Ethiopia opens up to foreign investment banks before exchange launch
TLDR
- Ethiopia is issuing licenses to foreign investment banks to open up its financial sector and attract private investment.
- Prime Minister Abiy Ahmed is leading efforts to liberalize Ethiopia's economy and encourage economic growth.
- The approval by the capital markets regulator marks a key development in Ethiopia's mission to open up its financial markets to foreign investment.
Ethiopia is taking steps to open up its financial sector by issuing licenses to foreign investment banks, marking a significant move as the country prepares to launch its securities exchange later this year. Prime Minister Abiy Ahmed has been leading efforts to liberalize Ethiopia's economy since 2018, aiming to attract greater private investment into the country with a population of 120 million.
While the liberalization initiative has attracted foreign investors, including Kenyan telecoms operator Safaricom, it has faced challenges due to what some analysts describe as an unpredictable regulatory environment, security concerns, and macroeconomic instability.
The justice ministry has approved the capital markets regulator to proceed with issuing the licenses, signaling a key development in Ethiopia's efforts to open up its financial markets to foreign investment and promote economic growth.
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 approximately 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.
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