Banking in Eritrea

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[edit] Historical Back Ground

Modern banking in Eritrea started with the coming of Italians. In 1914, Banca d’ Italia established its branches in Asmara and Massawa^[1]. And by the end of the Italian colonial period in 1941, there were four banks and one credit union operating in Eritrea. These banks were; Banca D’ Napoli: Banca d’ Italia, Banca D’ Roma, Banca Nazionale del Lavoro and a credeit union called Casa di credito. These banks have branches in 6 Eritrean cities: Asmara, Massawa, Keren, Adikeyh, Decamahare and Assab.

However, all the banking services, like other services, were only serving the Italians. It was with the coming of the British in 1941 that banking service extended to the local people. The Barclay Bank established branches in Eritrea shortly after the British establish their presence in Eritrea and extended the services to the local people. Private banking continued in Eritrea during the federation and the Haileselase regime. In 1974, when the Degue came to power, like other private sectors establishments, the banking sector was nationalized. All banking services were put under the Commercial Bank of Ethiopia, which monopolized the banking service. After independence, the Commercial Bank of Ethiopia Branch in Eritrea was formulated to be the Commercial Bank of Eritrea. The Bank of Eritrea was also established with a role of Centeral bank.

[edit] Banking Services in Eritrea

Banking is the dominant sector in the financial system of Eritrea. The balance of the financial system is made up by the insurance industry. At present there are three commercial banks in operation in Eritrea - The Commercial Bank, The Housing and Commercial Bank, and the Eritrean Investment and Devlopment Bank. All banks with the exception of the Housing and Commercial Bank are under state ownership, while the Housing and Commercial Banks is owned by the ruling party the PFDJ. At present there are no privately owened banks in Eritrea. Previously The Augaro Bank was in operation but quickly shut down after operations began. Branches of the Commercial Bank of Eritrea and the Housing and Commerce Bank exist in the larger cities and towns of every Region of Eritrea.^[2] The Agricultural and Industrial Bank of Eritrea, the Eritrean Investment and Development Bank has also branches in the major cities of the regions, The central bank of Eritrea is the Bank of Eritrea (BoE). The BoE is responsible for regulating the lending and deposit interest rates while keeping a handle on inflation and other macroeconomic indicators. As of yet the BoE has not been able to control inflation, which has led to tremendous rates of inflation, up to 23%.^[3]

The Commercial Bank of Eritrea

The Commercial Bank of Eritrea is the dominant bank in the country. It owns nearly 80% of all banking sector assets in the country. It is a state owned bank.

Housing and Commercial Bank of Eritrea

This is the second biggest bank in current operation. The Bank was established in 1994 to provide banking service to residential buildings. Later, in 1996 it extended its services to full commercial services.

The Eritrean Invesment and Development Bank

The third bank is the Eritrean Investment and Development Bank.^[4] Primarily the bank was established to provide agricultural and commercial loans to investors.

[edit] References

1. ^ Rena, Ravinder (2006): Financial Institutions in Eritrea
2. ^ Housing and Commerce Bank of Eritrea: Branches. Retrieved on 2006-08-30.
3. ^ IMF Executive Board Concludes Article IV Consultation with Eritrea (2005-02-09). Retrieved on 2006-09-07.
4. ^ General Financial Sector Overview. Retrieved on 2006-08-30.