Professional Documents
Culture Documents
Ethiopia
As Is Documentation
Report
Table of Contents
I. Introduction........................................................................................................1
1.1 Preamble.......................................................................................................1
1.2 Vision, Mission, and Values..........................................................................3
1.2.1 Vision.....................................................................................................3
1.2.2 Business Mission...................................................................................4
1.2.3 Core Values............................................................................................4
1.3 Statement of the Problem.............................................................................4
1.4 Objectives of the Study.................................................................................5
1.5 Scope of the Study...................................................................................6
1.6 Methodology Employed................................................................................6
1.7 Organization of BPR Team...........................................................................8
II. Background.....................................................................................................12
2.1 Profile of the Bank......................................................................................12
2.2 Credit Operations (An overview of Past Performance)..............................15
2.3 Human Resource Position..........................................................................21
2.4 Capital Structure of the Bank (Assets and Liabilities)................................23
2.5 Financial Performances..............................................................................23
III. Rational for Business Process Reengineering..........................................26
3.1. Customers Expectations............................................................................27
3.2 Core Business Process..............................................................................29
3.2.1 Selection Criteria..................................................................................29
3.2.2 Process Mapping.................................................................................30
3.2.3 Process Matrix.....................................................................................33
3.2.4 Cycle Time...........................................................................................34
3.2.5 Cost Build up........................................................................................38
3.2.6 Control System....................................................................................40
3.3 Factors Affecting Current Performance......................................................40
3.3.1 Organizational Structure and Manpower.............................................40
3.3.2 Material Resources..............................................................................46
Acronyms
I. Introduction
1.1 Preamble
Being one of the actors of the financial sector reform program, currently
the Bank has decided to reorganize a new Core Business Process
Reengineering Team to carry out the BPR effort on the core process in line
with the current business and technology situations. The re-design core
process is expected to address customers expectations in terms of cost,
quality, service level and speed in areas of service delivery. The
transformation process focuses on key service areas listed below as stated
in the regulation for the re-establishment of the Bank. The services are
ranked in order of their impact for the change:
The Banks vision, mission, and core values are adopted from the revised
(i.e., draft) strategic plan of the Bank dated 2006/07.
1.2.1 Vision
o Customer satisfaction
o Integrity (honesty, truthfulness, transparency)
o Teamwork (harmony, cooperation, synergy)
o Learning organization (flexible, change-oriented)
o Innovation
o Excellence (competence, dedication to work professionalism)
o Bring about positive attitude change and work culture among staff
members towards efficient and effective service to the extent of
satisfaction of service users.
o Transform the Bank into effective and modern organization capable
of executing the Government's National Development endeavor
through,
The BPR Team will focus on examining the existing complete cycle of
credit delivery process at the Head Office. Problems related with service
delivery will be identified, gaps with respect to customers expectations and
performance of other related organizations will be pin pointed.
Designing Formats
Forms required for data collection are designed. The designed formats are
used for documenting workflows, cycle time and cost. This was required in
order to analyze and endorse the credit delivery that had been conducted
over the reporting period.
Questionnaires
Experience Sharing
To enrich its purpose and widen its scope, the Team has given importance
and due attention to learn from the success story of some public and
private banks which are in the same industry though there are differences
in areas of specialization and concentration.
Observation
The BPR Team consists of ten members. This Team has the responsibility
of performing the day-to-day activities of the reengineering and reports to
the Steering Committee. Team members are pooled from different
functional units of the Bank which includes those staff members under the
core process.
National Steering
Committee
Strategic
BPR Team Plan
Tea
Departments/
Service/offices
Employees
Head Office
Employees Branches
II. Background
The Bank's history has undergone substantial changes since 1909 and the
policy changes that have been influencing its credit operations and other
activities have also been following the changes in the name with
subsequent changes in the business objectives of the Bank. Changes in the
name of the Bank may be summarized as follows with implied changes in
its activities over the years under consideration:-
Hence, one has to bear in mind while analyzing the loan operations of the
Bank that it has always been highly influenced by the various policy
In its service years, before 1970, the main objective of the Bank was to
accelerate the development of Agricultural and Industrial production by
initiating the investment of private capital for productive purposes. To this
end, the Bank granted its loans to the industrial sector, which was mainly
allocated for textiles, mineral water, and flour mills. In the agricultural
sector, the Bank assisted coffee plantation, field crops, dairy projects as
well as fruits and vegetable farms.
In addition to the financial support DBE provided to its clients, it has given
advisory services to prospective borrowers, organized training programs to
government and cooperative societies, employees as well as farmers to
improve managerial capacity of respective organizations. It was the pioneer
financial institution in the provision of agricultural inputs and technology
credits aimed at food self sufficiency of the Country which is the current
aim of the Government.
The credit operations, financial performances and related aspects for fiscal
years 1998/99 - 2005/2006 have been compiled in this report. Year
1998/99 is selected as a start year as it is the years for the first
restructuring. Previous eight years positions of the Bank and the trends of
credit operations over these years therefore is presented to compare what
is happening over the current and recent restructuring of the Bank. Effort
has also been made to compare operational results of the year under
consideration against actual results of the preceding year. Moreover, the
report tries to provide the loan positions of the Bank segregated into
outstanding and loan in arrears for the respective years. The summary of
activities and results of the Bank over the eight years considered are
illustrated in the following table below (Table 2. 1).
Table 2.1 Summary of Credit Operations & Financial result (1998/99 2005/06)
000
Particulars 1998/99 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006
1. Credit Operations
Loan Approval 604,915 306,664 212,929 127,337 120,866 382,274 781,399 1,667,314
Loan disbursement 553,714 456,959 227,683 111,292 69,177 294,896 504,667 626,702
Loan collection (P+I) 397,080 411,099 350,801 242,472 266,290 182,497 477,261 595,487
O/S Loan (P+I) 2,499,433 2,783,464 2,898,963 2,976,787 2,996,380 4,331,087 4,911,826 5,376,475
Loan in arrears 989,982 1,211,675 1,293,544 1,625,113 1,807,182 1,946,076 1,651,768 1,609,228
2. Financial Performance
Total Income 195,190 212,553 223,056 247,697 210,720 188,887 285,256 401,585
Total expenses 103,776 114,482 118,671 118,042 104,449 93,917 111,651 187,799
Net profit/Loss after Tax &
provision 26,305 29,081 21,706 16,087 -15,531 (1,906) 40,955 28,101
Total Assets 3,838,342 4,245,882 3,108,135 3,163,186 3,362,257 4,812,373 5,360,911 5,936,698
Total Liabilities 3,448,066 3,839,987 2,687,050 2,730,385 2,837,700 4,287,949 3,533,212 4,078,123
Net worth 390,276 405,900 421,085 432,801 524,557 524,424 1,827,699 1,858,576
Profit margin 30% 28% 31% 34% -7% -1% 14% 8%
3.Manpower ( in number )
Newly recruited 28 92 53 57 55 69 84 68
Termination 91 58 52 46 67 50 85 54
Ending balance 778 806 806 811 799 818 817 830
The total loan approval decreased from Birr 604.9 million in 1998/99 to
Bir127.3 million in 2002/2003, but registers an increased to Birr 1,667
million in 2005/2006. Similarly the total loans disbursed decreased from
553.7million to Birr 69.2 million during the years under review except an
incensement to Birr 626.5 million in 2005/2006. Likewise, loan collections
also registered decreasing trends from Birr 397.1 million to Birr
266.3million, respectively although moderate improvements were
observed during fiscal years 1999/2000, 2004/2005 and year 2005/06.
Please refer to Figure1 for loan approved, disbursed and collected during
the seven years under review.
The outstanding loans of the Bank, during the eight years period, show a
continuously increasing trend from Birr 2,499.4 million to Birr 5,376.5
million. Loans in arrears showed the highest increase in fiscal year
2003/2004. The increasing trends were also observed through out the
years from Birr 989.9 million in 1998/99 to Birr 1,946 million by the year
2003/2004. In the year 2005/2006, Loan in arrears showed relatively
decreased figure (i.e., Birr 1,609 million). Please see Figure 2.2 for loans
outstanding and arrears of the Bank over the reporting periods.
O/S Loan (P+I) 2,499,433 2,783,464 2,898,963 2,976,787 2,996,380 4,331,087 4,911,826 5,376,475
Loan in arrears 989,982 1,211,675 1,293,544 1,625,113 1,807,182 1,946,076 1,651,768 1,609,228
The total number of employees of the Bank varied between 778 (1998/99)
to 830 (2005/2006). The manpower balance for 2005/2006 was 830
despite variations in the current year. Out of the total staff of the Bank by
the year 2005/2006, 328 (40%) were professional and high level
supervisors, 200 (24%) were semi-professionals and clericals, 75 (9%) were
technical and skilled, while the remaining 227 (27%) were manual and
custodians. Figure 2.3 shows the human resource of DBE over the
reporting period.
The paid up capital plus reserve as net worth of the Bank increased from
Birr 390.3 million to Birr 1,854 million from years 1998/99 to 2005/2006.
The paid up capital has been declared to be Birr 1.800 billion as at the end
of the fiscal year 2005/2006. The authorized capital however is Birr 3
billion.
The total asset has increased from Birr 3,838.3 million to Birr 5,936.5
million between years 1998/99 and 2005/2006. Similarly total assets
started increasing from fiscal year 2000/2001 onwards reaching to Birr
5,936.5 at the end of 2005/2006. Correspondingly, liabilities of the Bank
registered the highest increase between years 1998/99 and 2005/2006
from Birr 3,448.0 million to 4,078 million respectively. Significant
increases in total liabilities were observed between years 2000/2001 (Birr
2,687.0) and 2005/2006 (Birr 4,078).
The total income of the Bank has been registering continuous increases,
although it was modest during the first four fiscal years from Birr 195.2
million in 1998/99 to Birr 401.5 million in 2005/2006 with a sudden drop
of Birr 188.5 million during the 2003/2004 fiscal year. Similarly, total
expenses increased from Birr 103.8 million in 1998/99 to Birr 187.8
million by year 2005/2006. The following two fiscal years of 2001/2002
and 2002/2003 registered decreased expense of Birr 118.0 million and Birr
104.5million, respectively. As a result Net Profit/Loss after tax and
provision for doubtful debts increased from Birr 26.3 million in 1998/99 to
Birr 29.1 million in 1999/2000. However, continuous decreasing trends
were observed during years 2000/2001 to 2002/2003 from Birr 21.7
The current BPR Team owing to the time limitation in finalizing the whole
reengineering of the core process was not in a position to conduct survey
on customers expectations. Yet the Team adopted what has already been
done by the earlier BPR Team as documented in their report.
Allowing equal weight to all responses one can conclude that the service
delivery of the Bank is rated as unsatisfactory by about 40.2% of its existing
customers which is a huge rate by any standard.
To identify the gap between what our customers expect and current
performance there is a need to conduct assessments in areas of customers
interest. In the following sections services that are of interest of customers
will be selected.
The Banks core business processes are those processes central to the
Banks business functioning. They are typically primary value-chain
activities and relate directly to external customers. The generic example is
the credit delivery process in which the Bank is expected to have shortened
lead-times, improve quality, reduced material and information flows, and
administrative steps.
These core processes, which mainly have a system, require formal study
and detailed assessment which in turn has significant impact on the
operations of the Bank.
Considering the above criteria, it is apparent that the core service area,
which expected to meet customers expectations, is the credit delivery.
The main objectives of the AS IS process mapping among others are the
followings.
(1) Understand the existing processes of work, their span, linkages and
bottlenecks,
(2) To identify and detect drawbacks in time, cost, quality and efficient
The following attached flows are part of the core process under study:
o Legal opinion
o Contract preparation
o Equity deposit
o Effecting disbursements
c) How well (or poorly) it performs and the critical issues that governs
its performance?
As can be seen from the attached process matrices, a good share of steps of
the core process are non-value adding, time consuming, costly and sources
of customers grievance. The detail is presented under annex 3.
Cycle time is one of the indicators of the level of the service delivery of an
organization. It is also the major factor that needs to be addressed in
improving customer satisfaction.
Information collected reveals that the Bank over the period of one year
(i.e., November 2005 to November 2006) used to finance projects in two
distinctive ways. For those projects applied for loan after fulfilling all the
required information as per the credit policy (i.e. with three Performa
invoices, approved plan, bill of quantity, feasibility study, land holding
certificate, etc.) the Bank approves loan right away as per recommendation
of first appraisal study. Others whose implementation schedule is long and
also did not fulfill the documents as per the policy the Bank finances
projects based on two level approvals.
Average data of cycle time elapsed at each sub process of the core process is
considered. Considering the time coverage of the report which is only one
year, it is assumed that incorporating projects which have passed all the
loan delivery cycle might limit the data coverage. Therefore all projects
though did not complete the over all loan delivery stage are considered.
The average cycle time of projects in the analysis is summarized and
presented based on the two approval processes practiced in the reporting
period.
Table 3.2 Cycle time of projects financed at first level appraisal stage
From the experience of the Bank over the reporting period, the quickest
service is delivered to those projects financed passing only one level
approval process. Yet including possibility of more than two disbursements
in equity utilization and loan, the average number of days projects elapsed
in the Bank is 214.15. The maximum time spend in the credit delivery
process described above as stated in table3.2 is during application sub
process especially in preparing the due diligence report. The sub process
that stands second in terms of cycle time is loan approval. This sub process
encompasses the time taken in discussing the case with clients and
understanding the report, time taken for approval of the appraisal report,
covenant and loan contract preparation and insurance. Release of equity
and loan for the second time are also one of the top in the list of credit
delivery cycle time.
Table 3.3 Cycle time of projects financed at second level appraisal stage
The cycle time of the core process in the second scenario is 269.07 days.
The difference in cycle time of the two scenarios is 55 days. It can be
observed from the two tables that the first level application process took
longer time followed by application process of second level approval stage.
The first level approval and second level equity release also accounted for
about 30 days each from the total cycle time of 269 days.
As the major cost component in the cost structure of the service delivery of
the Bank is salary, the cost structure of credit delivery is directly related to
the cycle time. Those processes with longer time, therefore, cost the Bank
higher than the shorter once. Owing to the direct relation between cycle
time and cost, the cost of the service delivery is evaluated based on two
stages of the loan approval processes.
An average of Birr 32, 292 is spent to deliver credit service for project
finances at one go approval level. Of the sub processes incorporated under
first level approval credit delivery, release of second disbursement is the
costly one followed by second equity release. Similar to that of cycle time,
cost of projects that pass both levels of approval is higher than those
finalized in one approval stage. The detail is presented as follows.
As depicted in the Table the average service cost of two levels of approval
processes is Birr 38,935 which is higher than the fist one by Birr 16,644.
Within two stages approval levels as depicted in the above Table, the first
stage approval level is more costly than the second stage. Second stage
equity and loan release are the top in the cost component followed by first
stage approval.
that a number of non-value adding steps are conducted at all levels of the
core process just for control purpose.
Reengineered processes however use controls only to the extent that they
make economic sense. The issue of excessive check and control will be re
designed during re engineering process.
The internal control system in line with the core process is too strong
The above findings shows that the organizational structure of the Bank is
not process based but functional with a number of hierarchical levels which
is against the theory of BPR that opts to set up empowered team and
expanded spans of responsibility in a flatter organization .
As per the existing organizational set-up, the Bank has a president who
manages the overall activities of the Bank. The President is assisted by
four vice presidents, 16 Departments and a Service, as well as 35 divisions
at the Head Office. The Bank has 8 Main Branches and 24 Branches
located in different parts of the country. The organizational structure of
the Bank is depicted under annex 4.
Currently 162 employees are engaged in the core process of the Bank. The
qualification and experience of these employees based on their assigned
functional unit is summarized in two tables as follows.
Sr. Departments /
No Work Units PHLS SPAC TS MC Total
1 V/P Client R/S & Br. Operation 1 1 --- --- 2
2 Client Relations Dept. 31 10 --- --- 41
3 Br. Operations Dept. 2 2 --- --- 4
4 V/P Credit Appraisal 1 1 --- --- 2
5 Appraisal Dept. 15 3 --- --- 18
Of the total 162 employees 98(60%) are categorized under professional and
high level supervisory, while 37(23%) are semi professionals and clerical
employees. The qualification of employees in their respective work units is
shown here under as follows.
As can be observed from the above Table, (86 %) of the employees are first
and second degree holders implying the Bank has adequate professional
staff working on the core process.
Training
for the training, and allocate the required resource either from own or
other sources. The training impact assessment should also need to be
evaluated based on the predetermined objectives of creating flexible work
force which foster the operational efficiency of the organization.
In this regard, although a lot of training has been provided to staff locally
and abroad, most of them were hardly based on need identification. The
Bank used to render trainings with out any proper plan. At times senior
staff members attend trainings meant for juniors. In other times it is
observed that some staff members attend training which has no relevance
with their current job description in the Bank. The impact assessment has
also never been carried out to ascertain whether the training has met its
objectives. Yet, as training is one of the vital concern of human resource
management it has to be given due attention.
Work Culture
Having the right quality and quantity of staff alone does not guarantee best
performance unless it is reinforced by change in attitude and work culture.
In this regard over the past two years extensive training and awareness
creation efforts have been made to put the Banks work force on the right
track so that every one should contribute to the realization of the Banks
mission and objective.
expected from the entire staff of the Bank to come up to the point where
every body contribute the best of his/her capacity.
Yet the PPMS exercise is at its rudimentary stage implying the need for
further training and follow up to institutionalize and meet the intended
objectives.
Internal and external recruitment process besides being lengthy and time
taking is reported to have weakness in identifying the right personnel to
promotion and recruitment of new employees.
Office Furniture
Despite the fact that the provision of office desk, chairs, etc, is observed to
be adequate, the standardization of these office furniture and office
facilities among the different levels of staff members and units is arbitrary.
Furthermore, currently the Bank purchased new office furniture in an
attempt to standardize and economize office space utilization, but it
doesnt seem effective as it was initiated.
Field Vehicles
At Head Office the Bank has a total of 24 field vehicles. Most of these
vehicles served for over 10 years and their repair and maintenance cost as
well as down time is increasing over time. Additional investment,
therefore is required to tackle this problem.
should pass all normal process steps. Then after the issue will be
execptionally approved by the President with report to BOM.
All the procedures and related formats are aso designed based on what is
stated in the policy. The credit policy by installing the functional loan
processing system takes its part to the previously stated extended cycle
time and customers complaint. List of policy procedures related core
service of the Bank are annexed to this report. Please refer annex 5.
The network infrastructure of the Bank has two major components, which
include the telecom communication infrastructure to link the various
branch offices with the Head Office (HO) and the network facilities in
place.
Currently the local area network system has been established and various
units of the Bank in the HO are linked with each other and with the central
data center. The infrastructure has the capacity to scale up and could easily
be upgraded.
Three branches (i.e., Bahirdar, Jimma, and Awassa) have been connected
using a dial-up communication system, and the communication
infrastructure was tested. The telecom infrastructure would however be
changed into a dedicated broadband line in the near future to properly
accommodate data communication among all units of the Bank.
The speed and level of office automation strictly adheres to the software
every unit is using to facilitate their day-to-day operations. That is, the
trend of the office automation follows the level and usage of the new
software applications, which have been implemented in the Bank (i.e.,
Globus banking software). That is, units in the HO have been given
personal computers and other accessories as early preparation activity for
the live run of the software application.
Telephone Line
For the Core BPR Team to conduct Gap Analysis benchmark studies should
be carried on organizations performing best-in-class so that the Team
could have an idea to set a stretched goal for re engineering and also see
where the Bank currently is in the global market. Despite the fact that
external benchmarking is not conducted so far, Gap Analysis is conducted
based on:
1. Domestic bench marking and experience of other banks
2. Customers requirments and desired goal of the Bank to
radically improve the service delivery.
Customers requirements
Table 4.2 Gap Analysis based on customer expectations and future target
Due to the fact that culture varies among banks, best practice in
one organization may be different for another. When using
benchmarking information, banks are first advised to consider their
corporate culture. Thus, adequate understanding of the Banks
corporate culture would be a prerequisite to identify and implement
any solution.
Assessment made in various parts of this report reveals that the past
performance of DBE evaluated in terms of customers satisfaction is
found relatively poor. Results of survey conducted by previous BPR Team
reveals that about 40% of DBEs clients rated the Bank as poor in
fulfilling their expectations. The rate is very high by any standard.
Management theory also recommends need for change for an
organization ill performing at this rate.
Considering the extent of the current ill performance, a bit and slow
improvements will not help as currently the pace of change itself is
changing in an unanticipated rate and customers will not tolerate what is
going on any more. Furthermore, with slow improvement the Bank will
remain way behind what is expected from it in terms of contribution to
the countrys economic development. To bridge the performance gap the
Team therefore recommends a dramatic change which reinstates and
brings the Bank to the newly desired high level.
Core Business Process Reengineering Documentation Report 61
VI. Challenges
During the course of studying the credit service delivery processes, the
Team has faced several problems of which some of them were inherent to
the status quo. The following are among the main challenges encountered:
o The EMI training programs which were not in the plan before had
disrupted the momentum of the Team on the reengineering effort.
o The Core BPR Team was organized by members who were added to
the Team at different times where it had taken the Team a long
time and effort to be in equal footing regarding the understanding
and orientation of the BPR assignment.
this, the Core Business Process Reengineering Team has exercised the
following solutions to overcome the impacts of challenges specified in the
same section.
o A good deal of effort was exerted to collect and archive data which
was done by the former BPR Team.
VI. Annexes