Ethiopian Securities Exchange Announces its Digital Academy Launch

December 19, 2024

The Ethiopian Securities Exchange (ESX) marks a significant milestone today with the official launching of its Digital Academy, a groundbreaking initiative aimed at enhancing financial literacy and inclusivity in the Ethiopian financial landscape. The launch of the ESX Digital Academy represents a strategic move by the exchange to bridge the knowledge gap and empower individuals to make informed decisions in the realm of finance and investing. Recognizing the critical role of education in promoting economic growth and stability, the ESX is committed to equipping the public with the necessary tools and skills to navigate the world of investing effectively.

The Academy offers courses categorized into three levels: Beginner, Intermediate, and Advanced, enabling learners to advance at their own pace and expertise. The Beginner Level has now officially launched, featuring a 10-module course covering various essential topics. These include an introduction to capital markets, the functions of the ESX, its technological infrastructure, regulatory frameworks, Sharia-compliant products, capital raising, and investment strategies.

“The launch of ESX Academy marks the beginning of our statement and commitment to build a knowledgeable and financially skilled capital market participants in Ethiopia”, said Tilahun Esmael Kassahun (Ph.D.), CEO of the ESX, adding that by providing accessible and modular training, we are not only empowering individuals but also strengthening the foundation for a thriving capital market ecosystem."

Participants will have the opportunity to learn from certified experts in the area, access interactive tools, providing a dynamic and engaging learning experience. This introductory course is available free of charge and provides participants with a certificate of completion upon finishing all 10 modules. The modules serve as a valuable resource for investors, students, and professionals seeking to enhance their understanding of Ethiopia's emerging capital market.

The launch of the ESX Digital Academy underscores the Ethiopian Securities Exchange's unwavering commitment to advancing financial education and promoting inclusive growth. As the exchange looks towards a future of increased digitalization and innovation, the academy stands as a testament to its dedication to fostering a more knowledgeable, empowered, and resilient investment community.

Ethiopian Securities Exchange Announces the Official Launch Date

December 13, 2024

The Ethiopian Securities Exchange made a significant announcement today during a press conference held on its newly unveiled trading floor. The eagerly awaited reveal pertained to the official launch date of Ethiopia's inaugural securities exchange. The establishment of the Ethiopian Securities Exchange (ESX) marks a significant milestone in Ethiopia's economic development. By providing a platform for trading securities, the ESX will strengthen the country's financial infrastructure, facilitate capital formation, and attract both domestic and international investment. This initiative has the potential to unlock new avenues for wealth creation and drive economic growth.

“We are thrilled to announce the official launch of Ethiopia’s first securities exchange, scheduled for the opening weeks of January 2025,” said Tilahun Esmael Kassahun (Ph.D.), CEO of the ESX. “This landmark event signifies a major step forward in Ethiopia’s financial development, offering new avenues for businesses by modernizing Ethiopia’s financial system and creating a vibrant capital market.”

The launch of the securities exchange is expected to create a more accessible investment environment, enabling businesses to raise capital effectively and allowing investors to diversify their portfolios with a broader range of investment options. This development aligns with Ethiopia's broader vision of fostering a vibrant and resilient financial sector that drives sustainable economic growth.

Op-Ed: Ethio telecom's IPO Heralds a New Era in Ethiopia's Capital Market

By Tilahun Esmael Kassahun

October 16, 2024

Ethiopia is on the brink of a financial revolution, with Ethio telecom, one of the country's most profitable enterprises, set to launch its Initial Public Offering (IPO). It is a landmark moment in Ethiopia's capital market history, offering an unprecedented opportunity for Ethiopians to participate in the country's economic growth. The new direction will embody a momentous step towards modernizing Ethiopia's financial ecosystem, writes Tilahun Esmael Kassahun, CEO of the Ethiopian Securities Exchange (ESX).

Ethiopia is at the threshold of a financial reel as Ethio telecom, one of the country's largest and most profitable companies, prepares to launch its Initial Public Offering (IPO). This landmark event is more than a mere corporate milestone; it marks a transformative moment in Ethiopia's capital market history and presents an unprecedented opportunity for Ethiopians from all walks of life to participate in the nation's economic growth. Ethio Telecom's IPO is poised to catalyze broader economic development, symbolizing a momentous step toward modernizing the country's financial ecosystem.

The Ethio telecom IPO, alongside the establishment of the Ethiopian Securities Exchange (ESX), forms an integral part of the government's strategy to deepen financial markets, promote private investment, and create wealth for its citizens. Ethiopia's capital markets have been underdeveloped for years, with the economy dominated mainly by small and medium-sized enterprises (SMEs) and a substantial informal sector. Ordinary Ethiopians have had limited avenues to participate in capital markets, and investing in publicly traded securities is a novel concept for many. However, this is a powerful step towards fostering a culture of investment and financial literacy.

The introduction of the Ethiopian Securities Exchange is set to play an indispensable role in this transformation. As the country's first securities exchange, we are committed to educate the public on the value of investing in regulated securities. By cultivating a culture of investment and financial literacy, the ESX empowers Ethiopians to participate actively in capital markets. Ethio telecom's IPO is expected to serve as a model for future listings, where broader participation, transparency, governance, and accountability become the foundation of Ethiopia's capital market.

As this capital market evolves, more companies will likely seek funding through equity and debt instruments, paving the way for a thriving ecosystem. This development is anticipated to attract considerable foreign portfolio investment, providing much-needed capital to Ethiopian entrepreneurs and stimulating economic growth. Modernising the capital market infrastructure will benefit large corporations and create opportunities for small and medium-sized enterprises to access funding.

Looking ahead, optimism abounds.

Ethio telecom's IPO is only the beginning of what could become a flourishing capital market supporting the economic aspirations of the Ethiopian people. The aim is to create a market that is inclusive, transparent, and accessible to all, whether institutional investors or first-time retail investors. By providing a platform that empowers everyone to be part of Ethiopia's financial future, the Exchange is laying the foundation for a more equitable and prosperous society.

With the growth of the capital market, increased regulatory oversight by the Ethiopian Capital Market Authority (ECMA) and the ESX, acting as a self-regulatory organization, is expected. The introduction of investment banks, brokerages, asset managers, and fund managers will enhance the quality of offerings by issuers. These entities will facilitate the aggregation of capital into various collective investment funds, promoting broader participation by retail investors and contributing to the overall stability and efficiency of the market

Modernizing the market will also attract substantial foreign portfolio investment, providing funding to Ethiopian entrepreneurs. However, as the capital market ecosystem develops, certain areas require clarification to ensure all stakeholders understand the new structures and processes.

One such area is the distinction between the primary and secondary markets. In the primary market, securities are issued for the first time and sold directly to investors by the issuing company, like Ethio telecom, to raise capital. An essential process in the primary market is the IPO, which typically involves a set of successive steps including engaging investment banks, submitting regulatory filings, pricing shares, and completing the public offering. On the offering date, shares are sold to the public, and the company receives the proceeds. After the IPO, the company's shares are listed and traded in the secondary market — here, the Ethiopian Securities Exchange (ESX) — where investors buy and sell securities among themselves.

To date, Ethiopia's primary market has been unregulated and inefficient. Issuers often spend months, even years, waiting to sell shares to the public during the offering stage. In one instance, a company seeking to raise capital had to wait over two years to complete its offering due to regulatory hurdles. This scenario contrasts sharply with most modern capital markets, including those in other African countries.

Modern markets have established safe, transparent, and efficient systems with contributions from regulators and intermediaries like investment banks and institutional investors. Ethiopia's capital market ecosystem is set to develop similarly. The Ethiopian Capital Market Authority (ECMA) and the Exchange, along with the licensing of investment banks, brokerages, and domestic and foreign institutional investors, will reduce the time to market for many issuers.

The Exchange plays a critical role as a central platform for liquidity, transparency, and price discovery. Contrary to recent media coverage, the primary offering of Ethio telecom's shares was not expected to occur on the Exchange's trading platform. Rather, once investors fully subscribe to Ethio telecom's publicly offered shares, they will be listed on the Exchange for secondary market trading. This approach aligns with global best practices and ensures investors have a regulated and efficient platform for buying and selling securities after the IPO.

The modernisation of Ethiopia's capital market infrastructure is set to revolutionise both the primary and secondary market ecosystem. Until now, shareholders often lacked a regulated and efficient platform for buying or selling their securities after purchasing them in the primary market. Investors relied on informal channels, including social media and personal networks, making price discovery challenging and compromising transparency. Such efficient price discovery and liquidity will significantly improve the efficiency of the primary market.

With the advent of the Exchange, all publicly traded securities, including shares, treasury bills, bonds, and sukuks, will be dematerialised. Hence, investors participating in offerings like Ethio telecom's IPO will have securities trading accounts within the central securities depository established under the National Bank of Ethiopia (NBE). They will be able to subscribe to upcoming IPOs or engage in secondary market trading through preferred market intermediaries, such as securities brokers or investment banks.

Securities trading will become fully electronic, leveraging modern technology to enhance accessibility and efficiency. Ethiopians across the country, as well as foreign investors, will be able to approach exchange trading members to buy or sell securities. They can also use web-based and mobile trading applications provided by the Exchange and its members to participate directly in the market. This safe, trustworthy, and efficient market is expected to enhance investor confidence and liquidity, attracting many issuers like Ethio telecom and investors worldwide to the Ethiopian capital market.

Undoubtedly, Ethio telecom's IPO marks the dawn of a new era. The IPO will be one of the Exchange's flagship listings, putting ESX and Ethio telecom on the map of global indices. It manifests Ethiopia's commitment to becoming a robust and modern financial hub, capable of attracting global investment and stimulating domestic economic growth.

By Tilahun Esmael Kassahun, CEO of the Ethiopian Securities Exchange (ESX).

Op-Ed : The launch of Ethiopia’s first interbank market trading platform on ESX marks a historic milestone

By Michael Habte

November 11, 2024

The launch of Ethiopia’s first interbank market trading platform on the Ethiopian Securities Exchange (ESX) marks a historic achievement as it becomes one of the few African exchanges to introduce interbank trading, setting a new standard for short term money markets on the continent. With dual regulatory oversight from the National Bank of Ethiopia (NBE) and the Ethiopian Capital Market Authority (ECMA), the ESX is proud to host a modern and flexible trading platform that promotes efficient price discovery, better transparency, and enhances liquidity in the Ethiopian banking sector. This enables a more stable, resilient, and adaptable financial sector, one that’s better equipped to support the nation’s long-term growth ambitions.

The interbank market forms the key part of a suite of short-term financing instruments in the money market asset class. Money market instruments are generally defined as highly liquid, low risk ‘cash equivalent’ financial instruments that mature in less than one year. In addition to the interbank segment, the money market includes time deposits, Treasury Bills, repurchase agreements (collateralized interbank loan), and commercial papers which are unsecured short-term debt instruments issued by companies to finance short-term working capital.

For years, Ethiopia’s financial sector has operated with limited mechanisms for interbank transactions. One of the primary reasons for this has been the lack of the necessary technological infrastructure which has held back the formation of an effective interbank money market. This lack of infrastructure coupled with the requisite regulatory framework has restrained the capacity of banks to respond effectively to liquidity needs, making lending and investment cumbersome and riskier than necessary.

The new interbank market trading platform changes this landscape, introducing a key financial market infrastructure and global standard regulatory framework that facilitates real-time transactions and more efficient allocation of capital in the wholesale financial sector. Banks can now trade cash amongst each other more seamlessly, ensuring liquidity is dynamically balanced across the system. Importantly, the NBE paved the path for the successful launch of the trading platform by finalizing and publishing the Interbank Money Market Directive (MFAD/IBM/03/2024) which formally regulates the interbank market prior to the commencement of trading in October 2024.

The interbank market is an essential prerequisite for the robust development of modern debt capital markets and serves as the foundation for constructing a proper market-based yield curve and building liquidity in the government debt market. An efficient interbank market helps to support government bond markets by optimizing financial institutions’ liquidity positions and helping price short term debt instruments such as Treasury Bills more accurately in the secondary market. The short-term interbank T-Bill market are inherently linked to each other.

The presence of a liquid money market also reduces the risk and expense in terms of storing government securities to maturity as banks can use these securities as collateral in the interbank market – in the form of repurchases agreements (repos)- unlocking valuable implied optionality in Treasury instruments that until now has not been realized in Ethiopia due to the absence of a functional capital market and necessary trading and settlement systems. The ESX trading platform will allow trading in both the interbank and debt – both government and private securities – markets and be integrated with the Central Securities Depository (CSD) hosted at the NBE that handles trade settlement, providing an integrated and seamless trade execution process on par with modern exchanges around the globe.

The significance extends beyond operational efficiency for banks alone, however. A regulated trading platform will improve price discovery in the cash market, enhance market discipline, and reduce the cost of interbank borrowing. These advancements mean that Ethiopian businesses — from SMEs to large corporates — can access credit more predictably and affordably and provide added flexibility to banks to meet customer credit demands more proactively. The ripple effects can spark increased investment, job creation, and innovation in the real economy, accelerating Ethiopia’s march toward becoming a middle-income economy.

It is also important to underscore how this milestone aligns with the nations broader efforts to integrate into international trade and finance following the recently announced reforms in the financial sector. By enhancing liquidity management and promoting a structured, regulated interbank market, a platform that adheres to modern money market norms provides a means to increase investor confidence in the banking system, both local and international.

As we take note of this achievement, we must remain cognizant of the new nature of this business and provide adequate capacity building and resources to market participants in the interbank market. This platform’s success hinges on trust, transparency, and resilience, which must be nurtured through continuous learning and adaptation. With thoughtful stewardship, the ESX Interbank Trading Platform can and should serve as a model for innovation and growth in Ethiopia and across the continent.

Michael Habte is Chief Operating Officer of the ESX

Ethiopian Securities Exchange (ESX) Closes Its Capital Raise Significantly Oversubscribed by Domestic and Foreign Investors

April 4, 2024

The Ethiopian Securities Exchange (ESX) announced today the successful closing of its capital-raising exercise, surpassing by more than two-fold the amount of funds it sought to start its operations. Initiated in November 2023, with intensive eƯorts by its management and advisors and roadshows in Addis Ababa, Nairobi, and London, the Exchange witnessed dramatic interest by domestic and foreign commercial investors, obtaining a whopping ETB 1.51 billion (US$ 26.6 million), representing subscription of 240% of its initial target capital raise of ETB 631 million (US$ 11.07 million), with participation by a total of 48 domestic and foreign institutional investors across financial and non-financial sectors.

ESX was established in October 2023 through a pioneering public-private partnership with the Government of Ethiopia through the Ethiopian Investment Holdings (EIH), its strategic investment arm, as the founding shareholder, with a mandated total public shareholding of up to 25%, with the remaining 75% to be private shareholding.

At present, the list of investors includes foreign strategic investors, including FSD Africa, the Trade and Development Bank Group (TDB), Nigerian Exchange Group (NGX), along with 16 domestic private commercial banks, 12 private insurance companies, as well as 17 other private domestic investors. Public sector interests, jointly representing 25% of shareholding, include EIH and its subsidiaries such as Ethiotelecom and the Commercial Bank of Ethiopia, among others.

The overwhelming interest as investors rallied around the Exchange, up to the close of the capital raise period, signals the enthusiasm and confidence that the ESX heralds a major milestone in the country’s journey towards financial sector development and economic transformation. By facilitating the mobilization of capital, enhancing transparency, and promoting corporate governance standards, ESX aims to unlock new avenues for investment, spur entrepreneurship, and catalyze sustainable development across various sectors of the economy.

“We are thrilled to have exceeded all our expectations in terms of the capital raise and are excited by the overwhelming confidence shown by investors in the long-term prospects of both ESX and Ethiopia’s capital markets more broadly,” said Tilahun Esmael Kassahun (Ph.D), CEO of the ESX, adding that “strategic foreign investments by TDB, FSD Africa, and NGX Group are particularly important in allowing the transfer of technical knowhow and best practices as well as other areas of long-term strategic value that we will explore.”

ESX also announced today other progress, including the release of its draft Exchange Rulebook for public consultation, the completion of the technical evaluation for the selection of its technology provider, a major milestone to operationalizing the Exchange’s trading, and issuer and investor education plans in the coming months leading up the launch of this exciting development for the Ethiopian economy.

Lion Insurance to Invest in the Ethiopian Securities Exchange

March 28, 2024

– Lion Insurance Company, has announced its commitment to invest in the Ethiopian Securities Exchange (ESX) Lion Insurance's equity investment will amount to 10 million birr. This investment is part of the initial founding member's investments provided to ESX, as outlined in the Information Memorandum shared by ESX, alongside Ethiopian Investment Holdings (EIH).

Lion Insurance Company (S.C) Chief Executive Officer Mr. Abreham Mersha said that the decision made to invest in the Ethiopian Securities Exchange is aimed at diversifying the company’s investment portfolio. “As a financial service provider, we are cognizant of the viability and economic significance of establishing the Ethiopian Securities Exchange and we are happy to be part of this process as founding member of this historic and modern establishment. We hope that there will be great opportunities coming with the formation of the Capital Market and the ESX. Accordingly, we are preparing ourselves to address the insurance needs of potential customers in the ecosystem,” said Mr. Abreham Mersha.

"We are delighted by Lion Insurance Company’s decision to join ESX as one of the many founders of this historic exchange," said Dr. Tilahun E. Kassahun, CEO of Ethiopian Securities Exchange. “Lion Insurance’s investment comes at a critical time as we are finalizing our capital raise process.” ESX will be at the center of Ethiopia's upcoming capital markets ecosystem, which will soon include a multitude of markets, including equities, fixed income, money markets, and various alternative markets, including equity and debt crowd investment platforms.

Established in June 2007, Lion Insurance Company S.C is a composite insurer providing both General Insurance and Life Assurance covers to customers from different sectors of the economy and the public at large. Over the past 16 years, Lion Insurance Company S.C has managed to expand its market penetration in a sustainable manner. Currently, the company is with good financial standing and remarkable growth trajectory demonstrating its stability & competitiveness in the market.

Nyala Insurance to Purchase 20 million shares

March 27, 2024

Nyala Insurance S.C (NISCO), a prominent insurance company in Ethiopia, has signed a memorandum of understanding (MoU) with the Ethiopian Securities Exchange (ESX) to purchase 20 million Birr worth of shares.

NISCO's equity investment in the Ethiopian Securities Exchange shows its dedication to fostering the growth of capital markets in Ethiopia. This investment is part of ESX's founding members' investments, as detailed in the Information Memorandum along with Ethiopian Investment Holdings (EIH).

At the MoU signing ceremony held at NISCO's Head Office, Ato Yared, CEO of Nyala Insurance, announced the company's investment in the Ethiopian Securities Exchange (ESX), emphasizing its importance in advancing Ethiopia's financial sector. Ato Yared emphasized the company's commitment to supporting initiatives that promote growth and innovation in the insurance industry.

Dr. Tilahun E. Kassahun, CEO of the Ethiopian Securities Exchange, welcomed NISCO as a founding member, stating that their investment is timely as ESX finalizes its capital raise process. He believes NISCO's participation will greatly benefit ESX and the development of Ethiopia's capital markets. Dr. Tilahun highlighted that ESX will serve as the hub of Ethiopia's capital markets, offering equities, fixed income, money markets, and alternative markets. The establishment of ESX is set to provide investors with a dependable platform for capital allocation, driving economic growth in Ethiopia.

Established in 1995 with 7 million paid-up and 25 million subscribed, Nyala Insurance S.C. has built a strong reputation for offering innovative insurance products tailored to the needs of the underserved segments of society based on their needs and demands. NISCO has seen significant growth, with paid-up capital of Br 1.084 billion and total assets of Bir 3.8 billion. The company operates through 49 service outlets in Ethiopia and is recognized for its strong financial performance.

Ethiopian Bank Zemen Buys Stake In Nascent Securities Exchange

January 11, 2024

Zemen Bank S.C. will take a 5% shareholding in the Ethiopia Securities Exchange, becoming the first closely held company to own a stake in the bourse expected to start by the third quarter.

The government has offered local and foreign investors 75% of the bourse with issued share capital of about 900 million birr ($16 million). The Ethiopian Investment Holdings, the nation’s sovereign wealth fund, and four other state-owned companies including Ethio Telecom and Ethiopian Shipping Lines, own 25%.

One other private company has put in a bid, according to ESX Chief Executive Officer Tilahun Kassahun. The offer closes on March 29.

Ethiopia is the only country among the five-biggest economies in sub-Saharan Africa that doesn’t have a stock market. Prime Minister Abiy Ahmed has pursued reforms that include opening up formerly closed-off sectors. The government is eyeing listings from banks, insurance companies, pension funds and multinational firms.

Ethiopia’s Maiden Stock Exchange Gets Founding CEO

November 4, 2023

The recently formed board of directors of the Ethiopian Securities Exchange (ESX) has endorsed a key figure vital to kick off the Exchange as the founding chief executive officer (CEO), The Reporter learned.

The appointed CEO, Tilahun Esmael Kassahun (PhD), was one of the chief architects behind the formation of ESX since it has been fermenting at a project office level for the past one and a half year. Working with a team of experts responsible for the crafting of the ESX, he has been leading the project office as a Senior Project Manager.

ESX will be the first securities exchange in Ethiopia, set to transform Ethiopia’s primary bond market to secondary, creating stock market ecosystem for trading of various types of shares and securities.

Its formation follows the implementation of the Capital Market Proclamation, which was ratified in July 2021, and the formation of the Ethiopian Capital Market Authority (ECMA), the apex regulator overseeing the activities of ESX itself and other market players for the protection of investors.

A month ago, the Exchange announced its establishment as a share company after signing the establishment document among its first five shareholders, altogether owning a 25 percent stake.

Ethiopian Investment Holdings (EIH) and four of its state-owned subsidiaries, ethio telecom, Ethiopian Shipping and Logistics Service Enterprise (ESLSE), Ethiopian Insurance Corporation (EIC), and Berhanena Selam Printing Enterprise, are the five corporations pledged to contribute 25 percent of the over 900 million capital it will have.

At the same time, the Board of Directors was also formed for the ESX last month, onboarding prominent names such as Eleni Gebremedhin (PhD) and Zemedeneh Nigatu. The board is chaired by Hilawe Tadesse, former banker and economist who is currently an advisor to the Governor of the National Bank of Ethiopia (NBE).

Along the board of directors, Tilahun’s first task would be mobilizing the rest 75 percent capital from private investors abroad and locally. Local financial institutions, particularly banks, are reportedly interested to invest in the Exchange and become shareholders. Banks are also earmarked as potential firms to be listed once ESX starts registering IPOs.

PM’s Thoughts On ESX

November 15, 2023

His Excellency Dr. Abiy Ahmed, Prime Minister of the Federal Democratic Republic of Ethiopia’s comments regarding the stock market.

Our One Collective Goal Is Capital Formation

November 1, 2023

The East Africa’s largest economy, Ethiopia, is just establishing its maiden stock exchange, the Ethiopian Securities Exchange (ESX). The latecomer in the mix of exchanges in Africa, ESX has been undertaking several preoperational tasks, among which includes raising capital.

October has been one successful month for the team behind the ESX, who managed to found the exchange as a share company. The Ethiopian Investment Holdings (EIH) and four of its subsidiary state-owned enterprises signed the founding agreement, taking a 25 percent stake altogether. Prominent names including EleniGebre-Medhin (PhD) and ZemedenehNigatuhave been designated as founding board memsbers, with HilaweTadesse chairing it.

Situated on the garret of Minaye Corporate Complex,a new building by the Africa Avenue, the Exchange secured an extensive trading floor. It is now revamping the whole floor in order to create the stock market environment that incorporates stock brokers, observers, media court and the yet to be gathered its three dozens of staff.

Tilahun Kassahun (PhD) has been serving intop management for over a year and half, since the exchange was formed as a project office. The Reporter’s Samuel Bogale sat down with Tilahun to discuss the developments at ESX. Excerpts:

The Reporter: What is the bigger picture behind ESX?

Tilahun (PhD):This is a good question and a reminder that we shall always consider, as you said, ‘the bigger picture’. We see the ESX as part of the broader capital market ecosystem. Within that ecosystem, the exchange plays a critical role as market organizer and a pivotal institution in creating liquidity for the securities market. It will be a liquidity providing infrastructure.

There are critical institutions that make up the capital markets alongside ESX. The Ethiopian Capital Market Authority (ECMA) is among others, which is the apex regulator playing critical role in investor protection. Its objectives include ensuring that those who seek to raise capital from investors are transparent, and meet certain corporate governance and financial reporting standards.

Other participants include the capital market service providers, who will play a key role in intermediating issuers and investors by giving advisory services, brokerage, auditing, and management of funds, among others. There are also private and government securities issuers with the desire to raise capitals by issuing bonds or selling shares and equities.

These ecosystems have an ultimate objective of filling the unmet need for long term finance to the government and private sector. The Ethiopian economy, in both sectors, requires 40trillion birr in the next 10 years. These needs will be met by foreign sources such as government borrowing or grants, as well as local sources by issuing treasury bills and bonds, or borrowing from banks.

The role of capital markets in this aspect is to become the additional and alternative sources of finance. Bank and other sources of finance will continue to be the primary sources of finance for the private sector, but gradually capital markets can have a significant role. There are individual and institutional investors such as pension funds, who will be on the supply side and put their savings in investable instruments.

How this ecosystem contributes to the national development objectives by filling the unmet gap for the long term finance, is the bigger picture we look. Our one collective goal is to enhance capital formation. In delivering on these objectives, I think it also plays a key role allowing all of us to share from the growth of the economy. That is why listing of certain key state-owned enterprises on the exchange will be useful. It gives Ethiopians across the country, and indeed in the diaspora, the opportunity to contribute and share from the growth of these companies.

The Reporter: What services will you mostly provide?

Tilahun (PhD): Exchanges play a central role in organizing the marketplace for transactions on securities. They are the infrastructure, or you might say the ‘highway’ which capital market flows. They serve this objective by delivering on key roles, which is to be a central platform for the listing, trading, clearing, and settlement. They also play a key role in product and market development.

Taking these objectives into consideration and learning from the experiences of exchanges in other economies, ESX will be organized as an exchange that caters for both,thefixed income and equity markets. We will list government treasury bills, bonds and corporate debt instruments. One key product that will make ESX an innovative exchange will be the interbank money market, which will allow financial institutions to trade on short-term money to meet their liquidity needs.To cater for Ethiopian small and medium sized enterprises, our equity market will be structured into two market segments, the main segment for high cap companies, and an emerging and growth segment to list small and medium enterprises.

ESX Held Its 3rd Capital Raise Investor Roadshow In London - AfSIC

September 8, 2023

LONDON, United Kingdom, 28 September 2022, /African Media Agency/- FSD Ethiopia is coordinating a delegation from Ethiopia to attend AFSIC 2023 and will be sponsoring the Ethiopian Investment Summit scheduled for Monday, 9th October 2023. FSD Ethiopia is a development agency that aims to support the development of accessible, inclusive, and sustainable financial markets for economic growth with a vision to contribute to a thriving financial system that delivers real value to the broader economy and to the people of Ethiopia.

The Ethiopian delegation includes the key financial sector actors, including the Ministry of Finance, Ethiopian Capital Market Authority, Ethiopian Investment Holdings, Ethiopian Securities Exchange, and Ethiopian Investment Commission– a truly comprehensive grouping and an exciting agenda item to look forward to.

The Ethiopian summit is organized under the theme “Ethiopia – The New Frontier Market, Opening Doors and Creating Opportunities”. The summit aims to provide a comprehensive overview of Ethiopia’s emerging opportunities and highlight Ethiopia’s recent economic reforms, favorable investment climate, and growing investment opportunities. The high-level officials in the panel will discuss significant developments strengthening Ethiopia’s financial architecture. The event will feature a road show to raise capital for the recently established Ethiopian Securities Exchange (ESX). ESX will highlight opportunities for forming strategic partnerships with financial actors in Africa and beyond. Ethiopia investment holding aims to attract investors and inform global finance practitioners of Ethiopia’s capital market and opportunities.

The Ministry of Finance will promote its far-reaching reforms to mobilize resources for sustainable and inclusive development, key to Ethiopia’s Homegrown Economic Reform agenda. Ethiopian Investment Commission will exhibit the various investment opportunities and a favorable business environment within the country, accomplished through a comprehensive and strategic approach that highlights the unique advantages of investing in Ethiopia.

Ethiopia Gears Up For Launch Of First-Ever Securities Exchange

July 6, 2023

Addis Ababa, July 6, 2023 - Efforts are underway to develop Ethiopia's financial market as the government prepares to launch its first-ever securities exchange in 2024.

In light of this, representatives from the public and private sectors, potential investors, policymakers, and regulators are meeting in Addis Ababa for a two-day workshop aimed at strengthening the capabilities of key market participants, preparing potential issuers and investors for the ESX's portfolio of instruments, and garnering support from key policy-making institutions and regulators.

Speaking at the opening of the workshop on July 6, Antonio Pedro, Acting Executive Secretary of the Economic Commission for Africa (ECA), described the ESX as a "game-changer for Ethiopia and the region.” He stressed the importance of inclusivity, sustainability, and connectivity to harness the platform's full potential.

The workshop is co-organized by the Economic Commission for Africa (ECA), Ethiopian Investment Holdings (EIH), Ethiopian Securities Exchange (ESX), and FSD Africa.

Mr. Pedro reaffirmed ECA's commitment to supporting African countries in their socio-economic development and expressed enthusiasm for partnering with Ethiopia on this groundbreaking financial market initiative.

According to Brook Taye, Director-General of the Ethiopian Capital Market Authority (ECMA), the ESX will serve as a "key part of a functioning Ethiopian capital market ecosystem." Mr. Taye emphasized that ECMA was "fully committed to supporting the launch of the ESX and will work closely with the ESX team as it becomes a full-fledged securities exchange over the next year.”

Mark Napier, CEO, FSD Africa said: “We are pleased to be collaborating with the Government of Ethiopia in this historic initiative that will accelerate the development of capital markets in Ethiopia. Our assistance for establishing the Ethiopian Securities Exchange will leverage FSD Africa’s vast expertise and experience in developing capital markets infrastructure across Africa. This support signals our long-term commitment to a thriving capital market that is deep, liquid, and efficient”.

Ethiopia Begins Fundraising For First-Ever Securities Exchange

ESX Held Capital Raise Roadshow in Addis Ababa

May 16, 2023

Ethiopia began selling shares to raise funds required to set up its first-ever securities exchange as Prime Minister Abiy Ahmed pushes to modernize eastern Africa’s largest economy.

The sale, which kicked off in the capital, Addis Ababa, on Tuesday aims to mobilize 75% of the required funding, said Michael Habte, a project manager for the planned Ethiopia Securities Exchange, or ESX. The remaining 25% of the shares will be held by Ethiopian Investment Holdings, the nation’s sovereign wealth fund.

The authorities want the bourse to be fully operational by 2024, and at least five state-owned enterprises to be listed soon after. The ESX stake is on offer to local and foreign investors, according to Michael who didn’t say how much money is being raised. The government expects local banks and insurance companies to invest.

Introducing a securities exchange is in line with Abiy’s plan to boost Ethiopia’s financial sector to rival African peers including South Africa, Nigeria, Kenya and Morocco. The Horn of Africa nation’s economy was one of the world’s fastest growing before it was disrupted by a civil war and the coronavirus pandemic.

National Bank Explores Treasury Bill Alternatives To Accommodate Islamic Banks

September 16, 2023

The National Bank of Ethiopia is looking for alternatives to traditional treasury bills to accommodate financial institutions that only offer interest-free banking services in accordance with Islamic principles.

Since last year, all banks have been required to allocate 20% of the loans they disburse to purchase treasury bills, with the exception of fully-fledged Islamic banks. However, providers of interest-free banking have been unable to acquire the bills as collecting or paying interest contravenes Sharia principles.

Discussions regarding possible alternatives have occurred since these requirements were established, though industry players say further preparations are needed to propose Sharia-compliant solutions.

“Talks have begun between Hijra Bank and the National Bank to explore the feasibility of introducing alternatives like Sukuk bonds to replace conventional treasury bills,” said Hassen Mohammed, Vice President and Information Sector Director of Hijra Bank.

A senior Zamzam Bank official, who spoke on condition of anonymity, expressed concerns about implementing such systems given Ethiopia’s current economic environment. The lack of an established capital market was cited as a potential hurdle to effectively integrating Islamic financial services into the treasury bill market.

ESX Successfully Completed Its 2nd Roadshow And Market-Sounding Activities In Nairobi

September 4, 2023

held several bilateral meetings with key capital market players

participated in deal room sessions alongside Africa Climate Week- held a successful market-sounding session alongside ECMA.