Goh Betoch Bank set to start operations in Ethiopia, aims to invest US$34m in housing development projects

ETHIOPIA – Goh Betoch Bank, a new financial institution that aims to reintroduce mortgage banking (loan for housing construction) in Ethiopia, has begun offering its share to the public.

According to the reporter Ethiopia, the bank which plans to begin operations next year is going to be the Nation’s first fully dedicated mortgage bank.

While presenting the bank’s prospectus, Mr. Eshetu Fantaye revealed that Goh Betoch Bank aims to invest US$34 million (one billion birr) in housing development projects once it begins operations next year.

“We target to invest around US$ 238 million (7 billion birr) per year in housing development during the fifth year of our operation,” said Mr. Fantaye.

“The return on Investment of Goh Betoch Bank is foreseen to be 32% after five years with profit of half a billion birr.”

According to Getahun Nana, the former VP of the central bank of the country, who now is one of the founding members of Goh Betoch Bank, Ethiopia has a housing shortage of 1.2 million units and is required to provide additional 100,000 houses every year in order to meet the growing demand for housing.

Speaking at the ceremony, Eng. Aisha Mohammed, Minister of Minister of Construction and Urban Development of Ethiopia, expressed her hope that the new bank will significantly benefit those engaged in real estate and individuals who are interested to build their own houses.

In Ethiopia only less than 4% of all loans goes to housing construction for both individuals and real estate developers, according to Getahun, who briefed the bank’s potential investors in September this year.

In his presentation Eshetu also indicated that most Africa countries can’t even allocate 1% of their GDP in housing development, while Europe spends on average 60% of its GDP.

He stated that in Africa, the housing shortage for the low- and middle-income group alone the housing shortage stood at 51 million plus houses.

The study he presented also shows that 17 countries have housing shortages of over 1 million and that the continent would require to invest over US$2.1 trillion over a period of 10 years to address this problem.

In Ethiopia for a new bank to enter the market, it has to be able to raise the minimum initial capital of half a billion birr (around $17 million at the prevailing exchange rate) of which one shareholder is not allowed to own more than 5% of the total capital.

Currently there are close to 20 banks operating in Ethiopia while about ten banks including six Islamic banks are under-formation.

The banking business is considered one of the safest and highly profitable businesses in Ethiopia with a stable return of investment ranging from 20% to 40%.

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