Executives of OVID Construction Plc, a leading building construction company in Ethiopia, are venturing into the financial sector with the creation of OVID Betoch Bank, a new mortgage bank backed by 13 stakeholders.

Despite a lack of legal frameworks for mortgage banking in Ethiopia, the bank secured a business licence in May 2023 and gained central bank approval for share offerings last month.

With ETB1.2bn ($21.3mn) raised in a swift fundraising dinner, OVID Betoch Bank aims to meet the National Bank of Ethiopia's minimum capital threshold of ETB5bn ($89.9mn). The bank plans to raise a total capital of ETB20bn ($356.3mn) in the near future.

OVID Betoch Bank, distinct from OVID Group's construction division, aims to provide financing for housing projects. The bank's financing model will start with a 20/80 structure and evolve based on investors' financial capacity.

“We’re hoping the NBE will issue a mortgage banking directive. Until then, we will operate based on the existing laws,” Zemedeneh Negatu, a founding shareholder, told The Reporter (Ethiopia). 

“Though we are looking to obtain a commercial banking permit, we will operate as a mortgage bank. The NBE is becoming dynamic, and we expect mortgage banking laws soon.”

Zemedeneh highlights Ethiopia's significant housing finance deficit, estimating a need for nearly ETB1tn ($17.8bn) in Addis Ababa alone. The bank plans to use borrowers' homes as collateral, seeking to conduct meticulous financial and credit history reviews to guarantee timely repayment.

The bank's focus on providing swift housing solutions aligns with its commitment to making homeownership more accessible and sustainable in the Ethiopian financial landscape.