The Cooperative Bank of Oromia is to begin interest free banking services nearly seven months after getting the licence in February, 2015, focusing on deposits, financing, as well as investment.
Services include Wadiya accounts for cash, Wadiya current accounts for cheques, Muharaba investment savings account and Haji Umra account to save for the pilgrimage to Mecca, Saudi Arabia.
Among its financing services are Muharaba financing, where the bank delivers any good after receiving the full money and specification of the good from its customer; Ejira financing, in which the customer renders payment gradually after the bank delivers the good; Estisna financing for construction, as well as Selam financing, where the bank gives agricultural inputs to take the equivalent amount after harvest.
The other area of interest free banking is investment and includes Musharaka investment, which is a joint venture between the bank and the customer.
Following its feasibility study which showed that up to 30pc of its financial customers would demand interest free banking, the bank opted to offer the service, Feyara Ageta, chief strategy & change management officer said. The bank has been organising a separate unit data base, recording system and window for the service since getting the licence in February.
The interest free banking service could appeal to non-Muslims, too, argued Wendmagegn Negera, president of the bank. Engaging in investment as a joint venture rather than charging interest could be more profitable.
Other banks that already offer interest free banking services are Commercial Bank of Ethiopia (CBE), Awash International Bank, Wegagen International Bank, United Bank, Abay Bank and Oromia International Bank. The Cooperative Bank of Oromia is therefore the seventh bank to do so.
The Cooperative Bank of Oromia currently has 130 branches, 1.4 billion Br capital, 6.73 billion Br deposits, and assets worth 9.76 billion Br.
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