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Ethiopia’s first stock exchange on horizon as it begins licensing investment banks

OUTSIDE investors have long eyed opportunities in Ethiopia — Africa's second-most populous country — especially within its financial sector. In Africa, lenders in Kenya, South Africa and Egypt are front runners.

ETHIOPIA has entered the final stage of its first stock exchange launch, as the country’s Capital Market Authority begins to on-board foreign investment banks from the second week of February.

The regulator announced that it will start issuing investment bank licenses from February 12th 2024- the first time in the country’s history and after six ‘rigorous’ months of developing guidelines to govern the financial sector players.

Ethiopia Capital Market Authority (ECMA) Director-General Brook Taye told reporters during a press briefing at the authority’s headquarters in Addis Ababa on February 7 that several private companies, including banks, had expressed interest in applying for licenses.

Taye also confirmed being in discussions with five other government development institutions and two foreign banks.


“The licensing process will be open to both domestic and international investors, provided the applicant meets Commercial Code requirements and ECMA guidelines,” Taye said.

Minimum capital requirements are US$1.76 million (100 million birr) for full banks and US$441, 772 (25 million birr) for non-bank institutions.

On January 18, ECMA issued its first comprehensive legal framework to regulate capital market service providers in the country.

Taye described the framework, titled ‘Capital Market Service Providers Licensing and Supervision Directive No. 980/2024’, “a significant milestone’ in the development of Ethiopia’s first capital market.

The directive outlines detailed regulations on capital market activities requiring a license, the prerequisites for obtaining a license, and the responsibilities and obligations of licensed service providers.

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The authority said that 15 different types of licenses would be made available to capital market service providers who meet the prerequisites outlined in the directive.

Already, 18 capital market service providers including investment banks, investment advisors including individual and corporate Sharia-compliant advisors, portfolio managers, brokerage firms, credit rating agencies and custodians.

“The Ethiopian Capital Markets is finalising its activities for the commencement of the capital market in Ethiopia and looks forward to working with all stakeholders to achieve this goal,” the authority said in a statement.

In 2018, the Ethiopian government allowed foreign investment, which opened up opportunities for companies like regional telecom heavyweight Safaricom to enter the untapped domestic market of 120 million people.

The country has been working on liberalizing its financial sector over the years to attract more capital and mobilize domestic resources for investment. While there are potential opportunities in the banking sector, foreign companies have faced challenges due to a regulatory environment that can be unpredictable, security concerns, and overall economic instability.

In November 2023, Ethio-lease, the only foreign-owned financial services company operating in Ethiopia, announced that it would be leaving the market due to foreign exchange constraints.


The company, a unit of the African Asset Finance Company (AAFC) based in New York, was the first to secure a financial services license in 2019 when financial liberalization began in Ethiopia.

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Ethio-lease was responsible for procuring equipment outside of Ethiopia in foreign currency and then leasing it to local companies in Ethiopian birr. However, two years into operation, the National Bank of Ethiopia changed its regulatory framework, requiring all lease agreements to be serviced in fixed payments denominated by birr, which had halved in value to 56 birr per dollar by November 2023.

“As a result of the changes to the regulatory framework, the viability of Ethio Lease as a foreign-owned leasing company became structurally impaired, and severely impeded its ability to raise funding,” the company said in a statement.

The capital markets regulator anticipates that the new legal frameworks allowing foreign investment banks to operate in Ethiopia will increase competition in the local banking sector.

This sector is characterized by high demand for financial capital and high collateral requirements.

According to Addis Ababa-based investment firm Cepheus Growth Capital, the Ethiopian banking sector is currently valued at around US$43 billion.

Several lenders, including KCB Bank from Kenya, Standard Bank from South Africa, and Egypt’s Commercial International Bank (CIB), have previously shown interest in entering the Ethiopian market.

Graphics: Hope Mukami