Human Resources Development Key to Balancing Banking Boom

 

A fourfold increase in monthly pay, a generous benefit package and a positive working environment may sound like a great deal for a young professional less than two years into their career.

But, this is not the case for Alemu Retta, 29, who works as a credit facility officer at the Gofa branch, Nefas Silk Lafto District, of one of the private banks.

This is the third bank he has worked at since graduating in mid-2012, yet Alemu, who has been at this bank just eight months, has been actively looking for a new position. In fact, Fortune met him as he was mulling over an offer from a rival bank.

“I like my job, I do not have any problem with the management or the working conditions,” he admits. “But I will leave this bank if I get offered an improved salary.”

His crowded CV looks sparse, however, when compared to that of Birnesh Belay, whose two-year career since graduating from the Addis Abeba Commercial College is peppered with five banks.

Currently working as a clerk in a bank on Sierra Leone Street, Kirkos District, she told Fortune that salary rises and attractive benefits, induced by the competitive nature of the industry, is what encourages her to hop from bank to bank.

Alemu, who agrees that the attractive offers are a result of stiff competition among private banks for the limited supply of human capital, nevertheless says that he finds the cost of living too high to withstand, even with the increase in salary he has earned.

“Skyrocketing rental prices have become a headache,” he complains. “Add to that the inflated cost of food and other daily expenses.”

Though the various bank professionals contacted by Fortune, who range from bank managers to clerks, agree with Alemu that the escalating cost of living and the strain it has on their financial resources was a driver for their flighty tenures, this provides little comfort to banks.

Aggressive growth, coupled with a dearth of skilled manpower, has created a situation where private banks are struggling to staff their businesses appropriately. In an effort to poach skilled employees from other banks and to retain their own, they are increasing salary and benefit packages. This is, however, putting a strain on their resources.

The increasingly tenuous balance they must keep as they grow is particularly easy to see at this time of year, as they release their annual reports.

In the 2012/13 fiscal year, deposit mobilisation remained the major competition base for Ethiopian banks. This forced them to engage in such activities as branch expansion, door to door banking service and conventional working hour extensions.

These measures, of course, require a boost in the number of employees.

For instance, the 14-year-old Nib International Bank (NIB), which was pursuing a branch expansion programme, recruited 308 workers to reach a total number of 2,278. This was part of what fuelled its total expenses of 472.6 million Br in the 2012/13 fiscal year – 102.7 million Br more than last year, with salaries and benefits alone growing by 24.3 million Br.

Berhan International Bank (BIB), on the other hand, saw its staff and administrative expenses soar by an eye-popping 70.6pc within just one year. It recruited 120 additional employees to reach a total of 409 – a 41.5pc boost compared to 2011/12. Being one of the youngest banks in the country, its expansion is also unlikely to slow down at anytime soon.

Oromia International Bank (OIB), another of the younger banks, saw its expense for salaries and benefits grow by 31.1 million Br, or 62pc.

It employed 250 more people in 2012/13, pushing the total number of employees up to 1,336.

“The cost is just too much,” said Abie Sano, president of the OIB. “I doubt we can ever maintain a strong presence given these difficulties.”

For Ermias Eshetu, vice president of marketing & corporate services at Zemen Bank, however, it is just a reality that banks in the country have to accept.

“It’s what you have to do to stay in the market,” he said. “You either do it or you cease to remain relevant.”

The problem has been compounded by the fact that most banks prefer to offer higher, often exaggerated salaries and benefits to the few skilled people in the industry, rather than devoting time to training the abundant unskilled labour force with far lower compensation packages.

This, according to most bankers approached by Fortune, is because it takes no less than six years to train an employee to the highest level.

For most banks, these long years of low productivity are a cost to be avoided.

“You spend more time and energy on these people,” argues a private bank vice president who talked to Fortune on the condition of anonymity. “It is therefore much better to scramble for the competent professionals, however few they may be.”

This strategy, however, can leave the banks facing vacant posts on a regular basis.

“The sector is constrained by high staff turnover because of the stiff competition,” says Solomon Jebessa, director of economic research, planning, monitoring & evaluation at Bunna International Bank (BIB).

The Ethiopian Institute of Financial Studies (EIFS) provides short term training courses under the four categories of banking, microfinance, insurance and management development. These courses are either provided in half day or full day sessions with different duration. The EIFS is based and mainly supported by the National Bank, but it also is supported by the public financial institutions: Commercial Bank of Ethiopia, Construction and Business Bank of Ethiopia, Development Bank of Ethiopia and Ethiopian Insurance Corporation. But the trainings of the Institute are open to private banks, insurance companies, and microfinance organizations as well.

Nevertheless, bankers and experts contacted by Fortune say what the industry needs most is a financial training institute offering long-term courses.

“The Institute under the NBE is great,” commends Ephreim Mekuria, communication manager at Commercial Bank of Ethiopia “However, what is most needed now is an institution, which offers long-term training to graduates.”

For Alemayehu Dibaba, a macroeconomic expert, the growth of the banking industry, though commendable, is straying towards a negative path. Although banks have to compete to recruit highly trained and experienced professionals in order to stay competitive, they also have to contribute their share in reducing unemployment by offering short-term trainings to less experienced staff, he argues.

There is a need for an institution devoted to offering courses in banking and acquainting students with the opportunities and challenges in the banking industry, according to experts and bankers that talked to Fortune.

Such an institution would give graduates specialisation before they start working in the financial industry, something that they currently lack. Moreover, graduates only have academic knowledge and lack practical experience within the banking industry when they search for jobs.

“I would prefer it if such an institution trained graduates, as opposed to students who have just completed their preparatory levels,” proposed Abie from OIB. “This makes the institution devoted to attracting only those who are interested in banking.”

The Ethiopian Bankers’ Association, one of the prime stakeholders, says the human resource development of banks has to focus on training in order to provide an efficient service to customers and maintain staff.

Although the institution is pivotal in rectifying deficiencies, banks should take the lead in striving to develop their manpower professionally, Berhanu Getaneh, president of the Association told Fortune. For the time being, the Association has established good working relationship with foreign banks, such as Commerzbank from Germany, and has sought assistance in resource and expertise.

“We draw participants from all member banks and give them exposure to new ideas,” he said.

Banks themselves, however, are also taking some steps towards improving retention. Awash International Bank (AIB), for instance, has made salary and benefit increases for existing employees. Though the competitive nature of the industry still poses a threat, the improved compensation is expected to reduce staff turnover and enhance motivation, according to Tsehay Shiferaw, president of the Bank.

Even the state-owned The (CBE) is going to recruit 3000 new employees in this fiscal year now that it has already developed a new human resource strategy by closely working with international consultants from the German firm, Frankfurt School of Finance & Management.

But it expects them to be fully productive only after a year as it takes time to learn on the job.

During the first year, as employees such as Kassa Tilahun, who works at the CBE admits, an employee is in his or her infancy, trying to learn the basics. But even after that, it takes a couple of years before the employee masters the complexities, they say.

“Banks have to focus on recruiting staff and training them for a long-term benefit, rather than compete for little available trained manpower,” says Ephrem

CBE has felt the need to enhance its benefits, by introducing such options as loans and career development for its employees.

Alemayehu, the expert, is cautiously optimistic for the near future. This stiff competition will subside once branch expansion begins to slow and customers rely more on new technologies, he says.

Sourced here:  http://addisfortune.net/articles/human-resources-development-key-to-balancing-banking-boom/

 

 

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