Interest-free window banking and finance in Ethiopia: Inception to expansion

Abctract. Interest-Free Banking and Finance services are continuously growing throughout the world in terms of customer size and the number of countries introducing the services. Entitled differently in different corners of the globe, numerous models have been implemented. Full-Fledged Banking, Subsidiary Banking, and Window Banking models are the eminent types. One of the countries, where an only Window Model has been practiced, is Ethiopia. In the last decade, the banking regulation of the country has legitimatized the operations of only Window Models. Consequently, within 6 years (2013-2019), 10 conventional banks have rapidly introduced Window-Based IFB services. Most of these windows became very weak in financing but they could attract billions of Ethiopian Birr (ETB) within a short period. As a result, the Window-Based IFB sector of the country became exceedingly characterized by cost-free deposit accumulation under the cover of a manipulated term of Interest-Free Banking. However, the parliament has approved a regulation which permits the establishment of Full-Fledged IFB in 2019. Consequently, some banks are under formation. The aim of this study is, therefore, to assess the expansion of the Window Model and the performance of the banks in deposit accumulation and financing trade and investment. A descriptive analysis is used based on mainly the reports of the banks.Keywords. IFB, Window model, Ethiopia.JEL. G21, G28, G29

Turkey - Africa trade: A gravity model estimation of determinants

Abstract. This study investigates the key determinants of trade between Africa and Turkey by using the gravity model of international trade. The major objective is to identify the core socio-cultural and macroeconomic factors of bilateral trade between both sides. Poisson – Pseudo-Maximum Likelihood Estimator is used in order to efficiently test the impact of many dummy variables and fixed effects. The results illustrate that there are geographic, socio-cultural and macroeconomic factors in the African economies and Turkey’s side.  African countries near to Turkey, sharing similar religion and recorded higher economic growth rates in the last couple of decades have better bilateral trade with Turkey than the others. Besides, economic freedom improvements in these countries have positive relationship with their bilateral trade. On the other hand, improvement in corruption level of Turkey, increasing its ODA donation and opening commercial consulates in African countries are the positive factors of its bilateral trade with Africa. However, there is no statistical evidence to say Turkey’s trade with Africa is for the purpose of natural resources.Keywords. Turkey, Africa, Foreign Trade, Gravity Model.JEL. F01, F14, F19

The distribution and determinants of Turkey’s FDI positions in Africa

Abstract. This study investigates the key determinants of Turkey’s FDI positions in Africa by employing the gravity model. The major objective is to identify the core macroeconomic, socio-cultural, political, and governance-related determinants. PMLE is used in order to efficiently test the impact of dummy variables. Besides, three different models are estimated – the whole Africa, SSA and North African countries to investigate the variations in the FDI factors within the continent. The results illustrate that GDP size, per capita income, improvement in economic freedom and corruption levels, sharing common religion, improvement in easiness of doing businesses, and better political stability are attracting FDI from Turkey to Africa in general and SSA in particular. In the North African region, the FDI positions of Turkey are increasing in parallel to the GDP growth of Turkey, its import volume and the macroeconomic conditions of the hosting economiesh. Keywords. Turkey-Africa relations, Gravity model, FDI.JEL. B17, F21, C01, C23

The potential critical success factors of full-fledged interest-free banks in Ethiopia

Abstract. The role of interest-free banking (IFB) is vital to enhance the financial inclusion rate of a country like Ethiopia that has a substantial number of Muslims and unbanked population. Although IFB windows have been operating in Ethiopia since 2013, the country allowed a full-fledged IFBs recently. Accordingly, two banks have already fulfilled all the requirements and are expected to operate soon while another 2 – 4 banks are under formation. The aim of this paper is, therefore, to assess the potential critical factors that will determine the success or failure of the newly establishing full-fledged IFBs in Ethiopia based on globalexperiences and specific bank cases from more than 14 countries using the concept of Critical Success Factors (CSFs). The outcomes of our analysis indicate three things. First, every country has its unique success and failure factors, thus, benchmarking should consider these factors. Second, based on the current circumstances, the most important CSFs which can determine the fate of the full-fledged IFBs in Ethiopia in the near future will be an adequate legal, regulatory and institutional framework; management skills and capacity; good reputation and image; product innovation and investment alternatives; unconflicting Shariah verdicts and availability of central Shariah supervisory body; and entrepreneurial discipline and ethical values. Third, full-fledged IFBs in Ethiopia will confront severe competition from the existing window banks that has big potential, better experience, and flexible Shariah controls.The study suggests that the government’s regulatory intervention to introduce guidelines and banking regulations specific to the full-fledged IFBs.Keywords. Interest-free bank, Shariah compliance, Critical success factors, Ethiopia.JEL. G21, G41, Z12

African emerging economies: The leading economies of Africa in the 21st Century

Abstract. In the last couple of decades, some African countries have achieved a significant economic improvement even though it is overshadowed by the severe poverty and conflicts in the continent. In fact, some of these countries, such as South Africa, Nigeria, and Egypt are recognized as emerging economies by many international organizations. However, there are many other economies in the continent which achieved an equivalent economic improvement recently. The objective of this study is to assess the progress of all African countries and identify the African Emerging Economies. An index with various measurements which are commonly employed by similar studies is used. Considering, the absence of the topic from the literature, this study may attract further works. The results show that at least there are 15 African economies, including the three biggest ones, which recorded a remarkable progress in the last couple of decades. These countries can be recognized as African Emerging Economies. All of these countries are also categorized as either global emerging or frontier economies by various rating agencies.Keywords. African emerging, Emerging economies, Frontier economies.JEL. O10, O55, F02