Ethiopian Financial Markets &

Institutions
Money markets is where short term securities are traded

 securities traded in this market include

 government treasury bills

 time deposits

 interbank loans

Government treasury bills

Are debt instruments issued by the federal government. Have maturities of 28 days,91 days and
182 days are sold at a discount through non-competitive auction, banks and non-bank firms
participate in the treasury bill market, non-bank firms include insurance companies, social
security agency, corporations and the like. banks have been the primary investors in government
treasury bills buying 89% of bills in 2006 and 74% in 2007.however, non-bank firms became
major investors since 2008 with 93% in 2008 and 67% in 2009.the weighted average yield on
treasury bills has increased from 5.3% in 2006 to 7.9% in 2009.

Time deposits (CDs)

issued by commercial banks,investors include other banks, non-bank financial institutions,

private corporations, public enterprises, and retail customers ,it accounted for 7.1% of total
deposit in 2006 and 4.5% in 2009,time deposits are kept with varying maturities of a few months
to more than 2 years.

Interbank loan

commercial banks borrow from each other, it began operation in September 1998 ,since then a
total of Br 292mill interbank loan has been extended between November 2000 and April
2008.the maximum interbank loan was made in 2003 by the amount of Br 93.43mill ,No
interbank loan has been extended since then .term of interbank loan ranges from overnight to 5
years. Interest on interbank loan ranges between 7% to 11%.Lenders included CBE, AIB, BOA,
and NIB, Borrowers included NIB, Wegagen and Awash .

Capital markets

No capital market in Ethiopia, despite an intense pressure from entrepreneurs, academicians and
international financial institutions such as IMF, the Ethiopian government didn’t want to
establish capital markets in the country. But capital market instruments are offered to investors
informally. Eg. Stocks and bonds.

Bonds

are issued by public enterprises(EEPCO and Ethio Telecom), state/regional governments, and
development bank of Ethiopia(DBE)during 2009/10 bonds by the total amount of Br10.86bill
were issued of which nearly half is by EEPCO.Value of bonds outstanding by June 2010 totaled
Br 27.72bill.

Eurobonds

Ethiopia has issued for the first time euro bonds in capital market after getting a good credit
rating in the month of December, 2014The value of the bond issued was $1billfor 10 years and it
pays interest of 6.625%.

Stocks

Despite absence of capital markets, financial institutions and corporations issue their stocks to
the general public.Due to absence of a secondary market for stocks in the country, investors seek
the help of the original issuers when the want to sell their stocks.Stocks of banks are highly
demanded than non-bank financial institutions,

Mortgages

mortgage loans are extended by construction and business bank(CBB now CBE).the bank does
not have any other option than keeping the mortgage loans until maturity

Banks ( History)

Bank of Abyssinia established in 1905.BoA was dissolved in 1931 and Bank of Ethiopia was set
up.Many private banks were established after the Italians left. State Bank of Ethiopia was
founded in 1943 and splitted into NBE and CBE in 1963 .The banks were used as instruments in
exercising socialist economic policy. The 1994 banking reform reopened the financial industry
to private investors