Mr. Mulugeta shares his remarkable journey in Ethiopia’s banking sector, highlighting key moments and bold decisions that shaped his career. From his humble beginnings to playing a pivotal role in the transformation of the banking industry, his story is a testament to perseverance, innovation, and leadership.

HBI: How did you enter the banking industry, and what pivotal moments shaped your career?

Mr. Mulugeta: I was fortunate to have chosen a path that combined both work and education. Coming from a rural area and studying in the province, I didn’t get into university on my first try. Instead, I chose to attend the Addis Ababa School of Commerce to study accounting. After two years, I graduated and found myself entering the banking industry at a unique time of expansion. There were job openings with both the Ethiopian Development Bank and the Commercial Bank of Ethiopia. I passed the tests and interviews for both institutions, but this put me in a dilemma: I had to choose. Ultimately, I opted for the Commercial Bank of Ethiopia, as the Development Bank position was outside Addis Ababa. The personnel at the Commercial Bank encouraged me to stay in the city, so in 1992 in the Gregorian calendar, I began my career as a young clerical staff member— what they called bank clerks at that time.

Starting as a bank clerk, I worked full-time while pursuing my studies at Addis Ababa University, which was an extension program that took six years. During that time, I gained firsthand experience in a branch of the Commercial Bank, learning the basics of banking, bookkeeping, and managing transactions. However, it was a very different era—private banks didn’t exist yet, and we were still transitioning from a socialist system. Banking was limited in scope, and deposits, for example, weren’t seen as a core strength. We’d even question customers who came from outside their neighborhoods, advising them to deposit at their local branch. Lending practices were also very traditional. No proper credit assessment was made and it was unprofessional. As a result of this, a larger portion of the loan portfolio went bad and became non performing.

But then came a pivotal turning point—a kind of U-turn in the banking sector—when the industry began to move towards a professional approach. The shift began with a new strategy at the headquarters, where younger staff from branches, as well as recent university graduates and experienced senior staff, were brought together to form a task force. I was part of this group. Around this time, the government announced the foreclosure law, and we saw a more modern management structure emerge, with academicians joining the banking sector and traditional practices being replaced. Extensive training, both internal and external, was rolled out to prepare us for the demands of modern banking. For a year and a half, we worked in a concentrated campaign to recover loans and bring our credit policies in line with contemporary standards. This initiative laid the foundation for the reforms that would continue to shape the industry.

During that period, many defects in our credit procedures became apparent, so we began implementing remedial actions. This experience was transformative for the bank and for me personally, as it allowed me to contribute directly to critical reforms. As the banking sector awakened to new possibilities, the Commercial Bank of Ethiopia experienced sweeping changes, and I had the privilege of participating in every phase.

"In 1992, Gregorian calendar, I began my career as a young clerical staff member. However, it was a very different era—private banks didn’t exist yet, and we were still transitioning from a socialist system."

One particularly defining moment occurred when several of our task force members, including some of the leadership, faced challenges that led to a major restructuring. The Ethiopian government decided to hire an international management consultant and a consultant team from the Bank of Ireland was hired to manage the bank for three years, and I was appointed to work as one of a counterpart team member in credit operations. This experience provided invaluable insight into areas where our traditional approach had fallen short. Over the next three years, we worked closely with these consultants, reshaping our practices, developing robust policies, and refining our procedures. Many of the CEOs and senior leaders in Ethiopian banks today emerged from that era of intense learning and transformation.

"The foreclosure law spurred professionalization and modern management. We corrected credit defects, refined policies, and set industry standards, producing today’s Ethiopian banking leaders through intense learning and transformation."

These reforms fundamentally changed Ethiopian banking. That pivotal time marked the point at which banking in Ethiopia began to take on its modern form. For me, it opened up opportunities to grow, lead, and continue adapting alongside the changes in our industry. I stayed with the Commercial Bank of Ethiopia for almost 18 years, eventually becoming the Director of Commercial Credit. My journey, which started with a choice, evolved into a career defined by learning, transformation, and a commitment to seeing the industry reach its potential.

Given the traditionally cautious nature of banking, have you encountered moments in your career when you had to make particularly bold decisions? Could you walk us through one or two instances?

Absolutely! One of the most impactful decisions I made came early on, when I was part of a team tasked with addressing non-performing loans at the Commercial Bank of Ethiopia. As part of the Credit Task Force, we conducted a thorough review across the provinces, evaluating how loans were being granted and identifying gaps in the credit policies. This led to a critical assessment of our risk management procedures, which needed significant improvements.

A major milestone during this time was the introduction of the Foreclosure Law, which had a profound impact on the Ethiopian banking sector. Without this law, I believe the sector would not have evolved to its current state. At that time, we worked tirelessly to revise and improve the credit policies, ensuring they kept pace with the changing economic landscape. 

Additionally, I was one of the ten people selected to be part of the “Loan Workout” department, which focused on recovering and restructuring bad loans. This department was crucial in analyzing and addressing the Bank’s weak spots, whether in geographic or sectoral loan distributions. We implemented continuous improvements, which resulted in the credit policies we still see today in many Ethiopian banks. 

The most important lesson I learned from this experience was the importance of making adjustments to policies and procedures to adapt to changing circumstances, which became one of my key contributions to the Commercial Bank of Ethiopia. Our work helped improve the sector’s approach to credit risk management, setting the foundation for future success. 

Another key contribution I made was in branch expansion, which I believe was crucial for deposit mobilization. Many people, including the government at the time, didn’t fully understand that deposits are the backbone of banks. In order to increase deposits, we had to make banking services more accessible by expanding our branch network across the country.

"Our work helped improve the sector’s approach to credit risk management, setting the foundation for future success."

There was a period when the National Bank of Ethiopia had imposed restrictions on branch expansion due to concerns over bad loans, which hampered our ability to grow. However, I and some young bankers advocated strongly for branch expansion, emphasizing that without the ability to collect deposits, it would be impossible to lend and inject money into the economy. Deposits are the primary source of funding for Ethiopian banks, and without them, we couldn’t sustain our operations or support economic growth. The then CEO, Abie Sano played a significant role in this regards.

After much negotiation and controversy, we succeeded in convincing the National Bank to lift the restrictions, which allowed the Commercial Bank of Ethiopia to expand its branches. This expansion played a vital role in improving access to banking services and mobilizing deposits. By the time I left the bank in 2010, we had around 265 branches, which, while significant, still wasn’t enough given the country’s potential. If branch expansion had started earlier, I believe the Bank could have achieved even more by this point. 

Another key contribution was my assignment to Dire Dawa, where I was tasked with resolving a significant issue. At that time, several private banks—like Awash Bank, United Bank, Dashen Bank, Wegagen bank and others—had established a strong presence in the region, especially in areas near the Somali border, where competition was fierce. The Commercial Bank, however, had no representation in certain border areas like Tugochale, a small town along the Somali border, even though it was a busy area for border trade and currency exchange. 

When I opened the first branch of the Commercial Bank of Ethiopia in that area, simply having a presence wasn’t enough. The competition in the region was fierce, especially with private banks exploiting the gap between the buying and selling rates for foreign currency. At that time, there were no formal and clear regulations from the National Bank regarding how far a bank could deviate from the official rates, so it was largely based on experience.  

To remain competitive, I decided to approach it strategically. I spoke with traders, particularly those in the khat business, and proposed offering foreign currency at the mid-rate—an unofficial rate between the buying and selling rates. This move attracted many customers, and our business started growing rapidly. 

However, soon after, the then president of Awash Bank, recognized the opportunity and began adopting similar practices, which meant the competition was intensifying. Faced with this challenge, I realized that if I could buy foreign currency at the selling rate, I would gain a significant advantage by trading the dollar more effectively. 

I made the bold decision to buy foreign currency at the selling rate, which was a significant step forward in creating a competitive edge. The National Bank of Ethiopia, however, was initially hesitant and questioned why we were engaging in this practice. I explained that as a commercial bank, we needed to be competitive, and I was willing to compromise on profit margins to make the business work. I believed that by increasing our dollar trading volumes, I could still benefit from the spread. I could still benefit from the commissions and service charges by opening LCs.

When the rumor got bigger, I sought permission from the head office to formalize it, and that’s when the practice of buying at the selling rate began. This decision was crucial in attracting more foreign currency and helped level the playing field for the Commercial Bank of Ethiopia, allowing us to compete effectively with private banks in the region. 

This decision had a major impact. In just one year, I managed to generate about $42 million from a single large exporter, which was a significant amount for the Bank. This was a breakthrough in bringing foreign currency trade, which was mostly controlled by private banks, into the Commercial Bank.

After returning to the head office, I didn’t stay long. I spent a year before moving to Bank of Abyssinia. During my time at Commercial Bank of Ethiopia, I not only focused on getting things done but also worked on my personal growth, learning, and capacity building. I started my post-graduate study during this time, although I completed it after leaving the Commercial Bank. 

I joined Bank of Abyssinia as Director of the Credit Department and worked in that role for about two years. Following that, I served as Vice President for another two years, focusing on internal adjustments such as credit policies, operational improvements, and branch expansions.  

"I made a bold decision to buy foreign currency at the selling rate, which was a significant step forward in creating a competitive edge."

Bank of Abyssinia had faced significant challenges that eventually reached a peak when I joined. The CEO before me, Mr. Addisu Haba, was a calm and steady leader who played an instrumental role in stablizing the situation. Following his example, I was prepared to make bold decisions to guide the bank forward when I was appointed as CEO. One of my first major decisions was related to the bank’s headquarters. At the time, Bank of Abyssinia did not own any real estate, which was a significant disadvantage. Although an attempt to acquire land for the headquarters had been made five years earlier, it had failed. The government had even offered land, but later canceled it. The question was whether we should use our own money to purchase a building or acquire land to build one from scratch. 

When I became CEO, Bank of Abyssinia owned no buildings outright. The only properties the bank’s possession were branch offices, such as one built by Nile Insurance and BOA as co-ownership in Bahir Dar and a small office aquired in Addis Ababa. I recognized that the Bank was lagging behind, so I convinced the board to buy properties. We acquired buildings in Addis Ababa, Hawassa, and Jimma, including the current head office in Legehar. This move allowed us to move out of rented premises and into properties we owned, increasing the bank’s assets and long-term stability.

"There was a period when the National Bank of Ethiopia had imposed restrictions on branch expansion due to concerns over bad loans, which hampered our ability to grow. However, I and some young bankers advocated strongly for branch expansion, emphasizing that without the ability to collect deposits, it would be impossible to lend and inject money into the economy."

I took it upon myself to ensure that Bank of Abyssinia had these valuable properties, which significantly enhanced its competitiveness and capital capacity. Acquiring these buildings—starting with the head office and expanding to properties in Jimma, Hawassa, and Addis Ababa—was essential for the Bank’s growth and long-term success.

Some argue that banks, as service providers, should focus on their core services rather than acquiring real estate. Why do banks invest in property?

The reason we invest in property is to build and sustain capital at a level that matches our deposit mobilization efforts. In our country, capital growth options are limited, so we primarily rely on selling shares. The psychology of our society places a high value on tangible assets. If people don’t see property, they hesitate to buy shares. So, holding property helps us attract shareholders because they see it as a sign of stability and strength. 

You can approach this academically, but practically, when we present shares to potential shareholders, they often ask what tangible assets the bank has. If I say we have a skyscraper or a state-of-the-art data center, that resonates with them much more than abstract values like branding. The moment they see something tangible, they feel more assured. 

Another key point is that internationally accepted standards, like the Basel Accords, play a role here. Basel III, which our banks are beginning to adopt, emphasizes capital adequacy. This includes both liquid capital and assets like property, which contribute to a stronger capital foundation. For example, OECD countries aim for a 12% capital adequacy ratio, which includes a mix of cash and tangible assets. In a market like ours, with inflation rates around 32-34%, fixed assets are a hedge against inflation and a solid way to protect our capital.

Were there any influential mentors or role models in the banking sector who influenced your leadership style? 

Absolutely. Three people stand out. First is Mr. Tilahun Abay, CEO of CBE when I joined the Bank as a young graduate. He inspired me not only with his banking expertise but with his character and dedication to developing young talent. Although he was in a very senior position, he was close to us young officers, guiding us through hands-on learning. He allowed us to sit in on credit committee meetings, where we observed discussions and debates. This was invaluable, and he often corrected our work, even down to our language, emphasizing that we were the bank’s future leaders. He also taught us the importance of respect, especially toward customers.

Another influential mentor was Mr. Hailu Legesse. He was young, energetic, and ambitious, with a vision for improving the bank. He challenged us to explore problems from different perspectives, not just correcting our work but encouraging critical thinking. His guidance laid the foundation for my current approach to challenges.

Lastly, Mr. Gezahegn Yilma, another former CEO of CBE, was instrumental during a turbulent time. He quickly stabilized the bank and was always well-prepared, with a keen ability to grasp complex issues. He was principled, especially about managing public resources responsibly, and wasn’t afraid to stand firm on his values. Although his life was cut short, his influence on us was profound.

I’d like to give special recognition to these three mentors, along with others who’ve shaped the banking sector. Many young people, such as Mr. Chanyalew Yilma, Mr. Abie Sano, Mr. Bekalu Zeleke, Getachew Teka(PHD) Gashawtena Amdetsion and Mr. Tsehay Shiferaw —some of whom are my supervisors, peers and juniors—have also made notable contributions. I couldn’t overlook the impact of these seniors and leaders; their coaching and mentoring were invaluable in my development.

How did your experiences impact your approach to banking, particularly in bringing global strategic management practices to the Ethiopian banking sector?

My experiences underscored the importance of incorporating international best practices into Ethiopian banking. Modernizing banking isn’t limited to automation; it includes risk management and adopting global standards for strategic decision-making. When I was at Abyssinia Bank, we issued an international tender and selected a global consulting partner. This collaboration allowed us to bring in world-class expertise, review our strengths and weaknesses, and develop a robust five-year strategy. 

To ensure that these practices took root, we engaged 27 staff members across departments like credit, HR, Risk management, IBD and finance to work alongside the consulting team. This intensive training and hands-on experience cultivated future bank leaders well-versed in modern banking approaches. Transforming the bank required a comprehensive restructuring—redeploying all 3,000 employees and enhancing their skills. It also necessitated challenging some traditional practices that stifled innovation and replacing them with a performance-oriented, knowledge-driven culture. 

"I convinced the board to buy properties. We acquired buildings in Addis Ababa, Hawassa, and Jimma, including the current head office in Legehar. This move significantly enhanced Abyssinia Bank’s competitiveness and capital capacity, increasing the bank’s assets and long-term stability."

We rebranded the bank, hiring a South African firm through another international tender. This exercise taught us that branding extends beyond visual identity; it’s a disciplined process reflecting the institution’s principles. To retain talent in a competitive environment, we implemented a substantial improvement in salary structure to ensure employees viewed the bank as a long-term career and knowledge hub. 

Ultimately, our efforts inspired other banks to consider similar reforms. This holistic transformation not only strengthened our internal processes but also served as a model for leveraging global consulting expertise to drive significant change within Ethiopia’s banking industry.

How did these decisions contribute to your leadership legacy?

I see it in two main ways. First, these decisions allowed us to modernize and make a strong impact, setting us apart from competitors. Second, they laid a foundation for the bank to sustain its market position and competitiveness. Bank of Abyssinia remains well-regarded by both the community and its employees, despite internal challenges. 

Among top competitors, Bank of Abyssinia ranks highly—after Awash, it became the third largest among private banks and fourth overall when including CBE. The bank continues to lead with innovations, especially in technology. For instance, our investment in the data center has equipped the bank with the infrastructure needed to support a wide range of applications, paving the way for future growth and adaptability.

With your exposure through travel and training abroad, what areas of the Ethiopian banking sector do you feel need to catch up in the coming years?

My travels have given me a broad perspective. For example, when attending World Bank and IMF meetings, Ethiopian banks gain exposure to global financial standards and innovations. At these gatherings, we build relationships with international banks and discuss topics beyond just banking—like health, technology, the Green Revolution, and even political dynamics impacting finance. 

In comparison, our banking sector remains underdeveloped in many ways. We lag behind in automation and fintech, whereas other countries already provide seamless banking services online, without over-the-counter interactions. While Ethiopia has started embracing this, there’s still a gap. 

Another area is our international influence, which is minimal due to our country’s economic standing. When we approach correspondent banks, they often question what we can offer in terms of trade volumes or economic value, which limits our options. Risk management is also a major challenge—banks in other countries adopt flexible, up-to-date approaches, whereas ours are often rigid. 

Our banking knowledge base is also lacking. Bankers abroad are well-versed in both their institution and the broader economic landscape. Here, our knowledge tends to be transactional rather than comprehensive, and our training needs to be more global in scope. 

Additionally, our products are limited and not on par with global standards. Part of this is due to the homogeneity in our banking organizations, which are sometimes shaped by ethnicity, religion, or politics, limiting the universality of our services. Political and economic factors also restrict areas like agricultural credit and mortgage loans, impacting financial market development.

We’ve made some bold moves, like investing in fintech and data management. We also invest on capacity building by training the board members and top and middle level management members abroad so as to get international practices. Bank of Abyssinia recently established a state-of-the-art data center, only the second after Commercial Bank of Ethiopia to do so. This data center supports scalable data mining, essential for future growth in big data and fintech.

Ethiopia has the potential to become a data management hub, thanks to its telecom infrastructure, workforce, and energy resources. As we embrace big data, Bank of Abyssinia is well-positioned to lead in this area.

Looking ahead, what major challenges do you foresee for the local banking industry?

There are a few critical challenges I foresee. First, banks need to modernize and broaden their focus. Banks organized around specific social or political affiliations won’t thrive; instead, a broad social base and universal approach is essential. To remain competitive, banks must be free from narrow influences and deliver services that meet international standards. 

Mergers and acquisitions will also be a driving force for growth. Organic growth alone is too slow for today’s demands, so banks should prepare for these changes as a necessary evolution. Additionally, automation is no longer optional. Non-banking institutions, like telecoms, are now offering financial services, putting traditional banks at a disadvantage. To stay relevant, banks need cutting-edge financial technology and user-friendly, multilingual interfaces—Amharic, Afan Oromo, Tigrinya, and Somali are crucial to serve our diverse population and boost financial literacy. 

"To survive, banks must adapt, especially by strengthening their capital and knowledge base. Capital adequacy will be essential, as will investing in technology,"

Knowledge and capacity building also present challenges. Banking is fundamentally about risk management, and that depends heavily on human judgment and expertise. We must invest in our people, ensuring the next generation surpasses us in capability. Risk tolerance, business judgment, and regulatory understanding are all areas where knowledge is essential, especially as competition intensifies and regulatory bodies face their own capacity limitations. Addressing these challenges with continuous learning will be key to the sector’s resilience.

Where do you envision local banks positioned 20 years from now?

That’s a million-dollar question. If they continue as they are now, they won’t be in the system — they’ll disappear. To survive, banks must adapt, especially by strengthening their capital and knowledge base. Capital adequacy will be essential, as will investing in technology, which is reshaping finance and reducing reliance on manpower. Purposeful investments in knowledge and technology are critical to remaining competitive internationally. If banks fail to make these changes, they may exit the market within the next 10 years, let alone 20.