Ethiopia capital markets, which are distinguished by a lack of formal capital markets and nascent financial and money markets, have several capital market development initiatives with a support from FSD Africa.
Ethiopia approved a new Capital Markets Establishment Proclamation in 2021 to provide the legal foundation for the development of capital markets in the country and to support economic development through increased capital mobilization, financial innovation, and risk sharing in investment.
The proclamation clears the way for the establishment of the Ethiopian Capital Market Authority (CMA), the capital markets regulator, as well as self-regulatory Organizations like the Ethiopian Securities Exchange (ESX) and the Securities Depository and Clearing Company. FSD Africa will assist the National Bank of Ethiopia (NBE), the country’s central bank, with a variety of foundational activities aimed at establishing functional capital markets, including assistance with:
1. Development of policies and regulations:
FSD Africa is supporting the development of policies and a regulatory framework for the licensing and supervision of capital market service providers in Ethiopia. In addition, FSD Africa is supporting the development of a policies and a regulatory framework for collective investment schemes in the country.
2. Ethiopia Securities Exchange (ESX):
The purpose of this program is to assist the National Bank of Ethiopia and the Ministry of Finance in establishing the ESX. The program will hire experts to help with various aspects of the ESX’s establishment, such as program management and administration, legal support, exchange operationalization, capital mobilization, and business development.
Within the context of an immature capital market ecosystem, the program seeks to support the implementation of an exchange model that is acceptable to market participants and has strong feasibility. Ethiopia has certain advantages in establishing a capital market and a securities exchange from the ground up, with multiple best practices from around the world to draw on to future-proof the design.
3. Ethiopia Central Securities Depository and Settlement System (CSD):
The goal of this project is to assist Ethiopia in acquiring and implementing a Central Securities Depository and Settlement System, which will ensure the safe custody of securities, enable accurate record-keeping and reporting, reduce transaction costs, minimize risk, improve efficiency in the transfer of securities, facilitate the implementation of corporate actions, and improve transaction integrity. This is a significant step toward realizing Ethiopia’s underutilized capital market potential.
Source: https://www.fsdafrica.org/wp-content/uploads/2022/08/22-08-17-CMIR.v2_AK_compressed.pdf
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