CBE NOOR PRODUCTS

and Service

.
 Outline

• Chapter One –Interest Free Banking overview

• Chapter Two – CBE Noor’s Deposit products

• Chapter Three – CBE Noor’s financing products

2
 CHAPTER ONE

INTEREST FREE BANKING OVERVIEW

 Definition: Interest Free Banking

• ‘A banking business in which

mobilization or advancing funds is
undertaken in a manner consistent
with Islamic law or Sharia
principles’.

( NBE Directive: SBB/51/2011;

SBB/72/2019)

4
Major Pillars of IFB
Riba
(Usur
Unfair y) Gharar
& (Uncert
aint,
Unjust Specula
Contra tion,
cts etc)
prohi
bitio
Profit ns
and loss
Maysir /
principle
Qimar/
is
Gamblin
proporti
g
onal to Haram
the risk
(Forbid
den/
Unlawfu
l)

5
 CBE-NOOR Vs Conventional
Characteristic Interest Free Banking System Conventional Banking System

Functions and operating modes are Functions and operating modes are
Business framework based on Shariah principles and secular based on secular principles
laws Interest oriented

Interest Impermissible to deal with interest Charge for &the

Interest use ofofmoney
guarantee principaland
pay interest for depositors

Islamic banks offer equity financing Risk sharing is not applicable

Risk sharing with risk sharing

Deal with only Shariah permissible Engaged with lawful business

Restrictions business activities activities irrespective of
permissibility.

Penalties imposed for default or late Conventional banks normally charge

Penalty on default payment but not considered as an additional Interest in case of late
income to the bank rather donated for payments or defaults and is income
charity for the bank
Feb 18, 2025 Interest Free Banking Service:
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 CBE-NOOR Vs. Conventional . . . .
Characteristic Interest Free Banking System Conventional Banking System

Avoidance of Transactions with elements of gambling Speculative investments are

uncertainty (Gharar) or speculation are forbidden. allowed.
Interest oriented

Interest & guarantee of principal

Customer relationships The status of an Islamic bank in The status of a conventional bank in
relation to its clients is that of partner relation to its clients is one of
and investor. creditor and debtor.

Shariah supervisory Each Islamic bank must have a Conventional banks have no such
board supervisory board to ensure that all its requirement.
business activities are in line with
Shariah requirements.

Legal requirements Must be in compliance with the Shariah Required to in compliance with
principles and Central bank central bank and other secular laws
requirements
Feb 18, 2025 Interest Free Banking Service:
7
 Motivational Factors for IFB Service in
Ethiopia
• IFB is increasingly common Globally.
 An average growth rate of 15% to 20% per annum

• Issuance of Proclamation No. 592/2008 and NBE

Directive SBB 51/2011;
• The existence of large potential;
• The existence of interest believed to be major cause
for low level of financial inclusion
• Muslim scholars endorsement & positive response;
• Proactive response of the existing commercial banks;
IFB Service Basic Requirements
 Ensuring Shariah compliance of IFB
as per the NBE directive;
 Establishing the Shariah Advisory
board/Committee;
 Establishing a separate Ledger and
Financial Reports;
 Keeping all data separate;

 Ensuring segregation of activities

from the conventional banking
 Contract
Wadi’ah ,
Deposit-taking Contracts Amanah;
Mudarabah,

Murabahah, Istisna,
Trade-based Contracts
Salam

Lease-based Contracts Ijarah

Mudarabah,
Equity-based Contracts Musharakah
Promise
/Undertaking Qard Al Hassen
Wa`ad/ Lending Money.

Hawalah /Money transfer/

Fee-based Contracts Wakalah /Agency Contract/
Kafala /Guarantee Contract /

10
 CHAPTER TWO

CBE NOOR DEPOSIT PRODUCT

 Cbe Noor Deposit Products
A- Wadiah Based Saving Account B- Mudarabah Saving Deposit Account
1. Wadiah Ordinary 1. Mudarabah Ordinary savings;
2. Wadiah Almerah (Women) 2. Mudarabah Almerah (Women)
3. Wadiah Ashebab (Youth) 3. Mudarabah Ashebab (Youth)
4. Wadiah Almerahiq (Teen Youth) 4. Mudarabah Atea’lim (Education)
5. Wadiah Atea’lim (Education) 5. Mudarabah Almerahiq (Teen Youth)
6. Wadiah Labbaik (Hajji/Umrah 6. Mudarabah Nikah (Wedding)
7. Wadiah Zakat Saving Account 7. Mudarabah EID (Holiday)
8. Wadiah Mahr Saving Account 8. Mudarabah Qadim(Elders)
9. Wadiah Cash Indemnity 9. Foreign Mudarabah Hawala Saving
10. Wadiah Qadim (Elders) LCY Account
11. Foreign Wadiah Hawala Saving A. Deposit 10. CBE Rihla Mudarabah Saving(Guzo)
12. CBE Rihla Wadia Saving(Guzo) Products 11. Mudarabah Labbaik (Hajji/Umrah)

C- Mudarabah Fixed/Term Investment D- Amanah Demand Deposit Accounts

1. 3 Months up to 6 Months; 1. Amanah Demand Deposit Account
2. Greater than 6 Months up to 12 Months; 2. Amanah ECX Related Account;
3. Greater than 12 Months up to 24 Months;
4. Greater than 24 Months; and Other
Negotiable

12
CBE NOOR DEPOSIT PRODUCTS
Wadiah Deposit Accounts…
Wadiah: Basic principles
1. The fund/property deposited for safekeeping purpose;
2. The deposit is guaranteed for full return on demand;
3. The usage of the deposit is subject to permission by
the depositor;
4. All profits generated from the use of the funds
belongs to the bank;
5. The person with whom the fund/property is deposited
may use it at its own risk.
 Types & Features Con…

Wadiah Opened individually

Almerah (Women) Cooperatives
or jointly; and or
associations having
Operated
above 50% bywomen
passbook,
members; Hiliwa
Withdraw
Card any
amount at any time
but as per NBE
 Types & Features Con…

Noor Wadiah Labbaik A special kind of

Saving Account commitment saving
Opened & operated
account for the
by its own
purpose to perform
Withdraw any
application form and
Hajj and/or Umrah;
amount at any time
passbook,
 Types & Features Con…

Noor Wadiah Zakat

Is a special purpose
Saving Account
account opened by
Opened by the
Zekat beneficiaries in
benefactor in order to
order to accept
Withdraw any amount
save his/her ‘above
Zekat/Alms ;
at any time but as
the Nisab level’
 Types & Features Con…

Noor Wadiah Mahr

Is a special purpose
Saving Account
account opened by
bridegroom/husband
to
Thesave Dower
Mahr/ Dower
money to his
should be expressed
Types & Features Con…

It is offered for
individuals or jointly
55 yearswith
Opened & above;
minimum
amount of Birr 250;
Priority to
Opened forbe served;
Ethiopian
Provide Award;
citizens May
& Foreigners
getEthiopian
of SME origin
Finance by
Operated
Types & Features Con…

Shall be Opened only

for Ethiopian citizen
Eligibility
No foreign
local currency
remittance
saving receiver
is allowed;
fulfill
Operatedthe criteria of
by passbook,
Account
regular holders
saving;
MB, IB, Noor Cardenjoy
discount;
Get priority for their
Allowed
FCY request any for
loyalty
travel
Types & Features Con…

Shall be Opened only

for meet their special
trip expenditure ahead
Operated by passbook,
Eligibility
MB, Ethiopians
IB, Noor Card &
Ethiopians origin;

Opened with minimum

amount of Birr 1000;
 Noor Amanah Con…

Amanah Demand Deposit Account: It is a current

account opened by a
Operated
businessmen by cheque
who
book, Debit Card,
need access to their
Maintained
Mobile with
accountBank and
frequently;
minimum balance of
Internet Bank;
Opened
Br. 1000 and
for
operated
individualby literate
and Br.
individual.
2000 for corporate
 Noor Amanah Con…

It’s a special type of

Amanah ECX Related Account:
account opened for a
Account opening and
member of the ECX
closure process is
to facilitate
Member Pay the
in/Pay out
carried out by
trading
accounts:of
Conventional
Client paybyin/Payout
commodities
opened members
Payment
accounts: Operation
throughout
who are trade the
Opened
country.; by
operators;
 Mudarabah

Mudarabah: Definition

•It is an investment saving accounts operated in line with the

Mudarabah principles. The Mudarabah principles shall mean a
form of partnership where one party, the Rabul Mal, i.e., the
Customer, provides the funds while the Mudarib, i.e the Bank,
provides expertise and management.
 Unrestricted Mudarabah: Basic
Principles

• Partnership for profit sharing whereby one party provides

fund and the other labour/expertise;
• Both parties share profit based on pre-determined profit
sharing rate;
• No prior guarantee for the return of principal or benefit;
• Financial loss, if any, solely incurred by the owner of the
 Unrestricted Mudarabah Cont…

DEPOSITORS/ INVESTORS BANK

INVEST FUNDS

(MUDHARABAH)

%
Financing &
Investment activities

% PROFIT
PROFIT
100% LOSS
LOSS

25
 Mudarabah: Application & Operation
 Depositing money in a Bank without any pre-defined
condition;
 The management of the fund is left to the Bank (Mudarib),
 Owner of the fund become a silent partner;
 The bank shares profit with the customer based on pre-
agreed rate;

26
 Mudarabah: Application . . . .

• Loss or significant reduction on investible fund is compensated with

Profit Equalization Reserve (PER) and Investment Risk Reserve (IRR);
• If the reserve couldn’t cover the loss, it will entirely be borne by the
depositor/investor (unless there is evidence of negligence or any
other cause on the part of the Bank);

27
 Noor Mudarabah: Type & Futures

Source must be from

Noor Mudarabah Saving: Common
permissible
Deposit balance for
Features business;
less than 10 days
shall not be eligible
It
forcan’t besharing;
profit opened
with zero
Fill and balance;
sign
Mudarabah/Investme
nt contracts in two
Types & Features Con…

Deposit Profit Sharing(%)

Below Birr 10,000 Ordinary Profit Sharing Rate (67%)
Birr 10,000-99,999 It is offered for
Ordinary Profit Sharing Rate Plus 1%
Birr 100,000-500,000
individuals or jointly
Ordinary Profit Sharing Rate Plus 2%
Above Birr 500,000
Opened
above 55with minimum
Ordinary Profit Sharing Rate Plus 3%
of ages;
amount of Birr 1,000;

To be eligible for
Opened forprofit,
additional Ethiopian
the
citizens
customer & must
Foreigners
deposit
of
theEthiopian
minimumorigin
balance
 Noor Mudarabah cont…
PSR
Types of Noor Mudarabah Initial
Eligible Entities Bank :Custo
Savings Deposit Accounts Deposit
mer
Noor Mudarabah Ordinary All natural and legal 1,000 33:67
Noor Mudarabah Almerah (Women) Individual women 1,000 27:73
Individuals, Whose age is
Noor Mudarabah Ashebab (Youth) 1,000 30:70
between >18-<25
Individuals, classified as teen-
Noor Mudarabah Atea’lim (Education) 1,000 30:70
youth, and 18+ years
Individuals, Whose age is
Noor Mudarabah Almerahiq (Teen Youth) 1,000 30:70
between 14-17
Any Ethiopian citizen above
Noor Mudarabah Nikah (Wedding) 1,500 30:70
the age of 18 years
Any Ethiopian citizen above
Noor Mudarabah EID (Holiday) 1,000 30:70
the age of 18 years
Noor Mudarabah Qadim (Elders) Individuals or jointly above 55
1,000 67 to 70%
of ages
Foreign Mudarabah Hawala Saving A. Foreign remittance receiver 1,000 1:99
Noor Mudarabah Labbaik All natural and legal 1,000 30:70
Ethiopian Or Eth Origin For
CBE Rihla Mudarabah Saving(Guzo) 1,500 33:67
Special Trip
Noor Mudarabah Fixed/Term Investment :
Features

• Contractual agreement
• Certificate issued;
• The accounts available only
in local currency (birr).
• Partial withdrawal of deposit
is not allowed;
 Noor Mudarabah Fixed Cont…
Types of Noor Mudarabah PSR
Initial
Fixed Eligible Entities Bank :Cus
Deposit
/Term Investment Accounts tomer

Account From 3 up to 6 Months 25:75

Account Above 6 up to 12
23:77
Months
Account Above 12 up to 24 All natural and legal
21:79
Months persons recognized 100,000
by the Ethiopian laws;
Account Above 24 Months 19:81

Others (if any) Negotiable

 CBE Noor FCY Deposit Products
. C- Non Resident Diaspora
A- Non Resident Transferable Accounts NRD
Accounts 1. Noor Amanah Diaspora Account
1. Noor Amanah -NRT FCY Accounts 2. Noor Wadiah Diaspora Account
2. Noor Amanah -NRT ETB Accounts 3. Noor Wadiah Diaspora Mortgage

E - FCY Saving Accounts

 Residents of Ethiopia
 Non Resident Ethiopian
 Non Resident Ethiopian Origins

B- Non Transferable Accounts D- Retention Account

NRNT 1. Noor Amanah Foreign
1. Noor Amanah Non Resident Non Exchange Retention
Transferable ETB Accounts Accounts
02/18/2025
33
Account Opening Stages

Identificatio Account
n of Creation
Customer
Document TRANSFE
Creation
Requiremen RD TO IFB
ts WINDOWS

34
Pool Amendment T24 Steps
Mudarabah Account opening cont…

36
Pool Amendment T24 Steps
 Challenges in A/C Maintenance

 Opening Mudarabah account without signing the

contract,
 Not using IFB user access while opening Mudarabah
Account
 Changing the product code of conventional account in
to Mudarabah Account
Effects of such manner
 The deposit is not considered as CBE Noor deposit, out
of the pool,
 Customers not entitled to the profit,
 Highly affects the CBE Noor deposit balance, profit 38
 CHAPTER three

CBE NOOR FINANCING PRODUCT & SERVICES

 Governing Rules

How We Do It? (Working Manuals);

 Laws, regulations and conventions of the country;
 Directives of the Supervising Authorities of the Bank;
 Sharia ruling (Fatwa) given by the Sharia Advisory
Committee of the Bank; and
 The Bank’s CBE Noor Policy and Procedure;
 The Internal control guidelines;

02/18/2025
40
 General Eligibility Criteria
 Financially viable ?
 Legally acceptable ?
 Technically feasible ?
 Environmentally friendly ? &
 Sharia’h Compliant ?
 Sharia Industry Screening

 Sharia Financial Screening

02/18/2025 41
 Sharia Industry Screening
 Manufacturing and/or distribution of alcoholic products;
 Applicants engaged in manufacturing and/or distribution of
arms and weapons;
 Applicants engaged in producing, packaging, processing or
any other activity related to pork or pork products and other
non-Halal meat like dead animals meat,
 Financial institutions/individuals engaged in extending loan or
borrowing money on interest; and
 Any other activities not permissible under Sharia’h as
determined by the respective SAC.
02/18/2025
42
 Sharia’h Financial screening
 Evaluating financial statements of the existing
business/customer so as to ensure Sharia’h
compatibility.
 Accordingly while reviewing the financial statement
of the business, if there is impure Income from sales
of alcohol, tobacco, interest etc, the ratio of impure
income to the business’s total income shall not
exceed 5 % of the total income.
02/18/2025
43
 Trade Based Mode of Financing

02/18/2025
44
 Trade Based Mode Of Financing

There are three types of Trade Based Financing

• Murabahah (Cost plus Mark up)

• Salam (Advance Payment)-Agriculture
• Istisna (Work in Progress)- Construction

02/18/2025
45
 Trade Based Mode Of Financing
1. Murabahah /Cost-Plus Mark up

Definition: A contract in which Bank sales a specified asset at a

declared profit rate added on the purchase cost to be paid in
accordance with a predetermined payment schedule in lump-sum or
in equal periodic installments.

The prerequisite is that the goods are not already owned by the
buyer .Murabahah finance is not a loan given on interest, it is a sale
of asset(s) for cash/deferred price.
Widely used instrument of Islamic finance(60-70%)
02/18/2025
46
 Scope Of Murabahah
It Cannot
 Be a substitute for running finance facility
 Be used for an unspecified purpose
 Be used for paying utility bills, wages,
overheads
 Be used for a deferred payment basis where
assets are gold, silver, currencies
02/18/2025
47
 Murabahah

Goods (immediate
Goods (immediate delivery)
delivery)
Goods Bank
Supplier Customer
$100,000
(spot payment) $107,000
Bank must own the (deferred payment,
asset before selling it. including profit mark
up)

02/18/2025
48
 a
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Process flow of Murabahah
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02/18/2025/tm
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 ds
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02/18/2025
( 50
 Practical Issues in Murabahah

1. TIMING OF ‘OFFER & ACCEPTANCE’2

2. Rollover In Murabahah:

3. Murabahah with related parties:

4. Rebate On Early Payments:

5. Penalty on late payments

6. Collaterals/Securities In Murabahah

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51
Pre-shipment Export
Financing

• It is operated based on the Principles

of Qard-ul-hassan and refer to an
interest free short term export loan
facility for purchase of export input
either from ECX or other trader
Pre-shipment Export …..
• The financing shall be availed for free.
• shall be renewed within a maximum period of one year.
• each advance under this facility shall be settled in foreign
currency within a maximum period of 180 days;
• The sum of all advance payment purchase prices to be made
under this facility shall not exceed the approved limit
• The applicant shall present valid sales contract
• The export proceed shall be channeled to the exporter’s account
only through the CBE’s branch that maintains the Interest Free Pre-
shipment Export financing account.
Specific eligibility criteria

 The applicant must have earned at least USD

100,000 or equivalent during the last twelve
months;
 If the applicant is new exporter or existing
exporters that do not fulfill the condition stated
herein above:
• He/she/it should have been engaged in any
viable business at least for one year or
• He/she/it shall offer collateral that covers at
least 40% of the approved facility limit/amount
 2. Ba’i-Salam
 Salam
 Sale where price paid in full at contract’s execution
 Delivery is deferred to future date
 Subject matter need not exist and be owned and possessed by seller at Salam’s execution

 The origin of salam dates back to the time of the prophet Mohammed (PBUH),
allowed subject to certain conditions

 It’s basic purpose is to allow farmers sell in advance to fulfil immediate

requirements like spending for seeds and providing their family until the time of
harvest and thereby avoid lending on interest.

 Similarly the traders of that time had also imported and exported some good
through advance payment mechanism.
 Hence, Salam can be applied on sharia complaint homogeneous commodities

 The bank as buyer of the salam goods have the following options
 To enter into a parallel salam with a third party with a higher price
 To obtain a unilateral promise from a potential buyer with a higher price
 Ba’i –Salam…
 seller/customer undertakes to supply specific goods to the buyer/bank

at a future date in exchange of an advanced price fully paid at spot ;

 The supply/delivery of purchased goods is deferred to a fixed date.
 The bank buys the farm output to be produced in the future against the
full spot payment of the price which may be utilized by the farmer to
meet his/her financing needs.

56
Features of Ba’i –Salam (Advance Payment)

57
 3. Istisna’ (Work-in-Progress)
 Work-in-progress (Istisna’) financing is a mode of sale, at an agreed price;
 The bank places an order to a manufacturer/contractor to manufacture, assemble or
construct, a specific commodity for a purchaser/customer of the bank to be delivered
at a future date.
 Istisna’ contract shall be entered between the Bank and the customer, on the other
hand, the bank enter into a Parallel Istisna’ contract with the third party
manufacturer/Contractor.

58
 2. Rental Based Mode of Financing

Feb 18, 2025 Interest Free Banking Service:

59
 1. Ijarah (Leasing)
 Ijarah “To give something on rent”

 defined as “transferring of usufruct (legal rights to use property) to another person

for an agreed period, at an agreed consideration/amount”.

 The bank purchases a real asset (the bank may even purchase the asset as per the
specifications provided by the prospective client) and leases it to the client.

 In the period of lease, the asset remains in the ownership of the bank but the
physical possession of the asset and its right of use is transferred to the lessee

60
Feb 18, 2025 Interest Free Banking Service:
61
 2. Musharakah/Joint Venture
 Musharakah comes from the word Shirkah, which literally means
sharing.
 It is defined as a contract between partners on sharing of both capital
and profit.
 Musharakah means relationship established under a contract by the
mutual consent of the parities for sharing of profits and losses arising
from a joint enterprise or venture.
 It is impermissible to fix a certain percentage of return on capital
invested.
 Profits shall be distributed in the proportion mutually agreed in the
contract whilst losses are shared by all partners in proportion to their
capital.

62
 Musharakah Vs. Mudarabah

MUSHARAKAH MUDARABAH
1. All partners invest 1. One party, Rabbul Maal, invests
2. Management of the business by 2. Management of the business by Mudarib
Only
any/all partners
3. Only Rabbul Maal suffer the loss provided
3. All partners share the loss to the
that the Mudarib acted with due care
extent of the ratio of their investment while the mudarib suffers the loss of his
labor.
4. All partners share in the ownership of
4. The assets are owned by the Rabbul Maal
the assets pro-rata to their and no share is owned by the Mudarib.
investment 5. Mudarabah is a partnership in profit not
5. Musharakah is a partnership in profit in capital.
and capital,

63
 What do you think The Advantages and
Disadvantages of CBE Noor’s Financing
Compared to
Other Banks?

02/18/2025
64
 Comparative Advantage of CBE

CBE Shariah Board

 The shariah board members serving as a bridge
between the bank and customers
 CBE formed its Shariah Board by well know
Muslim community scholars and leaders in the
country
 Mohammed-Zein Nur /Ass. Professor/
 Nur Abdi Gudle /Ass. Professor/
 Uztaz Awel Abdulwahab
 Cont…
2. Financing Price
 CBE current mark up price is 7% per year
 Other banks: Greater than 10%

3. Financing Amount Limit

 Banks are allowed to make loan up to 25% of their paid up
capital to a single customer.
 CBE have large capital compared to other private banks.
So we have a comparative advantage in loan amount limit
 Cont…
4. Early Settlement Penalty
 CBE only make a penalty of 5% of the outstanding
mark up amount
 Private banks will take all the mark up
 For instance, if we lend our the customer 1 million
birr with 7% mark up for two years, we would
collect 1.14 million Birr at the end the loan period.
However, if the customer wants to pay the entire
outstanding loan in one year CBE and other banks
treat the customers as follows
 Cont…
 Loan: 1,000,000
 Loan Period: 2 years
 Markup rate: 7%
 Markup for 2 years: 1,000,000*7%*2=140,000
 Total Loan will be 1,140,000
 Hence CBE will collect loan and one year mark up:
1,000,000+70,000=1,070,000
 Penalty: 70,000*5%= 3,500
 Total loan that has to be paid by the customer at the
end of year one (Early Settlement) will be: 1,073,500
 Cont…

 Other banks assuming we have the same markup,

Total loan that has to be paid by the customer at the
end of year one (Early Settlement) will be: 1,140,000.
 Hence the private banks will charge the customer
66,500 more compared to CBE
 However, according to Shariah we could not add a
price in Murabaha financing, we will use the penalty
to charity
 Working on CBE Dis Advantages

 We have identified that, there were two disadvantages in

CBE Financing processes.
i. Bureaucracy/Service(Culture Vs. Structure )
ii. Collateral estimation
I. Bureaucracy/Service
1.Credit Culture
 CBE credit portfolio shows 90% of CBE loans are allocated
to Government
 So Government is the main borrower to the conventional
Banking Service. Hence we did not make a loss by not
disbursing loan to private sector.
Cont…
 We did not give a considerable attention to credit
unlike private banks
 Private Banks are obliged to make credit their
customers where there is a large loanable fund. On the
other hand they are forced to mobilize deposit where
there is shortage on resources.
 99% of IFB credits are disbursed to Private Sector.
 Hence we could change this credit culture by availing
IFB loan as a product instead of waiting the customer
demands. Moreover, in IFB we have to help our
customers how to make the credit happen. Branch
Cont…
 IFB Support and head office IFB Financing department must be
aligned in order to improve the current credit culture
 We have brief our customer about the checklist and be a part of
solution. for instance showing where they can get
 TIN
 Tax Clearance
 Audited or provisional statement
 Feasibility and Business plan,

 CBE Noor service has currently mobilized above 100 billion

deposits. However, we disbursed only 30 billion Birr (30%)
 II. Collateral Estimation
 The major issue in collateral estimation
Customers consider market value
Banks consider cost of the collateral
 NBE has a report of Average Recovery Rate (ARR) every three
month
 AAR: It is a rate that shows how much the banks cover their
loan by selling acquired collateral
 According to NBE the maximum amount of ARR is 65%
 As we all know few people are attending the bid due to
tedious foreclosure requirements. So we are forced to sell the
acquired asset in low price.
 Hence the banks are forced to estimate the collateral in low
 Cont…
 For instance the Collateral market value is 4 million
the banks estimation value is 2 million. So the loan
disbursed to the customer might be 2 million. This
will enforce the customer to repay the loan instead of
default
There are two strategies in collateral valuation
I. More estimation and Less Disbursement: this
strategy is mostly used by private banks
• Estimation might be 20 million
• Loan disbursement might be 10 million
 Cont…
II. Exact Estimation and Exact loan Disbursement: this
strategy is used by CBE
• Estimation might be 10 million
• Loan disbursement might be 10 million

 On the other hand CBE only considers the collateral value

while private banks need the collateral value plus markup
For instance, 1 million loan disbursements, CBE only
require collateral which is valued at 1 million even
though the total amount of loan includes mark up. On the
contrary, private banks need collateral which is valued at
1 million plus mark up.
 4. The Loan Process

• All banks are supposed to disburse the mobilized

resource in order to make the profit at the end the
budget year.
• However, we have to make sure that the loan has to
be returned otherwise we can no say it’s a loan.
• Information Asymmetry: banks might not have
adequate information about their customers
• Adverse Selection: banks might disburse loan to wrong
customers due to information asymmetry
 Cont…
• Therefore, in order to avoid Information
• Asymmetry and Adverse Selection , we need to
• evaluate our customer loan repayment capacity
• by using the following data

 Documents
 Visit
 Interview
• For CBE Noor loan disbursement we have four types
of checklists
I. Project - Sole
II. Project - PLC , S.C
III. Working Capital – Sole
IV. Working Capital- PLC,S.C
• Project loan: it’s a type of loan which is disbursed
for non-operating or new business
• Working capital Loan: it’s a type of loan which is
disbursed for operating or existing business
 4.1Documents Required for Loan
Disbursement Process
4.1.1 Business and Personal Documents
• All business documents required for loan process are not the
same. It depends on the type of loan and ownership of the
business. Generally, we have the following Business and
Personal Documents
 ID  Feasibility study/Business plan
 TIN  Marital Status Certificate
 Principal registration  Audited Financial statement
 Trade license for >5 million
 Tax Clearance  Provisional Financial statement
for <5 million
 4.1.2 Collateral Documents
• Collateral documents are almost the almost of all business entities
and types loans. Generally, we have the following Collateral
Documents
 Commercial Invoice and Custom Declaration for machineries
 Libre for Vehicles
 Conformation Letter from ERCA for Duty free machineries and
Vehicles
For Completed Building
 LHC
 Approved Architectural plan
 Structural , electrical and sanitary plan
 Lease or land tax payment receipt
For under construction Building
 Bill of Quantity
 Construction permit
 Invoice of lifts ,generators etc
 4.1.3 Legal Documents
• Legal documents are depends on the ownership of the
business. The most common Legal Documents are
 Power of attorney
 Registered Memorandum of association
 Registered Article of association
 Registered Minute
 Key Job Duties and Responsibilities CRM
 Strengthen relationship with IFB wholesale and Affluent Retail Customers;
 Maintain and managed IFB wholesale and Affluent Retail Customers profiling and portfolio;
 Serve as single point of contract for IFB wholesale and affluent Retail customers;
 Provide assistance for IFB wholesale and Retail Affluent customers in using products and services;
 Selling of products and services to IFB wholesale and Retail Affluent Customers.
 Handle the IFB wholesale and Affluent Retail customers request;
 Process all IFB wholesale and Affluent Retail customer’s requests;
 Facilitate the provision of efficient and high quality service to IFB wholesale and Affluent Retail
customers;
• Enhance the Banks image through pro-active customer driven servicing of their needs to maximize
customer satisfaction

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 Cont…
 Ensure the fulfillment of overall tasks that have given to execute customer-focused service in the process;

 Ensures the needs of key customer are met without compromising business efficiency;

 Adheres strictly to compliance and operational risk controls in accordance with the Bank’s and regulatory standards, policies
and practices;

 Performs the tasks within the agreed standards delivery time;

 Participates in resource mobilization initiatives of the Branch;

 Receives any IFB wholesale and Affluent Retail customer’s applications, verifies signature, conducts preliminary checking of
applications and supporting documents against check list, and forwards to the concerned bank’s organ for processing;

 Provides information and advises to customers;

 Promotes CBE products and services to IFB wholesale and Affluent Retail customers;

 Recruits new IFB wholesale and Affluent Retail customers;

 Identifies customers’ needs and forwards any new product ideas to Product owners,

 Perform other assigned duties.

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 Questions?

?
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84
Thank
you!