Dashen Bank as an Information Infrastructure

First Deliverable: INF5210

Prepared by

Sofia Lulseged Abrha Seid Hussein Yimam

October 2005

Table of Contents

Table of Contents ....................................................................................................14 Chapter One: Introduction........................................................................................2

1.1 History .......................................................................................................... 2

1.2 Services offered by the Bank ....................................................................... 4

1.3 Technology used in the bank ....................................................................... 5

Chapter Two: Dashen Bank as an Information Infrastructure: emphasis on the FlexCube Software ................................................................................................... 8

2.1 What is an Information Infrastructure ........................................................... 8

2.2 It is evolving ................................................................................................. 8

2.3 It is shared.................................................................................................. 10

2.4 It is open..................................................................................................... 10

2.5 It is heterogeneous..................................................................................... 11

2.6 It is standardized ........................................................................................ 11

2.7 It is enabling ............................................................................................... 12

2.8 It is an installed base.................................................................................122

2.8 The Infrastructure: Evolutionary or Revolutionary?.......................................... 12

Chapter Three: Conclusions...................................................................................14 References ............................................................................................................... 15

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Chapter One: Introduction

1.1 Introduction

This document discusses Information Infrastructure of one of the prominent private

banks in Ethiopia. It tries to discuss banking history in Ethiopia and the bank’s

history, services delivered and technology used briefly. Moreover, it discusses the

bank and its major software as an information infrastructure viewing the infrastructure

from the properties of information infrastructure. At the end, it gives conclusions

based on the discussion. References are also provided at the end.

As a source of information, we referred literature on information infrastructures, read

different publications and visited relevant websites, used the lecture classes and

group discussions, and drew from our own experience. We also conducted interview

with relevant personnel of the bank.

1.2 History

Modern banking in Ethiopia introduced in 1905. At the time, an agreement was

reached in between Emperor Minelik II and a representative of the British owned

National Bank of Egypt to open a bank which led to Bank of Abyssinia inaugurated in

Feb.16, 1906 by the Emperor.

In the 30’s the bank was bought by the Ethiopian government and the State Bank of

Ethiopia was established by a proclamation issued in august 1942. This bank was

later disintegrated to two different banks forming the National Bank of Ethiopia and

the Commercial Bank of Ethiopia.

Through times, more foreign and domestic banks were established. To name a few

Banco di Roma, Banco di Napoli, Banca Nazionale del lavoro and Agricultural Bank

were the prominent ones. The first private Ethiopian bank was Addis Ababa Bank

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Share Company, was established on Ethiopians initiative and started operation in

1964 with a capital of 2 million in association with National and Grindlay Bank,

London which had 40 percent of the total share.

However, the banking business could not move further because of the

institutionalization of private investments by the Socialist regime that came into power

leaving only three government banks; the National Bank of Ethiopia, the Commercial

Bank of Ethiopia and agricultural and Industrial Development Bank.

This was reversed when the Socialist regime was overthrown in 1991 and the

issuance proclamation for the licensing and supervision of insurance business, which

led to the beginning of a new era. Immediately after the enactment of the

proclamation private insurance companies began to flourish, leading to nine private

banks operating in Ethiopia as of 2000.

Dashen Bank was established as per the intent of the new policy and the Ethiopian

investment code. It came into existence on September 20, 1995 according to the

Commercial Code of Ethiopia, 1960, and the Licensing and Supervision of Banking

Business Proclamation No. 84/1994.

The first founding members were 11 businessmen and professional that agreed to

combine their financial resources and expertise to form this new private bank. Since

then the Bank has been growing now having 34 branches all over the country.

As stated on the website of the company the mission of the bank is “to provide

efficient and customer focused domestic and international banking services,

overcoming the continuous challenges for excellence through the application of

appropriate technology”.

The bank has now 59 share holders, quarter million customers, 34 area banks, 1051

number of employees and it stood 2nd on the market share among other banks in the

country.

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The annual report of the bank states that by the year 2004 it has total revenue of 192

million birr and net profit of 56.3 million birr.

1.2 Services offered by the Bank

Currently, the bank renders four major services in all of its branches namely, Credit

Facility, Saving Scheme, International Banking, and Fund Transfer. Moreover, the

bank is providing the customers MasterCard and Visa cards so that they can use it

internationally.

The bank provides a credit facility to its customers in different forms depending on

their need and the nature of their business they are to invest on. Some of the credit

lines offered include; overdraft facilities, term loans, letter of credit facilities,

merchandise loans and personal loans.

The other service the bank renders is deposit services including demand deposit,

savings deposit, youth savings deposit and time/fixed deposit.

The bank also renders international banking services providing services like; opening

letters of credit for importers, handling of incoming LCs for exporters, purchase of

outward bills purchasing and selling of foreign currency denominated notes, receiving

and transferring foreign currency payment by swift and handling incoming and

outgoing international letters of guarantee.

Furthermore, the bank is currently offering fund transfer. The bank provides both

domestic fund transfer all over the country and international fund transfer, rendered in

cooperation with Western Union.

Dashen Bank has established account maintenance relationship with thirteen

correspondent Banks. Overall banking relationship in SWIFT has expanded to 109

banks in 55 cities and 44 countries.

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1.3 Technology used in the bank

The bank uses various kinds of communication and computing technologies to carry

out its day to day activities. The communication technologies range from telephone

and fax to dial up internet connections and very fast high speed broadband network.

As to the interview with one of the bank employees, now the bank is under transition

of changing the old system with the new one for all branches. The change includes

replacement of old hardware with modern and competent one. All branches in the

capital started to work using the new system and other branches especially branches

in rural areas are under process (training users, preparing the necessary hardware

and equipment...).

Wide Area Network (WAN) is another attractive feature of the Bank's technology,

customers having a deposit account in one of the area banks can access their

accounts from any other area bank in the country.

Micro Banker is used as major bank software (UNIX sco version) starting from its

establishment 9 years before. The system is decentralized in a sense the servers are

distributed to the branches to support the service provision. Those branches are

connected by WAN through dial up connection. The software supports different

banking activities like customer registration, transaction processing, generating

reports to different departments and so on. Microbanker works only in a UNIX

environment obligating workstations to use only command lines and prohibiting them

to change between applications while using the software.

As the need for control and efficiency increases, the bank decides to change the

software to new banking software called Flexcube. This system enables the bank to

have competitive advantage and more control over the operations. ”This system will

not only allow the Bank improve its competitive edge but also make a difference by

ensuring further capacity as well as providing assured centralized control and

centralized database”(Bank President).

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The new software has a lot more facilities and modules that the previous software

does not have. Though currently, the bank uses only some of the functionalities that

the banking software provides, it can use more functionalities in the future as more

and more services are introduced in the bank.

Figure 1 depicts the architecture of the software, in the picture it shows that the

software have functionalities for any kind of financial institution like banks, asset

management and brokerage.

The bank also uses different applications for performing different tasks. For instance,

Microsoft Excel and Access for payroll and human resource database respectively.

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Internet

Teller

ATM

POS

Phone

Mobile Phone

PDA

ACH

Institutional Delivery

SWIFT

GIRO

CENTRAL BANK

REPORTING

ZENGIN

CLEARSTREAM/CEDEL

RATE FEEDS

Performance Mesearement

Business Analytics

Risk Management

Workflow Mgt Nostro Reconcilat. Fixed Assets Expense Processing

Signature Verifica. Funds Transfer Standing Instructi. Electronic Mesg. Syst.

COMMON FACILITIES

General Legder

Customer Information System

Management Information System

Risk Management Clearing

CORE MODULE

Investor services Cash & Liquidity Asset Managemnt Derivatives Securities

Bills & Letters of Credit Foreign Exchange Money Dealer

Curt. & Sav. Accts Deposits Loans Loan Recnci, proc Loan Syndction

FUNCTIONAL MODULES

Customer Ralationship

THE ARCHITECTURE OF FLEXCUBE

Figure 1. FlexCube Architecture

REVELEUS

Reveleus Avtive Portal

Reveleus Insight

Reveleus Mart Builder

Technology Solutions

FlexCube Internet Banking Suite

PORTAL

RETAIL

CORPORAT

INVESTOR

BROKER

3rd Party Interfaces

Reveleus Data Integrator

Other Systems

CRM Systems

Dealing S stems y

Chapter Two: Dashen Bank as an Information Infrastructure: emphasis on the FlexCube Software

2.1 What is an Information Infrastructure

According to Ole Hanseth, 2002 an information infrastructure is a shared, evolving,

open, standardized, and heterogeneous installed base.

Based on the above definition any system has to qualify the following criteria to be

regarded as an Information Infrastructure if:

• It is sharable: in a sense it has to be common resource to all users (of a

community)

• It is evolving: it should exhibit growth in terms of number of users,

technological improvement, diversification of services

• It is open: It should not have limit or boundary to number of users , or groups

• it is heterogeneous: The different users because it has no limit to group or

number of users, the different technological progress and the diversification of

service it supports makes it heterogeneous

• it is standardized: means there must be agreement between different users

about the arrangement of the infrastructure in order to be used by all users

2.2 It is evolving

Change in services

The bank is introducing new services to the user community. Services like ATM,

MasterCard and Visa cards are introduced to the user community this year.

Change in technology

The bank has changed its system from the previous computer system called

Microbanker which does not have a centralized database to a new one called

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FlexCube which can enable centralized database processing as well as distributed

one.

This means all the branch banks will have their own database of users, which as well

be propagated to the central server of the bank. This helps the recovery of data

easier than that of the previous system. If the servers at the branches crash the data

can be reclaimed from the central database since the data from the branches is

synchronized with the central server.

The changes have not only affected the software part, but also the hardware that the

previous system used to use. This includes the change in computers and network

facilities.

The workstations at the service end have changed to meet the requirements of the

FlexCube client software. To this end, high speed computers with high memory and

hard disk capacity have been introduced.

Regarding the network, it has been changing over the time from dial-up to broadband

technology. As a result the components have changed from wired network solution to

wireless one using the UBR technology which can increase the bank’s bandwidth.

This has enabled the branches in the regional towns where the infrastructure is not at

the level of the one in the capital city benefit from the new improved network.

All the above cases of development in the technological part show that the

infrastructure is evolving over time.

Increase in number of users

The bank has been increasing the number of branches it has every year. The

branches are opened not only in the capital but also in regional towns where the

infrastructure is not at the level of the one available in the capital. This implies that

the increment in number of users in accordance with new branches.

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2.3 It is shared

The infrastructure is shared by the community of the bank. Flexcube is used by clerks

to register users and for processing transactions, accountants for authorizing

registration of users, authorization of transactions and loan transaction processing,

bank managers to authorize loan and the daily transaction as well as reports, and IT

professionals for managing users of the system and providing technical support.

It is also used by top management for designing strategic plan. They also use it to

generate high level reports to base their decisions on. In the near future, the bank will

open ATM and web based banking services which will make the infrastructure to be

shared by the customers as well.

2.4 It is open

The infrastructure is open to more customers, new services, new type of employees

and new applications. This means the bank can have more and more customers in

the future and no part of the infrastructure prohibit the bank customer community to

increase.

At the same time the bank can establish new services along with the ones it is doing

now like brokerage services, asset management and international banking (which

FlexCube provides but not used by the bank). Along with the services, a room for

new kind of employees will open. These employees will perform the tasks that are

needed to render the new services to be offered.

The infrastructure is also open to new applications. For instance, the laws of the

country may obligate every bank in the country to use the social security database of

the government in the future if the country is to build one. The bank may also

exchange information with other banks which have different systems.

All the above characteristics of the infrastructure imply that the infrastructure is open.

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2.5 It is heterogeneous

There are different kinds of software in the bank for banking system, for payroll and

for money transfer.

Currently the bank is on transition stage transforming from Micobanker to Flexcube.

At this time, the bank is using both softwares in different branches. Microbanker

(which is the older) is used by most of the branches out of Addis Ababa. On the other

hand, FlexCube (the new software) is used in all branches in Addis, and some

branches out of Addis.

The bank uses spreadsheet software (Excel) to manage its payroll. There is also

software that the bank uses to give Western Union money transfer service. Along

with the software, different kinds of hardware are employed to support the services

rendered in the bank.

There is also a difference in the kinds of system users and customers. The kind of

system users range from IT supports staff to managers, clerks and accountants. The

users also range from individuals to private companies, government offices and

associations.

These above characteristics make the infrastructure heterogeneous.

2.6 It is standardized

The banking business has standards that upon which every transaction is made.

There are standards to send money from one bank to another, there are standards to

send money from one country to another, there are standards to send one branch of

the bank to another, there are standards on the screening mechanisms of users

(banking criminals and fraudulent people can not open an account or to get loans

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throughout the other banks), there are standards on the use of forms all over the

bank. Dashen bank works on the standards set by

2.7 It is enabling

The banking service has room for new technologies. New systems can be integrated

to the infrastructure. In the case of the bank for example a new IT solution for

accomplish domestic fund transfer can be introduced.

New services can be established without the need of a very big investment in

Information Technology and related matters since the current information

infrastructure of the bank has already paved the way for new technological areas.

One example of the enabling feature of the infrastructure regarding new applications

is the installment of ACI technology over FlexCube in order to introduce the use of

MasterCard and Visa cards which is being implemented very recently.

2.8 It is an installed base

The previous system that the bank uses, Microbanker is a product of the same

company that produced the new software the bank has introduced. Flexcube is built

on the model that Microbanker is built and hence it was easy for the bank to integrate

the operation of the two systems easily.

Hence, the previous system of the bank is an installed base for the new one. The

new system can be an installed base for more change in the bank like introducing

new services that were not offered and the like.

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2.9 The Infrastructure: Evolutionary or Revolutionary?

The new software solution (FlexCube) for instance evolved from the previous

software the bank uses (Microbanker) which ensures that the work is done in more or

less the same way as it was made in Microbanker apart from new and advanced

features FlexCube has. For instance, the bank is doing domestic fund transfer using

FlexCube which was previously done using phone lines. On the other hand, the new

system can help the bank to introduce services like phone banking and internet

banking. This can elaborate that the system is evolving and hence evolutionary.

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Chapter Three: Conclusions

Conclusions

According to Hanseth (2000), an installed base is regarded as an infrastructure if it is

open, shared, standardized, heterogeneous and evolving. As we can see from the

discussion in the previous chapters, Dashen Bank fulfills all the requirements of an

Information Infrastructure in that:

• It is open to new services, customers, employees and applications

• It is shared by different kinds of users and customers

• It is a heterogeneous mixture of customers and personnel as well as

hardware, software and network components

• It is evolving in that there are changes in the bank and the banking solution

also evolving to meet the needs of the bank

• It is standardized, that the bank can perform tasks that are performed in any

other bank using the system

From these points we can conclude that Dashen Bank and the software solution the

bank is using can be regarded as Information Infrastructures.

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References

1. Dashen Bank website. www.dashenbanksc.com

2. Hanseth, O. (2000). The Economics of Standards. In From Control to Drift, pages 56 – 70. Oxford University Press

3. Hanseth, O. From systems and tools to networks and infrastructures - from design to

cultivation. Towards a theory of ICT solutions and its design methodology implications.

http://heim.ifi.uio.no/~oleha/Publications/ib_ISR_3rd_resubm2.html

4. The History of Banking and other Financial Institutions in Ethiopia (2000?). National

Bank of Ethiopia. http://www.nbe.gov.et/History/history.htm.

5. iFlex Solutions website. The company that produced Microbanker and Flexcube.

http://www.iflexsolutions.com/iflex/home/default.aspx

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