1.

2 Background of the Banking Industry in Ethiopia

Retrieved on 03/January/2019 ([Link]

Banking-Industry-in-Ethiopia-As-a-result-of-the-agreement/)

As a result of the agreement reached between Emperor Minilik II and [Link] Gillivray,
representative of the British owned National Bank of Egypt; modern banking in Ethiopia began
in 1905 with the Bank of Abyssinia, a private company controlled by the Bank of Egypt In 1931.
It was liquidated and replaced by the Bank of Ethiopia which was the bank of issue until the
Italian invasion of 1936. During the Italian occupation, Bank of Italy banknotes formed the legal
tender. Under the subsequent British occupation, Ethiopia was briefly a part of the East Africa
Currency Board. In 1943; the State Bank of Ethiopia was established, with two departments
performing the separate functions of an issuing bank and a commercial bank. In 1963, these
functions were formally separated and the National Bank of Ethiopia (the central and issuing
bank) and the Commercial Bank of Ethiopia were formed. In the period to 1974, several other
financial institutions emerged including the state owned: The Agricultural and Industrial
Development Bank (established largely to finance state owned enterprises); The Savings and
Mortgage Corporation of Ethiopia; The Imperial Savings and Home Ownership Public
Association (which provided savings and loan services). Major private commercial institutions,
many of which were foreign owned, included the Addis Ababa Bank, the Banco di Napoli, the
Banco di Roma. However, the banking business could not move further because of the
nationalization of private investments by the Socialist regime (the Dergue 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. Following the
overthrown of the Dergue regime in 1991, the EPRDF declared a liberal economic system. In
line with this, Monetary and Banking proclamation of 1994 established the National Bank of
Ethiopia (NBE) as a judicial entity, separated from the government and outlined its main
function. Monetary and Banking proclamation No.83/1994 and the Licensing and Supervision of
Banking Business No.84/1994 laid down the legal basis for investment in the banking sector.
After the proclamation of 1994, the first private bank, Awash International Bank was
established in 1994 by 486 shareholders paving a way to the establishment of related private
banks such as Dashen Bank ( 1995), Abyssinia Bank (1996), Wgegan Bank (1997), United Bank
(1998), Nib International Bank (1999), Cooperative Bank of Oromia (2004), Lion International
Bank (2006), Oromia International bank (2008), Zemen Bank (2006), Buna International Bank
(2009), Birhan International Bank (2009), and others which are under establishment.

OVERVIEW
 Author: Dr. Richard Pankhurst
 Series: Early Ethiopian Banking History
 Title: 01. Early Ethiopian Banking History
 < Return to library

01. EARLY ETHIOPIAN BANKING

HISTORY
Ethiopian banking history, in its modern sense, began towards the end of the reign of
Emperor Menilek. This period witnessed the establishment, as most readers will know, of the
country’s first bank. Called the Bank of Abyssinia, or in Amharic “Ye-Ityopya Bank”, it was
an affiliate of the National Bank of Egypt, and was founded in 1905.
Ten years later, in 1915, the bank began issuing bank notes. The issue of this paper money
was another notable event in the country’s history.
These notes, which are now collectors’ items as they are extremely rare: until a few weeks
ago almost no one I know even knew what they looked like!
The present author has been searching for copies of these notes for many years: They are
urgently needed for the newly reorganised Institute of Ethiopian Studies Museum, at Siddist
Kilo, which has thus far not been able to acquire any.
Through the kindness of my friend Dennis Gill, I have now traced photographs of these
beautiful notes, which were issued to supplement the country’s silver currency. The latter
consisted of the old Austrian Maria Theresa dollar, or thaler, which had originally been
introduced to the country in the eighteenth century; and Menilek’s own currency was first
issued in 1894. This latter money consisted of the Menilek thaler, which bore effigies of the
monarch and the Lion of Judah, and fractional coins, first struck a few years later, made of
both silver and copper.
The Bank of Ethiopia notes, which were printed by Bradbury, Wilkinson and Company, of
England, bore inscriptions in both French and Amharic.
They issued five different denominations: five thalers, ten thalers, fifty thalers, a hundred
thalers and five hundred thalers.
Each note also carried a representation of the Lion of Judah, bearing a staff surmounted by a
cross, and a picture of the Bank’s building (in later years the Ethiopian Treasury building).
Four out of the five Bank of Abyssinia notes featured Ethiopian animals: antelope on the five
thaler bill; leopard on the ten, lion on the fifty, and elephant on the hundred. The five
hundred thaler note, on the other hand, embodied a representation of a traditional warrior in
military dress, and a characteristic Ethiopian shield at the foot of the design.

The notes in question, photographs of which we present this week and next, were traced for
us by our friend Dennis Gill, and are copyright of Krause Publications, Iola, Wi, USA.

OVERVIEW
 Author: Dr. Richard Pankhurst
 Series: Early Ethiopian Banking History
 Title: 02. The Bank of Abyssinia’s Bank Notes
 < Return to library

02. THE BANK OF ABYSSINIA’S BANK

NOTES
We saw the founding of Ethiopia’s first bank, the Bank of Abyssinia, in 1905, was followed,
in 1915, by that institution’s issue of bank notes.
This issue of paper money was something of a revolution in Ethiopian currency hisotry.
The Bank of Abyssinia bank-notes took time to be accepted by the population at large.
Charles Rey, a British businessman, claimed, in the 1920s, that paper money was not used
outside Addis Ababa. A decade or so later the scholarly French diplomat, Maurice de
Coppet, declared that paper money was not even accepted at the customs or post office.
Merchants and other nevertheless increasingly recoginzed that paper money had an important
advantage over coins: you could put a note for 500 thalers in your pocket, without feeling it,
but a sack of coins to that value weighed at least fourteen kilos!
Visitors to the Bank of Abyssinia in those days recall seeing long convoys of mules carrying
bag after bag of silver dollars to bank.
Ethiopia’s circulation of bank notes was put by de coppet at a value of 214,765 thalers in
1921, but had risen, by 1931, to 1,740,000 dollars, according to the Greek authro Adrien
Zervos.
The Bank of Abyssinia’s notes provided the basis for the later notes of Ethiopia’s second
pre-war bank. This was the Bank of Ethiopia, whoch came into existence on the Bank of
Abyssinia’s liquidation, in 1931. These latter notes bore identical designs to those of the old
Bank of Abyssinia: based for the most part on animal motifs.
These early Ethiopian notes, published here, and last week, for the first time, deserve a
unique place in the hisotry of Ethiopian art.
For the moment the new Numismatic and Monetary Department of the Insitute of Studies
Museum, at Siddist Kilo, does not have examples of these fine old notes but the hunt for
them is on; and there are many other interesting things to see!

(Retrieved from [Link]

library/)

2. An Overview of Ethiopian financial system,and the

main types of finanacial institutions and markets
operating in Ethiopia.

Does Financial Sector Development Drive Economic Growth in a Post-

Communist Economy? Evidence from Ethiopia.

 Source: Economic Insights - Trends & Challenges . 2016, Vol. 68 Issue 1, p15-
38. 23p.
 Author(s): Bekana, Dejene Mamo

 Abstract: This empirical investigation using VAR approach and Johnson co

integration found that financial development indictors are with negative
coefficient and insignificant in the long run. In the long run degree of
openness and government spending are the most important forces behind
economic growth in Ethiopia. In the short run model, however, there exists
strong evidence that domestic credit to the private sector, degree of
openness, broad money or monetization, inflation rate and government
spending are the prime sources of economic growth. The study concludes that
financial sector development has a growthstimulating effect on Ethiopian
economy. However, the financial sector development in Ethiopia did not reach
the minimum level needed to support long run economic growth. Hence, the
paper recommends that encouraging saving culture should be pursued while
facilitating the intermediation function of banking institutions to channel
saving to its productive uses through financing growth enhancing investment
projects. It also suggests that the regulatory and supervisory framework for
 the financial sector should be strengthened to ensure public confidence and
improve the contribution of the financial sector to economic growth.
 Copyright of Economic Insights - Trends & Challenges is the property of
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