0 percent) was domestic and the remaining 434.3 million birr (18.0 percent) from foreign sources.

During the first quarter of 2007/08, total fresh loans disbursed by the banking system amounted to 3.9 billion birr, showing a quarterly decline of 9.5 percent while registering an annual growth rate of 28.3 percent. On quarterly basis, loan disbursements by both public and private banks decreased by 9.7 and 9.2 percent, respectively.

Meanwhile, compared with the same quarter of last year, loan disbursements by public banks increased by 168.2 percent while that of private banks declined by 20.6 percent. Of the total new loans disbursed by the banking system, 45.8 percent was disbursed by private commercial banks.

With regard to the beneficiaries of new loans, about 23.6 percent went to agriculture followed by domestic trade (18.6 percent), international trade (17.7 percent), industry (11.7 percent) and housing and construction (10.2 percent). Another major beneficiary was transport and communication sector, which received about 8.1 percent of the total fresh loans disbursed.

The report revealed that total outstanding credit of the banking system (including credit to the government) reached 46.7 billion birr at the end of September 2007, which was 5.2 and 14.2 percent higher than that of the preceding quarter and the same period of last year, respectively. Of the total outstanding credit, credit to the private sector accounted for 54.3 percent, followed by credit to central government (34.5 percent) and credit to public enterprises (7.5 percent).

Sector wise, about 15.2 percent of the outstanding credit went to industry sector followed by international trade (12.9 percent), domestic trade (9.1 percent), housing and construction (8.6 percent), agriculture (8.1 percent) and transport and communication (5.5 percent).

At the end of the first quarter of 2007/08, total claims of NBE on the central government reached 30.3 billion birr, 22.6 percent higher than the same period of last year but 6.7 percent lower than the preceding quarter. Direct advances amounted to 20.4 billion birr (67.3 percent of the total claims), showing 13.6 percent quarterly decline and annual growth rate of 35.8 percent. In contrast, NBE's holdings of government bonds slightly declined by 0.2 percent to 9,899.3 million birr at the end of the review quarter.

Meanwhile, deposits of the central government and financial institutions at the NBE increased by 35.3 percent to 20.4 billion birr, compared to the balance in the same quarter last year. Quarterly, however they declined by 3.1 percent.

Of the total deposits, 39.4 percent was that of the central government which increased by 33.6 percent on annual basis, but declined by 7.2 percent on quarterly terms. Similarly, deposits of financial institutions registered an annual growth of 36.6 percent and a quarterly slow down of 0.3 percent.

During the first quarter of 2007/08, the amount of Treasury bills (T-bills) supplied to the fortnightly auction market amounted to 18.1 billion birr, 26.65 percent higher than the preceding quarter and 0.35 percent lower than the same period last year.

Meanwhile, T-bills worth 23.6 billion birr were demanded during the quarter, higher by 38.8 percent vis-à-vis the preceding quarter but rose by 9.6 percent compared to the corresponding period of last year. Thus, in the review quarter, the amount of T-bills sold satisfied about 76.7 percent of the demand.

Commercial banks continued to dominate the T-bills market by purchasing about 83.9 percent of the bills auctioned owing to their excess reserve holdings.

The average weighted yield on T-bills of different maturities showed a significant increase during the quarter under review vis-à-vis the corresponding period of last year. The annual weighted yield for 28-day bills, which was 0.043 percent, last year, went up to 0.848 percent.

Similarly, the yield on the 91-day bill rose from 0.045 percent to 1.139 percent while that of the 182-day bills increased from 0.024 percent to 1.056 percent. On quarterly basis, the yield for 28-day, 91-day and 182-day bills rose by 41.8, 13.5 and 21.2 percent, respectively.

The stock of outstanding Treasury bills reached 14.5 billion birr at the end of the review quarter, registering quarterly increase of 30.0 percent. About 86.4 percent of the total outstanding bills were held by commercial banks.

No inter-bank money market transaction was held during the first quarter of 2007/08. Since the introduction of the inter-bank money market, merely nineteen transactions worth 259.0 million birr were transacted with an interest rate ranging between 7 and 11 percent (average 7.74 percent). The maturity period of these loans widely ranged from overnight to 5 years.