Ethiopia issues licensing directives for capital market operators

AFRICAN STOCKS AND FINANCEJanuary 27, 2024 at 9:34 AM UTC

TLDR

Ethiopia has implemented new regulations for capital market service providers, effective from January 18th, 2024.
Companies seeking licenses must submit an application fee and necessary documents within 15 days.
The Ethiopian Capital Markets Authority will issue 15 different types of licenses for various service providers in the capital market, including securities brokers, securities dealers, securities custodians, and investment banks. These changes aim to improve the regulatory framework and governance of Ethiopia's capital markets.

Ethiopia has implemented a legal directive aimed at regulating the licensing of capital market service providers as part of the nation's efforts to streamline the securities and exchange sector. The new directives officially took effect on January 18th, 2024.

Companies seeking licenses in the capital market are required to submit an application fee, and the Ethiopian Capital Markets Authority will assess applications within 15 days. Successful applicants will have a date set for certificate inspection, and they must compile necessary documents such as copies of commercial registration, tax documentation, and articles of association.

The legal framework introduces 15 different types of licenses to be issued by the Ethiopian Capital Markets Authority, covering various service providers in the capital market. These licenses include those for securities brokers, securities dealers, securities custodians, and investment banks, among others. This move is part of Ethiopia's broader efforts to enhance the regulatory framework and governance of its capital markets.

Key Takeaways

Despite being one of Africa's largest economies, Ethiopia currently lacks a stock exchange platform, and equity and stock transactions are primarily conducted directly between investors and companies. There are around 350,000 equity investors in the 30 banks and 18 insurance companies in Ethiopia, underscoring the country's readiness for a stock exchange. The opening up of the financial markets is expected to pave the way for foreign involvement in the upcoming Ethiopia Securities Exchange (ESX), slated to launch next year, to enhance access to local currency financing for both the government and businesses within the nation. In collaboration with the International Finance Corporation (IFC), the Ethiopia Securities Exchange is being developed to play a pivotal role in expanding finance accessibility for the government and small to medium enterprises within Ethiopia, primarily through domestic markets.

Ethiopia

Capital Markets

Liberalization