Corporate Strategy

(2019/20 to 2023/24)
 Background
Balanced Scorecard adopted for Strategy formulation and
implementation
Strategy Formulation steps:
STEP 1: ENVIRONMENTAL ASSESSMENT
STEP 2: STRATEGY DEVELOPMENT
STEP 3: STRATEGIC OBJECTIVES
STEP 4: STRATEGY MAPPING
STEP 5: PERFORMANCE MEASURES AND TARGETS
STEP 6: STRATEGIC INITIATIVES
Strategy Implementation steps:
STEP 7: AUTOMATION
STEP 8: CASCADING
STEP 9: MONITORING AND EVALUATION
 Outlines

01 Global and Domestic

06 Customer Value
11
Environment
01 Discipline Strategic Objectives

02 Banking Industry
Analysis 07 Strategic Issues
12 Measures and Targets

03 Internal Environment
Review (RBS) 08 Vision, Mission, Values
13 Strategic Initiatives

04 SWOT
09 Overarching Strategic
Results 14 Monitoring & Evaluation

10
05 Stakeholder Analysis 10 Strategic Themes &
Results 15 Communication Plan
 1.Global and Domestic Environment

 The global and domestic socio-economic environment is analyzed and

implications captured as follows:
Global Growth
✓ A combination of rising U.S. interest rates, a stronger dollar, and the intensification of trade tensions
have brought market pressures in some emerging market economies.

✓ The most vulnerable economies have faced a difficult market environment, large currency
depreciations, difficulties in rolling over external debt which may burden the performance of the
economy on external sector.

✓ On the positive side, a rebound in global growth is expected in the medium term which may reduce
the pressure on the economy.
 1.Global and Domestic Environment (Cont.)

Major Import and Export Commodities

✓ The outlook for commodities has a mixed implications for our economy.

✓ The subdued outlook for price of major commodities i.e oil and fertiliser is a good news to
relieve the country from further pressure of FCY allocation, although a significant saving is not
expected due the increasing volumes of import.

✓ The price forecast of oils remained to be volatile as its depends on geopolitical factors.

✓ The expected price decline for major exports such as coffee will become a challenge to the
economy which demands the country to compensate the FCY earnings through volume
increases as well as through export diversification.
 1.Global and Domestic Environment (Cont.)

Remittance Trends
✓ The growth prospect of remittance inflow in the coming years is an opportunity for Ethiopia to
grow its FCY earnings.

✓ Remittance has become the primary source of FCY earning to the country overtaking export.

✓ Focus should be to grow the FCY earnings from remittance sources through, service excellence,
expanding outlets, minimising costs, leveraging on technology to facilities convenience and cost
reductions.

Development of Financial Technology

✓ Explosions of digital technology is rapidly transforming the financial sectors. Digital technology
offers both opportunities and challenges for banks.

✓ It offers opportunities to provide better services, conveniences, and gain on efficiency;

 1.Global and Domestic Environment (Cont.)

Development of Financial Technology (Cont.)

✓ Increasing competitive pressure arises from non traditional players i.e FinTech as they push
forward entering into the space of banking services; which become major threats for banks.

✓ With the growing alignment of technology in financial services, cyber security has become the
major concern of financial sectors.

Domestic GDP
✓ the positive outlook for the Ethiopian economic growth presents opportunities to the banking
industry through improving of individuals’ disposable income thereby enhances deposit
mobilization.

✓ The political uncertainties may have a downside risk to the growth prospects impacting the
potential for resource mobilization.
 1.Global and Domestic Environment (Cont.)

Price and Exchange Rate Dev’t

✓ High parallel market premium remained to be a challenge for banks to draw the FCYs in to
formal sectors from illegal market;

✓ The high level of inflation is also identified as major risk factor to the bank’s effort to increase
deposits mobilization.
External Sector
✓ The export performance of the country remained to be a challenge as its gap with import is
widening from time to time.

✓ The outlook is not that much promising as country is dependent on primary goods export thus
continued to be victim to the volatile and declining commodity prices.

✓ On the positive side remittance has good potential with growth prospects thus due focus shall
be given to remittance particularly private transfer.
 1.Global and Domestic Environment (Cont.)
Demographic Trends
✓ The rising of the working age population, improving literacy rate coupled with the development
of urbanisation would accelerate the development of financial sector;

✓ The challenges related to access to jobs and high dependency ratio can be cited as downside
risk to the development of financial sector.
Telecom Infrastructure
✓ the development of telecom infrastructure and services will bring opportunity for the financial
institutions to provide digital banking product and services.
✓ Mobile network expansion in the country also represents a very good potential to set the path for
much stronger and inclusive financial development in the country.
✓ The recent reform initiated to privatise key strategic sectors such as telecommunication is expected
to improve the existing service quality and efficiency of telecommunication, particularly if the
implementation of the reforms take the approach of encouraging competition in this sector.
 2.Banking Industry Analysis (Porter’s model)

Porter’s five forces of competition

‣ Rivalry among existing competitors

‣ Bargaining power of buyers
‣ Bargaining power of suppliers
‣ Competition from Substitute
‣ Threat of Entry
 2.Banking Industry Analysis (Porter’s model)Cont.

‣ The basic principle: that competition will be intense or high if

‣ there are many players of the same size,

‣ there is no much differentiation between players,

‣ barriers for exit is high,

‣ there is low level of profitability and the market growth

is low.
 2.Banking Industry Analysis (Porter’s model)Cont.
Findings Based on Porter’s five forces:

‣ The banking industry has high concentration on major performance variables such as
deposit, loans and advance, FCY earnings and distribution channels;

‣ The concentration is largely driven by CBE, where it has maintained an influential role in the
industry;

‣ There is low intensity of competition in the industry among the existing banks as can be
inferred from high concentration ratio and the growth trend;

‣ Therefore, the industry can be rated as attractive and there is good opportunity for growth
due to availability of untapped market, with profit potential;

‣ The deposit structure of the sector shows that the largest share of deposit is contributed by
saving deposit, which is normally considered as stable source of deposit.
 2.Banking Industry Analysis (Porter’s model)Cont.

Findings Based on Porter’s five forces (Cont.)

‣ The FCY earnings has high concentration; mainly due to remittance factor.

‣ It has been noted that competition for export business is growing and becoming more intense
unlike to other businesses; mainly because of the limited market growth of the export business
which forced all banks to target the same exporters;

‣ The sector is characterised by undifferentiated products and low level of loyalty of customers;
hence price has come out as one of the major competition field.

‣ Despite the industry has potential for growth to the untapped market, some banks have opted to
aggressively target each other markets leading to price war, with a trade-off for their profitability.
This becomes costs to all banks in the industry;

‣ Resource owners i.e depositors and FCY earnings contributors have a high bargaining power
 2.Banking Industry Analysis (Porter’s model)Cont.
Findings Based on Porter’s five forces (Cont.)

‣ Resource seekers have low bargaining power due to resource constraints. This requires
banks to have due focus on resource owners, as they determine their resource allocation
effort with ultimate effect on profit;

‣ The Micro finance institutions, Saving and credit unions, informal sectors such as Equib and
Edir are the major players considered as substitute to banking products

‣ The financial technology service providers have also recently emerged as substitute for
payment services.

‣ The possibility of Stock market could become threat to banks; which requires proper
strategic response to mitigate this;

‣ The industry is in advantageous position since it protected with regulations ; however this
may no longer hold true for long, due to the recent development in the market as well as
 3.Internal Environment Review (RBV)

The RBV tool: to identify the competitive advantage of the Bank through
analysis of resources and capabilities controlled by the Bank.

I.Resources of BoA
- Financial Resources
- Human Resources
- Physical Resources
- Intangible Resources
 3.Internal Environment Review (RBV) Cont.

1.Financial Resources
‣ Profitability:
- Three years’ average (ROE) for BoA stood at 21.74% : Below Industry Average, and
Peer banks’ average;
- Three years’ average ROA stood 2.39% which was again below the industry
average;
- The net interest margin average for the BoA stood at 6.07%, which was below the
industry average;
- This revealed the Bank’s profitability is unsatisfactory as compared with the
competition.
 3.Internal Environment Review (RBV)Cont.

1.Financial Resources (Cont.)

‣ Liquidity and Asset Quality:
- BoA’s liquid asset to net deposit averaged at 15.3%, which fell below the Industry
average of 17.6%.
- The average loan to deposit ratio (excluding bill) stood at 65.8%, which was
contained well below the standard and consistent with the private banks’
performance.
- The three years average NPL ratio for BoA stood at 1.5%, which was favourably
below the standard set by the NBE. Nonetheless, it has been noted that the NPL
position of the bank has inconsistent trend through out the year which has gone up
to 9%.
 3.Internal Environment Review (RBV)Cont.

1.Financial Resources (Cont.)

‣ Efficiency
- the BOA’s three years average cost to income ratio stood at 71.2% which had been
unfavourably above the industry average i.e. 65.4%. This implies that efficiency is a
concern;
‣ Capital Adequacy:
- the capital adequacy ratio for BoA averaged at 13.8% which had been above the
requirement, and slightly below peer banks position i.e Awash and Dashen banks.
- Its average capital to total asset ratio also stood at 10.3% which again was above
the requirement of 4% to 5%, however below the peer banks position.
 3.Internal Environment Review (RBV)Cont.
1.Financial Resources (Cont.)
‣ Deposit
- the total deposit position of the Bank has reached Birr 25,795 million, with average
growth rate of 33%. The three years’ average growth rate had been below the
industry average of 42%;
- The deposit of BoA in absolute term fell behind both Awash and Dashen banks.
- The share of time deposit i.e. costly deposit consistently grew and reached to 15%
from 6% in 2015/16, which demands further attention as it impacts the profitability of
the bank.
‣ Total Asset :
- the total asset of the Bank registered yearly growth of 33,12% for the past three years,
lagging behind the average industry growth rate.
‣ Loan and Advance :
- loans and advances on average grew by 46%, at a higher pace than the industry and peer
banks.
 3.Internal Environment Review (RBV)Cont.
3.Human Resources
‣ Workforce composition by job category:
- the staff strength in 2018 FY reached to 6,037, the permanent staff number stood at
3,989 with average growth rate of 14.7%.
‣ Workforce composition by education qualification
- more than 66% of the Bank’s work forces have first and second degrees, 97% the
managerial staff have first degree at minimum.
‣ Workforce Composition Years of Experience :
- most of the work force have served the bank for less than five years i.e 61%;
- Senior staff who have served in the Bank for more 15 years accounted for 5% of the total
work force
‣ Employee Productivity :
- BoA’s three years average labor productivity reached at Birr 340 thousand, which was
below the industry average of Birr 432 thousand, and below the peer private banks’
average of Birr 431 thousand .
 3.Internal Environment Review (RBV)Cont.

2.Human Resources

‣ Workforce Composition by Age and Gender :

- about 39% of the total workforce of the BoA, falls under the youth category i.e less than
30 years. This age category also accounted for 11% of managerial position.
- The majority of workforces (50.6%) are found between the age category of 30 to 45,
representing 77% of the managerial positions.
- From overall permanent staff composition, currently 60% of the staff are male while
women constitute 40%, The composition of women in managerial positions are low (29%)
in comparison to other positions.
‣ Attrition Rate :
- During the last three years, the attrition rate on average are 2.25% and declining in
recent periods.
 3.Internal Environment Review (RBV)Cont.

3.Physical Resources

- The Bank’s physical assets have been growing at 12% in the past years. The physical
resources are composed of land, building, vehicles, office equipment, furniture,
computer equipment and construction in progress.
4.Intangible Resources
‣ Brand
- Bank’s brand is rated as strong and well recognised by the public. But it requires full and
fast implementation of the rebranding initiatives as per brand guideline so that
inconsistencies are avoided.
‣ Organisational Structure:
- Streamlined organisation is still a major focus area for the bank since some constraints
have persisted such as large span of control, weak integration and coordinations, weak
performance management.
 3.Internal Environment Review (RBV)Cont.

4.Intangible Resources
‣ Culture
- normally expressed in the form of core values which should be nurtured aiming to help
employees practice this stated cultures on their day to day activities.
‣ Information Technology
- The Bank has focused on acquiring and implementing core infrastructures and system
with a focus on front office i.e. customer facing systems.
- Focus should be keeping up to date the Information Capital to cope up with the current
dynamism, risk of technology obsolesce and also support the business strategy of the
bank.
- needs to adopt to the new trends of digital technology disruptions
 3.Internal Environment Review (RBV)Cont.
II.Capabilities of BoA
1.Financial Resource Mgt
- The actual performance of the bank in deposit mobilisation, loan collections, FCY
earnings and outstanding loans and advance fell short of the targets in the past
consecutive years.
2. Accessibility
- The branch network of BoA reached 286 at the end of June 2018, with market share of
8% ; following CBE, Awash and Dashen banks;
- The branches’ capability to recruit new customers was limited, i.e. one branch on
average opened 734 accounts per year;
- The Bank’s capability to reach out to customers through E-banking channels was limited
as it can be noted from its volumes as well as market shares;
- The pace at which the Bank moves towards adopting electronic channels and improving
their functionality is very slow;
 3.Internal Environment Review (RBV)Cont.
II.Capabilities of BoA
3.Human Resource Management
- The human resource transactions are currently handled manually, without a support of
central and unified system such as ERP;
- The strategic initiatives of human resource development such as such career
development, succession plan, leadership development program, culture and talent and
performance management are all at very preliminary and documentation phases.
4.Marketing and Sales Management
- The product and service diversification efforts of the Bank has been rated as
unsatisfactory in consideration to the dynamism of the working environment;
- Absence of sales strategy was also identified as one of the major weaknesses of the
bank in relation to the marketing efforts;
- There is inconsistent performance across branches and other channels in customer
service, and monitoring of the improvement plan for customer satisfaction was weak.
 3.Internal Environment Review (RBV)Cont.

II.Capabilities of BoA
5.Risk Management
- The Bank lacks a well crafted risk management framework which is tuned to address all
emerging risks;
- The operational risk management is not well developed in the Bank
6.Information Technology Management
- Weak project management capability;
- The Bank lacks well established standards and systems to manage its IT services and
operations;
- The Bank fails to proactively monitor the new trends of technological disruptions in
order to cope up with the challenges as well as leverage on the opportunities offered by
the digital technologies.
 3.Internal Environment Review (RBV)Cont.

II.Capabilities of BoA
7.Customer Relationship Management
- lack of comprehensive customer data, weak competency of the sales personnels, lack
of integration and coordination among branches and supporting organs;
- The bank has delayed to implement call centre;
8.Strategic Leadership
- Areas of improvement includes :
- bring strategic alignment with all its operations and business
- effective strategy executions, change management and communication.
- Strategic agility which requires proactive monitoring of the dynamic environment
and come up with emerging strategies
 3.Internal Environment Review (RBV)Cont.

Resources and Capabilities Relative Strengths against the competitors

CBE Peer Banks Overall
(Awash and
Dashen)
Financial Inadequate Inadequate Inadequate
Physical Inadequate Inadequate Inadequate
Human Inadequate Inadequate Inadequate
Intangible Inadequate Inadequate Inadequate
Financial Resource mgt Inadequate Inadequate Inadequate
Accessibility
Branch Inadequate Adequate Inadequate
E-Banking Inadequate Inadequate Inadequate
Marketing and Sales mgt Inadequate Inadequate Inadequate
Information Technology mgt Inadequate Inadequate Inadequate
Customer Relationship mgt Adequate Inadequate Inadequate
Organisation and Leadership Inadequate Adequate Inadequate
 3.Internal Environment Review (RBV)Cont.

‣ Concluding Remarks:
- The internal analysis of the BoA using the RBS view shows that most of the
Bank’s resources and capabilities could only bring competitive parity to
the bank.
- Therefore the focus in the coming strategic period should be working on all
these areas to transform the resources and capabilities into distinct
competencies and create sustainable competitive advantages.
 4.SWOT Analysis

‣ Strengths
- Branch coverage
- Young and trainable staff mix;
- Good capital base;
- Good standing in asset base ;
- Strong brand
‣ Weaknesses
- Low profitability growth
- Weak resource mobilization performance ;
- Low level efficiency and effectiveness;
- Weak liquidity management;
- Weak risk management;
- low level customer base
 4.SWOT Analysis (Cont.)

‣ Weaknesses (Cont.)
- Unsatisfactory HR development;
- Weak IT service support, project management,
- Weak efforts to proactively monitor & adopt to the new technology trends;
- Weak E-banking service expansion and adoption;
- Weak marketing and sales management;
- Weak functional units integration and coordination;
- Weak performance management
‣ Opportunties
- The medium term growth prospect for Global economy and world trade;
- The positive outlook for the Ethiopian economic growth;
 4.SWOT Analysis (Cont.)

‣ Opportunities (Cont.)
- Government’s commitment and actions to stabilize the macro economy;
- The development in travel and tourism sector remains an important sector;
- The prospect for Remittance growth;
- New innovations in technology and positive trends in digital transformation;
- Increasing number of young and unbanked population;
- Untapped market potential for financial services
‣ Threats
- Export shocks remain high for major Ethiopian export commodities;
- Persistent shortage of FCY coupled with growing demand for it;
- High Inflation rate
 4.SWOT Analysis (Cont.)

‣ Threats (Cont.)
- Political uncertainties, heightened ethnic tensions, and the upcoming election;
- Increasing young and unemployed population;
- Service interruption in telecom services and power supply;
- Malpractice in foreign currency supply and wide spread between parallel and
official exchange rates;
- Possibility for opening up of financial sector to foreign banks;
- Possibility of establishing stock market
- Disruptive technologies and non-traditional players in the industry;
- Intensification of cyber-attacks and cybercrime
Question
 5.Stakeholder Analysis

‣ Stakeholders ‣ Understanding Their need

- Shareholders
‣ Identifying their level of influence;
- Board of Directors
‣ identifying the strategic response to
- Management
their expectations
- Employee
- Regulators
- Customer
- Suppliers, partners
- Embassies, NGO’s
- Service providers
- etc
 6.Customer Value Discipline

‣ Value proposition: defines the organisations' unique mixes of offers in terms of

relevance to the customers, benefits, price, etc designed to convince customers that
their offers will meet their need better than the competitive set of offers.
‣ the three generic customer value discipline i.e

1. Product Leadership,
2.Operational Excellence and
3. Customer Intimacy.

‣ Successful organisations achieve competitive advantage by excelling in one of the

three customer value disciples while maintaining “good enough” on the other two.
 6.Customer Value Discipline (Cont.)

1.Operational Excellence
‣ revolves around cost leadership and aims to lead the market through price and convenience;
‣ The value proposition is a combination of quality, price, and ease of purchase;
‣ Operationally excellence organisations works towards excelling :
- Client excellence: providing effective sales and services across channels; through , branch
excellence, call-center excellence, multi- channel delivery
- Efficient and effective processes: standardized, simple, fast and ideally paper
free ,across all functional units.
- Optimised and streamlined organisations: with clear sales and service focus, and
strong operation;
- Strong underlying capabilities: which include complexity management, performance
management, continuous process improvement, and effective collaboration between the
front and back offices.
 6.Customer Value Discipline (Cont.)

‣ The recent trend of digitalisation allows to leverage not only on better price but also on automation and
Digitalisation. The followings advantages can be attained :

- Improving customer experience with digital technologies: the shift in preference for self services
and digital channels allows provision of hassle-free services; at the same time brought higher income and
reduced costs;

- Digitalising end-to-end processes to boost efficiency; enhance efficiency by automating and

standardising processes; It encourages customers to migrate from branch activities to more convenient,
more efficient, and less expensive online interactions;

- Offering a human touch in a digital world: freeing up time in back and front office due to significant
efficiency improvements. The freed up capacity in time and effort can be shifted to client-facing advisory
functions;

- Expanding digital capabilities while controlling complexity: that increase lead generation and
simplifies sales process at front end while reducing complexity at back end.
 6.Customer Value Discipline (Cont.)

2.Customer Intimacy
‣ Revolves around building bonds with customers, through personalisation of services and
customisation of products designed specifically for individual customer;

‣ Customer intimate organisations have an obsession with understanding the individual

customer in detail;

‣ Organisations pursuing customer intimacy are required to have a full range of services
available to serve their customers on demand.

‣ Their focus is to bring unparalleled value to customers, so they most likely charge premium
price for their products and services since they compete on value not on price;
 6.Customer Value Discipline (Cont.)

3.Product Leadership

‣ Product leadership value focus on continuously bring superior products to the market.

‣ The operating models for a product leader organisation include:

- A focus on invention, research management, product development, and market
exploitation, and talent management;
- A business structure that is loosely knit, ad hoc dynamic;
- Management system that take risks and rewards new venture , measures and rewards new
product success; and
- A culture that encourages out of box thinking and creativity;
 6.Customer Value Discipline (Cont.)

‣ The value discipline of Bank of Abyssinia is proposed to be revised to “ Operational

Excellence”, with a focus on
- Convenience: The Bank will embrace convenience as key features in all its offers; High
focus will be given to digital banking particularly for basic transactions and interactions.
- Standardised services and products: The Bank will focus on provision of quality and
consistent products and services ; (Mass diversification)
- Error free: Make things easier for customers: creating a hassle-free or error free
customer experience and avoid delay to make the customer service excellence;
- Competitive price: The bank will leverage on standardisation, efficiency and
effectiveness thus would offer competitive price to customers;
 6.Customer Value Discipline (Cont.)
‣ The operating model of the bank will bases on front office- back office integration with the
following major features:
• Customer excellence: Providing efficient and effective sales and service across channels i.e
branches, contact centres, digital channels etc;
• Efficient and Effective Processes. Design processes that are simple, fast, end-to-end digital
processes to enhance efficiency;
• Strong underlying capabilities: including complexity management, performance management,
front and back office integration, and continuous improvement;
• Digitalisation: Provide seamless cross-channel banking solutions for both sales and service.
Customers will be encouraged to migrate from branch activities to more convenient, more efficient,
and less expensive online interactions.

Bank of Abyssinia will strive to excel in delivering extraordinary level within the “ Operational Excellence
“ value proposition, while maintaining a threshold standard on other dimensions of value.
 7.Strategic Issues

‣ The following eight strategic issues that the BoA should address in the next five years strategic
period are identified:
1.Profitability
2.Resource mobilization
3.Efficiency and Effectiveness
4.Human Resource Management
5.Digital Banking
6.Risk Management
7. Marketing and Sales
8.Collaboration and Communication
 8.Vision , Mission and Values

‣ Vision “ To become a leading commercial bank in East Africa by the year 2030”

‣ Mission : “We are committed to provide excellent financial services through competent, motivated
employees and digital technology in order to maximise value to all stakeholders”

‣ Value :
1. Customer Satisfaction
‣ We are committed to provide the highest quality service to our customers at competitive price;

‣ We continuously work towards achieving excellence in all our endeavours;

2.Integrity
‣ We Promote and stand guard to a set of high moral standards and ethical values.

3.Team work and Collaboration

‣ We foster teamwork and collaboration to achieve our goals.

4.Caring for our community

‣ We promote sustainable and responsible business practices that are conscious of the community we operate in.
 9.Overarching Strategic Results

I. Strong and sustainable profitability

‣ Continuous growth of Profitability;
‣ Strong Liquidity Position;
‣ Strong Asset and Capital Base;
‣ High productivity;

II.Excellent Customer Service

‣ Quality products and services, at competitive price to ensure our customers get
the maximum satisfaction at all times.
‣ Increased customer base.
 9.Overarching Strategic Results (Cont.)

III.Effective and Efficient work process

‣ Seamless work processes;

‣ Streamlined organisations ;

‣ Automated, efficient and effective work processes ;

‣ Sound Risk management;

IV.Strong digital capabilities

‣ Enhanced accessibility through digital services and channels.

‣ increased rate of adoption and usage of digital channels/services/media

 9.Overarching Strategic Results (Cont.)

I. Engaged and Competent employees

‣ Motivated and engaged employees;

‣ Improved competencies and performance results;

‣ Strong career path and succession management;

‣ Effective communication and collaboration;

 10.Strategic Themes and Results
‣ Strategic themes

- define the broad focus areas in which the Bank must excel in order to achieve its vision.

- criteria : that they are cross functional and cut across boundaries where the whole functions
within the Bank can work towards them.

Strategic themes for BoA

1.Growth: expanding its major activities including

- accessibility options, extensive customer acquisition, high resource mobilization and
allocation of same, and enhancing the variety of product and service offers.

2.Operational Excellence: this theme combines all efforts that aim to bring excellence in all
endeavours of the Bank through focusing on :
- standardisation, optimisation, convenience, efficiency, and effectiveness.

- building internal capabilities leveraging on high utilisation of technology and driving

continuous improvement.
 10.Strategic Themes and Results (cont.)

Strategic themes for BoA

3.Digitisation: as a theme is more than bringing efficiency and effectiveness

- to respond to the disruptive power of digitisation

- to seize the opportunity offered by digital technologies and quickly conquer the market ;

- building internal capabilities leveraging on high utilisation of technology and driving

continuous improvement.
- driven by the ever increasing demand of customer for convenient, simple, fast services
and better experience,
- driven by changing employee behaviour and thought patterns that require modern intra-
organisational communication and interaction forms.
 10.Strategic Themes and Results (cont.)

No. Strategic Theme Strategic Result

1 Growth Sustainable profit

2 Operational Excellence Satisfied stakeholders

3 Digitalization Convenient services and seamless work process

Question ?
 11.Strategic Objectives

Strategic Themes and Perspectives Objectives

Results
Growth Increase profitability
Sustainable profit Financial increase financial resource mobilisation
Enhance financial soundness
Operational Excellence
Satisfied stakeholders Increase customer satisfaction
Customer
Increase customer base
Increase accessibility with a focus on digital
Digitisation channel
Internal Process Improve efficiency and effectiveness
convenient services and
seamless work process Improve risk management
Improve employee competency
Increase employee satisfaction and engagement
Learning and
Growth Improve digital capabilities
Improve communication and collaboration
 12.Performance Measures and Targets

I. General Assumptions
− Ethiopia’s GDP growth rate used as a base year is 8.5% based on IMF outlook Jan, 2019;
− Ethiopian GDP growth rate is forecasted to grow at 7.6% for 2020, 7.1% for 2021 and 7% for the rest of
the strategic period (as per IMF forecasts)
− Saving to GDP ratio is forecasted to be 23.4%, 23.8%, 26.6%, 28.2% and 28.2% respectively for the
fiscal years in the period, i.e. FY 2019/20 through 2023/24 (as per IMF forecasts);
− Inflation rate anticipated to be 13% based on CSA trends
− No changes are anticipated in minimum deposit rate on savings and time deposits in the strategic period;
− No significant change in the official exchange rate of Birr against major foreign currencies, and Birr is
expected to continue to depreciate normally;
− Regulatory requirements and restrictions are expected to continue (1) NBE Bill purchase, (2) FCY
surrender requirements, (3) restriction of the financial sector for Ethiopians only, (4) All statutory
requirements are expected to remain intact
 12.Performance Measures and Targets (Cont.)

II.Specific Assumptions
Deposit Assumptions
‣ Deposit will grow by 45% throughout the strategy periods
‣ The deposit mix will be:
− 15% demand deposit; 75% saving deposit;5% time deposit and; 5 % IFB.
‣ Effective interest rate on saving deposit shall be 5.32%
‣ Effective interest rate on time deposit shall be 12.26%

Loans and Advances Assumptions

‣ Loan to deposit ratio will be 75% at the end each strategy year;
‣ The Bank will invest 27% of new loans disbursement amount in government securities i.e. NBE bills;
‣ Effective lending interest rate will be:
− 16.90% for term loans;
− 15.90% for overdraft and;
− 8.50% for other loans and advances.
 12.Performance Measures and Targets (Cont.)

II.Specific Assumptions

Foreign Currency Assumptions

‣ Foreign currency mobilization will grow by 35% throughout the strategy period;
‣ Birr depreciate against dollar will be 6% per annum.
‣ 30% of foreign currency inflow will be surrendered to NBE;
‣ Foreign currency utilization rate will be 97% of the remaining amount (after 30% surrender);

Non Financial Assumptions

‣ The Bank will double its branches offices number in the coming five years.
‣ The Bank will have 50 self service branches within five years;
‣ The Bank will deploy 3,000 ATMs and 10,000 PoSs within the strategic period;
‣ It will recruit 100,000 merchants and 400 agents in each strategic year;
‣ The Bank will broaden its customer base by recruiting 1.5 million new a account holders per annum;
‣ 50% of account holders will be card banking users;
‣ 20% of accountholders will subscribe mobile banking service;
‣ 50% of corporate customers will use internet banking;
‣ The Bank staff strength will grow on average by 15% per annum;
 12.Performance Measures and Targets (Cont.)

S.no. Objectives Measures Baseline Targets

June June June June June June
2019 2020 2021 2022 2023 2024

1 Increase Gross profit (in 1.06 bln 1.609 bln 2.793 bln 4.257 bln 7.475 bln 11.890 bin
profitability Bn birr)
Earnings per 100 25% 29.6% 45.7% 62% 91.2% 117.7%
share (%)
Return on equity 20% 22% 31% 37% 48% 55%
Return on asset 2.4% 2.0% 2.4% 2.6% 3.1% 3.4%
Net interest 10.5% 12.2% 12.5% 12.6% 12.6% 12.7%
margin
Operating ratio 55% 53% 48% 43% 35% 29%
 12.Performance Measures and Targets (Cont.)

S.n Objectives Measures Baseline Targets

o. June June June June June June
2019 2020 2021 2022 2023 2024

2 Increase Deposit amount 32,142 46,605 67,578 97,988 142,083 206,021

financial mobilized (Mn Birr)
resources
FCY amount 347 468 632 853 1152 1555
mobilization
mobilization (Mn USD)

Loan collection per 95% 95% 95% 95% 95%

schedule (95% of loan
due for collection)
 12.Performance Measures and Targets (Cont.)

S.No
Objectives Measures Baselin Targets
e June June June June June
June 2020 2021 2022 2023 2024
2019

3 Enhance Liquidity ratio 15% 15% 15% 15% 15%

financial
soundness
NPL ratio <5% < 5% < 5% < 5% < 5% < 5%
Capital adequacy ratio 12% 13% 11% 10% 10% 10%

FCY exposure limit -15% ±15% ±15% ±15% ±15% ±15%

Loans-to-deposit ratio 72.5% 75% 75% 75% 75% 75%

 Performance Measures and Targets
S.N Objectives Measures Baseline Targets
o June
June June June June 2023 June
2019
2020 2021 2022 2024

4 Increase Customer satisfaction 70% 75% 75% 80% 80% 80%

customer score
satisfaction
5 Increase Number of new deposit 1.35 mln * 1.5 mln 1.5 mln 1.5 mln 1.5 mln 1.5mln
customer base customers recruited
Number of Card banking 465,000* 500,000 800,000 800,000 1,000,000 1,200,000
users
Number of New Mobile 410,000* 200,000 300,000 300,000 350,000 350,000
banking subscriber
Number of New internet 5000 * 30% 35% 40% 45% 50%
banking users (% of
corporate customers
Number of Mobile money 600 * 200,000 300,000 500,000 500,000 500,000
users
* Cumulative figures indicating position not yearly performance
 12.Performance Measures and Targets (Cont.)

S.No Objectives Measures Baseli Targets

ne June June June June 2023 June 2024
June 2020 2021 2022
2019

6 Increase efficiency SDT - Base 5% 5% 5% 5%

and effectiveness line will improveme improve improvement improvement
be set nt ment
Number of - Base 5% 5% 5% 5%
transactions line will improveme improve improvement improvement
per front- be set nt ment
office staff
 12.Performance Measures and Targets (Cont.)

S.No Objecti Measures Baselin Targets

ves e June June June June June
June 2020 2021 2022 2023 2024
2019

7 Increase Number of branches 335* 415 495 555 615 675

accessibi Number of ATM 254* 400 650 650 650 650
lity with
focus on Number of PoS 359* 1000 1500 2500 2500 2500
digital Number of Agents 24* 400 400 400 400 400
channels
No. of Merchants - 20,000 50,000 80,000 100,000 100,000
No. of self-service branches - 5 15 10 10 10
8 Risk Liquidity Coverage Ratio 60% 70% 80% 90% 100%
manage Net stable fund ratio 60% 70% 80% 90% 100%
ment
* Cumulative figures indicating position not yearly performance
 12.Performance Measures and Targets (Cont.)

S.No Objectives Measures Baseline Targets

June June June June June June
2019 2020 2021 2022 2023 2024

9 Improve Employee satisfaction - 65% 70% 75% 75% 80%

employee score
satisfaction
and
Employee - 60% 65% 70% 70% 75%
engagement
engagement score
10 Improve Employees who took 100% 100% 100% 100% 100%
employee training (at least
competency once)
Employees with pass - 75% 80% 85% 90% 95%
results on
Competency Exams
 12.Performance Measures and Targets (Cont.)

S.No Objectives Measures Baseline Targets

June June June June June June
2019 2020 2021 2022 2023 2024

11 Improve IT/digital User satisfaction 42% 70% 75% 80% 85% 90%
capabilities
% of transac-tions through - 15% 20% 25% 30% 40%
digital means

12 Improve Reputation index - 60% 65% 70% 75% 80%

communication
%age of staff who do visit - 50% 70% 80% 90% 95%
and collaboration
the Bank’s communication
platform, at least once a
week
Internal communication & - 60% 65% 70% 75% 80%
collab. rating
 13.Strategic Initiatives

‣ The following strategic initiatives are selected for implementation to support the stretched targets
and objectives
1. Develop Resource Mobilisation Strategy (Deposit and FCY Mobilisation)
2.Develop Digitalization Roadmap;
3.Implement 3000ATM, 10000 POSs
4.Implement various IT projects
‣ Implement ERP Solution
‣ Replace the existing website
‣ Replace the existing Internet and Mobile Banking System
‣ Implement Datawarehouse and BI Solution
‣ Replace the existing SWITCH Solution;
‣ Contact-less payment System
 13.Strategic Initiatives (Cont.)

4.Implement various IT projects Conti.

‣ IT Infrastructure enhancement;
‣ Introduce Micro Savings and loan;
‣ Implement Audit and Transaction Monitoring and Fraud Detection System;
‣ Establish Security Operations center;
‣ Implement E-Commerce;
‣ Implement Risk Management System;
‣ Implement CRM Solution;
‣ Enhance Internal Communication (E-Mail, IP Phone, Intranet, Collaboration, Video
Conferencing, etc);
‣ Upgrade Core Banking System;
‣ Implement Electronic Document Management System
 13.Strategic Initiatives (Cont.)

5.Develop HR Strategy
6.Implement Competency exam
7.process improvement (design workflow, develop policies, procedures)
8.Establish a Contact Center
9.Establish Self-Service Branches
10.Develop Marketing and Sales Strategy
11.Develop customer acquisition strategy
12.Build Head Office and Corporate Buildings
 13.Strategic Initiatives (Cont.)

13.Develop effective cost management system

14.Standardize office layout, office equipment and furniture
15.Implement Fund Transfer Pricing
16.Implement BASEL III
17.Undertake audit by an international audit firm
18.Undertake rating by International Rating company
 14.Monitoring and Evaluation

Monitoring & Evaluation

‣ Cascading of the strategy into annual scorecard and ensuring whether the corporate strategies
are aligned with the functions or business unites’ plan and that it is properly cascaded and being
executed, and that the proper resources are allocated;
‣ Periodic monitoring towards progress made on performance of major goals and targets by the
designated owners. This is part of the routine follow up and monitoring tasks which is carried out
by the concerned target owners.
‣ Monthly monitoring and evaluation by dedicated committees to monitor performance of strategic
focus areas such as resource mobilisation, i.e deposits and FCY earnings, digital targets, critical
IT projects and initiatives;
‣ Monthly Evaluation by the respective business owners on progress as well as main challenges
and weaknesses, and take timely actions;
 14.Monitoring and Evaluation (Cont.)

Monitoring & Evaluation

‣ Monthly Evaluation by the respective business owners on progress as well as main challenges
and weaknesses, and take timely actions;
‣ Monitoring of the operating environment to ienditifgy emerging situations and evolving
changes that have the potential to affect the strategy implementation, and make proper
revision on the strategy in response to the dynamism on the market environment.
‣ This may include revision of the strategic initiatives with addition of new initiatives or even
dropping of the ones that no longer supports the strategic objectives;
 14.Monitoring and Evaluation(Cont.)

Monitoring & Evaluation

‣ Executive leadership level evaluation of the strategy implementation cascaded to

annual plan on quarterly level to ensure :
−The progress made on the strategy implementation (annual cascaded
scorecards) in line with the expectation, and the outcomes and results are in
line with the intended impact or meet objectives.
−Analyse the main challenges and weaknesses that are impacting the
achievement of the strategy and address or minimise their adverse impact;
−Review emerging situations i.e external as well as internal that deviates from
our original assumptions and make proper revision on the strategy plan with in
order to respond to changes expected.
 15.Communication Plan

‣ to bring a shared understanding on where the Bank intends to go i.e its vision, and
how to reach to its vision i.e translations of the vision into theme, objectives,
targets and respective initiatives.
‣ to ensure every employee at the Bank will have a shared understanding of the
high level strategic elements, and be abel to make a connection to its day to day
business operations.
−Communicating the strategic foundations
−Cascading the strategy to business plan
−Periodic strategy reinforcement
Thank You