Yinager Dessie (PhD): African banks have a big appetite to invest in Ethiopia
FSD Africa is working in the financial sector along with the National bank of Ethiopia (NBE). Now, Ethiopia has got its own version, Financial Sector Deepening (FSD Ethiopia) with the aim of supporting the financial sector.
Newly-established development agency Financial Sector Deepening Ethiopia (FSD Ethiopia) was officially launched at the Hyatt Regency Hotel, Addis Abeba, Ethiopia, on May 19, 2022. With funding from UKAid and the Bill & Melinda Gates Foundation, FSD Ethiopia will build on FSD Africa’s initial efforts to strengthen the country’s financial sector.
The organization’s role is to identify the underlying causes of financial system failures and provide technical and financial resources to market actors to address these constraints to help build a functional and effective sector that generates economic gains for a wide cross-section of Ethiopian individuals and businesses.
FSD Ethiopia’s vision is to contribute to a thriving financial system that delivers real value to the economy and the people of Ethiopia.
Yinager Dessie (PhD), Governor of the National Bank of Ethiopia, was one of the dignitaries who attended the official launch of the FSD Ethiopia on May 19, 2022. In the sidelines of the meeting reporters caught up with Dr. Yinager to forward some queries about the new developments in the finance sector.
Regarding the capital market, a proclamation approved by the parliament in June last year to permit its establishment. Close to 15 professionals are working in a project working on the Capital market, according to Yinager. Half of these professionals come from abroad such as Europe and the United States, where a vast experience of stock and capital markets activities can be gained.
“These professionals are crafting the directives and other legal frameworks,” Yinager said, adding, “It would take some time to finalize such a task”. As soon as a bundle of tasks completed, the stock market will officially be inaugurated, he says.
Represented by Ethiopian Investment Holdings (EIH), the government can purchase a stock market shares like everybody else.
Both local and global investors can also participate to have their slice, too. “Therefore, the market would be inclusive but the tasks to realize require lots of infrastructures and laws,” Yinager said.
The banking business proclamation has been in amendment process as the previous proclamation did not allow involvement of foreign banks in Ethiopia.
Scholars have been arguing in favor of and against the financial liberalization through their research works, which depict the experiences of other nations on the matter.
Scholars have been arguing in favor of it for years, the Governor said, adding when we look at the experience of nations across the globe, Ethiopia is among the few countries that doesn’t host stock markets so far.
“There would be disagreements and promotions when we execute policy measures, which is a natural phenomenon,” he explained. “The major issue should be whether the policy is useful or not for us”.
Local banks have been left without any global competition for three decades. Therefore, opening-up the sector for competition would likely to have its own benefit for the economy, he says, “But, that is not a simple task, it would require implementation preparatory measures, which consumes some time”.
Economists and observers have been repeatedly arguing that the macroeconomic condition of Ethiopia is in turbulence stage, and the liberalization trend could worsen the situation.
But, Yinager refuted such argument.
“There’s no turbulence in the macro economy,” he argued. He even went on saying that, “Depending on the actual reality on the ground, we require lots of investments in various sectors”.
“As far as the information I have, African banks have big appetites to invest in Ethiopia,” Yinager said. “If we’ve expressing opinions about the economy and African businesses are ready to invest, then the aforementioned opinions are simply perceptions,” he further elaborated.
The Governor said creating a win-win approach that would benefit both the local businesses and foreign investors is the ideal way to handle the matter.
The Capital Market will work with companies for most of the time and it will be important for the government, too in case if it needs money for some activities the government can buy that from the market.
Companies with a requirement of the capital market can sell shares and raise capital for other purpose, which make them the major actor in the process.
Women economic empowerment
Women will also be beneficiaries in banking through using projects and saving schemes in the banking sector.
They can use movable properties as collaterals to secure loans from banks, according to Yinager.
With regard to digital financial accessibility, telebirr has managed to attract 20 million subscribers to be part of the digital financial system. Telebirr further enabled customers’ to get a micro-credit and micro-saving service through their smart phones.
Access to finance must be supported by technologies such as mobile money as well as laws and procedures. Once the policy change is there towards mobile money service, global mobile money services providers such as MPESA will join the Ethiopian market.
With regard to which will get the priority from capital market or that of entry of foreign banks, he said, “The two can go simultaneously and independently,” said Yinager, adding, “Companies that will involve in the Capital market are unique from the banking sector”.
For instance, Dubai stock market may seek to invest here; it has nothing to do with the banking sector, he says. Once the preparation for all these finalized the next move will be initiating preparatory activities to launch capital market.
Mobile money services will have micro-credit and saving services, which will have things to accomplish jointly with banks.