The Central Bank Bars Banks From Paying Deposit Interest Before Maturity

The National Bank of Ethiopia has ordered every bank in the country to stop paying deposit interest upfront, barring them from crediting interest before a deposit has been held for its contracted term or reached maturity.

The instruction, issued to all banks by Solomon Desta, Vice Governor for Financial Institutions, also stops banks from adding such interest to the principal before maturity. It takes effect immediately and covers deposits generally, including time deposits.

What supervision found

The directive did not arrive in the abstract. Supervisory reviews had found that some banks were advancing interest on time deposits before the balances had been held for the required period. The Vice Governor did not name them.

The practice is a deposit-gathering tactic with a straightforward appeal. Paying a year's interest at the moment of deposit makes a headline rate arrive as cash today, which is a materially better offer than the same rate arriving in twelve months — and it costs the bank nothing visible in the quarter it books the deposit. It does, however, mean a bank recognising an expense against funding it has not yet had the use of, and it lets a depositor take the yield and leave.

For a sector competing hard for deposits, that is exactly the sort of competition a supervisor moves to close before it becomes the market standard.

Also from the regulatory desk

Allied Gold has connected its Kurmuk mine in western Ethiopia to the national grid and begun crushing ore. An 88km transmission line built by Ethiopian Electric Power now supplies the Benishangul-Gumuz site under a 20-year deal priced at about four US cents a kilowatt-hour. The company expects ore to reach the grinding circuit within weeks, with first gold shortly after; it has not declared commercial production.

At the 2 September auction, the 28-day Treasury bill cleared at a weighted-average yield of 3.1pc, the lowest in the central bank's series since August 2024. Bids reached 74.18 billion Br, of which about 43 billion Br was accepted — an acceptance rate of 57.9pc, against 41.4pc across the previous six auctions. The government is borrowing more cheaply even as investors bid less.

Open

The directive's text has not been published, so it is not clear whether existing contracts with upfront-interest terms must be unwound or simply not renewed, nor what penalty attaches to non-compliance. The banks found advancing interest have not been named.

Sources: Addis Fortune, 21 September 2026, Addis Fortune, 21 September 2026, Addis Fortune, 21 September 2026