Chapter-Five
Financial Market and Institutions in Ethiopia
To get more insight in Ethiopia’s financial market and financial institutions, this chapter
consists of parts of the 2024-2025 first quarter report of the National Bank of Ethiopia (NBE,
2025). Some information we already shared in earlier chapters, but by compiling it together
we hope you get an overview of major issues in Ethiopia’s formal financial sector.
5.1 Financial institutions in Ethiopia
5.1.1 The Banking sector
The number of banks in Ethiopia has reached 32, of which, 30 were private and 2 state
owned. With the total number of bank branches reaching 12,426, population to bank branch
ratio stood at 88,125. State owned banks accounted for 18.3 percent of the total bank
branches while private banks had a 81.7 percent share. Of the total bank branches, 30.9
percent were located in Addis Ababa. Total capital of the banking system (excluding NBE)
reached Birr 356.9 billion of which, state owned banks accounted for 42 percent and private
banks 58 percent.
5.2.2 Insurance companies
The number of insurance companies remained 18, of which 17 were private and 1 state
owned. Their branch network increased to 809 from 762 a year ago. About 56.7 percent of
the insurance branches were in Addis Ababa. Total capital of insurance companies reached
Birr 24 billion of which private insurance companies accounted for 79.9 percent.
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5.1.3 Microfinance institutions
At the end of the review quarter, the number of Micro Finance Institutions (MFIs) was 48.
Their savings, credit, capital and total asset witnessed a 32.5 percent, 24.8 percent, 11.1
percent and 27 percent respective annual growths signifying relative importance of micro-
finance institutions in providing access to finance and financial inclusion both in rural and
urban areas.
Table 5.3 Microfinance Institutions Performance
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Overview of the Ethiopian Capital Market
The Ethiopian Capital Market is a newly developing sector in Ethiopia’s financial landscape,
marking a significant step in the country’s economic reform efforts. Ethiopia, historically
operating a bank-dominated financial system, had no formal stock or securities exchange. But
now a day, the government has initiated steps to establish a capital market that support long-
term economic growth, attract investments, and diversify financial instruments available to
investors.
The establishment of a capital market in Ethiopia marks a significant step in the country’s
economic development, transitioning from a banking-dominated financial environment to a
diversified capital market structure. Predicated on broader economic reforms, the Ethiopian
government has introduced the Ethiopian Securities Exchange (ESX) as a centralized
platform for trading stocks, bonds, and other securities. This initiative aims not only to
stimulate economic growth by attracting both domestic and foreign investment but also to
enhance financial inclusion in a nation historically characterized by limited access to
financial services.
The creation of the Ethiopian Capital Markets Authority (ECMA) under Capital Market
Proclamation No. 1248/202 further solidifies the legal framework necessary for regulating
this new market and ensuring transparency and investor protection.
Regulatory Bodies Governing the Capital Market
Regulation is crucial for the proper functioning of financial markets, providing the necessary
framework to prevent chaos and ensure fairness and reliability. Regulations aim to prevent
unethical practices like fraud and insider trading while promoting transparency and
accountability within the marketplace. In Ethiopia, the regulatory framework governing the
capital market will likely involve several key bodies, reflecting the nation’s efforts to
establish a structured and efficient financial system. The primary regulatory bodies
anticipated to oversee the capital market in Ethiopia include:
Ethiopian Capital Markets Authority (ECMA): Is the principal regulatory body
established under the Capital Market Proclamation. ECMA is responsible for
regulating market participants, licensing stockbrokers, ensuring compliance with
securities laws, safeguarding investor protection, and promoting transparency within
the capital markets.
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Ethiopian Securities Exchange (ESX): A central market place, the ESX serves as a
self-regulatory organization (SRO) responsible for establishing different regulations
and monitoring its members and market participants to ensure fair and efficient
trading. To this end, the ESX has developed rulebooks that outline listing rules,
membership rules, trading regulations, and dispute resolution procedures.
National Bank of Ethiopia (NBE): As the central bank of the country, the NBE has a
role in regulating financial institutions, ensuring monetary stability, and implementing
policies that may affect the broader financial system, including capital markets.
Ministry of Finance: This governmental body will be involved in developing
financial policies, shaping economic strategies, and coordinating with regulatory
agencies to promote investment and economic growth, which can significantly impact
the capital market environment.
Ethiopian Securities Exchange (ESX)
The Ethiopian Securities Exchange (ESX) is the country’s first organized securities
exchange, marking a pivotal step in the development and growth of Ethiopia’s capital market.
The ESX’s primary objective is to facilitate access to capital and support effective capital
allocation, thereby contributing to Ethiopia’s economic growth. By establishing a regulated
and efficient capital market ecosystem, the ESX enables the mobilization of financial
resources for both the government and the private sector, while providing investors a reliable
platform for informed investment
The ESX comprises three important markets:
ESX Equity Market: This market features a main segment for large companies and a
growth market segment for small and medium enterprises (SMEs). The growth market
offers flexible listing requirements suited to the developmental stage of these
businesses. The ESX aims to build a formal, transparent venue for the listing of equity
securities and other structured products in the future.
ESX Fixed Income Market: This market facilitates the trading of debt securities,
aiming to enhance the efficiency, transparency, and liquidity of the fixed-income
market. It includes a trading platform for short-term instruments, such as Government
Treasury Bills and Commercial Papers, and long-term instruments, such as Treasury
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and Corporate Bonds. The market also encompasses the interbank market with
Repurchase Agreements (Repos).
ESX Alternative Market: In addition, to the above two markets, the ESX also
features an alternative market, which includes an over-the-counter (OTC) market for
unlisted securities and a crowd funding platform for emerging businesses