Modern Banking History of

Ethiopia
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1
Bank of Abyssinya
Modern banking began in Ethiopia in 1905,
when the bank of Abyssinya was first
established in Addis Ababa under 50-year
franchise agreement with the then British
owned National bank of Egypt.
The agreement that was reached in 1905
between Emperior Menelik II and Mr. Mc
Gillivray, representative of the British
owned National Bank of Egypt
2
 The bank was totally managed by the
Egyptian National Bank and the following
rights and concessions were agreed upon
the establishment of Bank of Abyssinia

The capital of the Bank was agreed to be

Pound Sterling 500,000 and onefifth was
subscribed and the rest was to be obtained
by selling shares to some important cities
such as London, Paris and New York.
3
The Bank was given full rights to issue bank
notes and monitor coins which were to be
legal.
Land was given to the bank free of charges
and permitted to build offices and ware
houses.
Government and public funds were to be
deposited with the bank and all payments to
be made by check.
The government promised not to allow any
bank to be established in the country within
50 year concession period. 4
 started its operation on February 16,1905,
as a branch bank of the National bank of
Egypt on a monopoly basis.
Mr.D.Mac Gillivary himself was governor
of the bank . Only few Ethiopians knew the
advantage of banking .
Checks were completely unknown and they
were rarely used by foreigners. The banks
work expanded after the railway lines started
operation from Djibouti to Addis Ababa in
1917 (Continued)
5
 Bank of Abyssinia branch offices were
opened in Dire Dawa, Gore and Dessie. It
had also an agency office in Gambella and
a transit office at the port of Djibouti.
.

Other banks and intuitions established at

that time in Addis Ababa were the societe
Nationale Dethiope pour le development de
lagriculture et du commerce opened in
1908, Banque de l Indochine and
companies de l Afrique Orientale , both
(Continued)
opened in 1955. 6
 In short the bank of Abyssinia was carrying
limited business such as keeping
government accounts, some export
financing and undertaking various tasks for
the government.

(Continued)
7
Bank of ethiopia
after haile Selassie came to power. The
Ethiopian government decided to offere
shaers to the public and buy the British
owned bank of Abyssinia which was
working under contact. 30,000 shares
were offered for sale each at a price of 25
pounds sterling of which pounds sterling
235,962.10.0 were subscribed and paid
largely by the government.
8
 This amounts was paid for the settlement of
the bank of Abyssinia for the assets
transferred to the new bank.
The new set-up was named bank of
Ethiopia. The bank of Ethiopia, which was
a purely Ethiopian institution or the first
indigenous bank in Africa .
Bank of Ethiopia established on August
29,1931 with the capital of 750,000 pounds
Sterling.
9
 The bank had branches in Dire Dawa ,
Gore, Dessie Debre Tabor and hare as well
as an agency in Gambella and a transit
office in Djibouti . The same building
housed the new bank .
The Bank of Ethiopian operated unitl 1935
and ceased to function durting the fascis
invasion it was closed by the Italians 1936.

(More...)
10
The state bank of Ethiopia
On August 1942, a charter was granted to the
state bank and was published on 30th November
1943 under General Notice No 18 of 1943.
Although the bank was legally established in 1942
, in the old building of bank of Abyssinia.
After 8 month of preparatory activities stated its
full opration in rented ofice on 15th April ,1943.
The state bank of Ethiopia started its operation it
had 43 employees and 2 branchs.
The first governor of the bank was a Canadian
named Mr.C.S. Collier . 11
 The state bank acted as the central bank of
Ethiopian with the vested power to issue Bank
notes and coins as the agent of the ministry of
fianc.
In may 1945, the bank was garneted the sole
right of issuing currency in Ethiopia and an
issue department was established in July
1945, after the currency and legal tender
proclamation in the same year.
In July 1949, the bank was made the sole
authorized dealer in foreign currency and
foreign exchange in Ethiopia. 12
 the bank offered services such as current
accounts, issuance of drafts, mail and telegraphic
transfers, opening of letters of credit and granting
of loans, Later saving accounts were introduced in
January 1946.
The Barclays branch banks in Asmara and
Massawa which are opened in 1942 withdrew, later
when branches of the state bank were opened there
in 1952, the time of the federation of Eritrea with
Ethiopia.
Barclays bank (the dominion colonial and
overseas) which was opened after the liberation, in
Addis Ababa in July 1941 , came with the British13
troops and organized
 banking services and it was closed in 1943 after
two years of service when the satate bank of
Ethiopia was opened the same year.
The national bank of Ethiopia was proclaimed
in the Negarit Gazeta No 206 of 1963 and began
operation in January, 1964 the bank was re-
established under proclamation No 99 of 1976
with the following powers and duties.
1.The purpose of the bank , by which it shall
be guided in all its actions are according to
national plan, to :-
(More...)
A. Foster balanced and accelerated economics
development
B. Promote and maintain high level production ,
employment and real income .
C. Encourage and prompted the full development
of the -- forces of Ethiopian
2.The bank shall have the exclusive right to coin ,
point and issue legal tender currency
3.Without prejudice to the purpose for which bank
been established the bank act consistently with
international monetary and banking agreements
to which Ethiopia is a party.
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4.In the fulfillment of its purposes stated above,
the Bank may :
A. Regulate the supply, availability of money and
credit , and applicable interests and other
changes;
B. Determine exchange rates; manage and
administer the international reserves of Ethiopia
and participate in the planning of the use of
foreign exchange;
C. Establish, consolidate or dissolve banks and
other finical institutions and define, or modify
the functions, thereof;
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D. Supervise, regulates and control the operations
of banks and other finical institutions;
E. Encourage organized bodies such as Idir and
Iqub to transact their business dealings
through banks;
F. Adopt measure which will ensure that monetary
and finical resources are utilized in a socially
beneficial and economical manner, and at the same
time foster the growth of the socialized sectors ;
G. Where deemed appropriate by it, direct banks
and other finical institutions to deny credit
allocations toe enterprise which misuse finial
resources at their disposal; 17
H. Ensure, in conjunction with other relevant
organs of the Government, the accounts of will
enable the government and the Bank to
determine the utilization of various type of
expenditures with a view to assessing their
efficiency and utilization of funds ;
I. Ensure the efficient and optimal allocation of
monetary resources among banks and other
finical institutions
J. Make short and long term refining facilities
available to banks and other finical institution
in accordance with terms and conditions set by
it; 18
K. Promote and ensure, as far as practicable , the
balanced insemination of banking services
throughout the country
L. Accept deposits of any kind form foreign sources
M. Promote and sponsor the training of personnel
in the subject of money, banking, statistics,
fianc, and other related subjects;
N. Prepare forecasts of the balance of payments of
Ethiopia and statistics on the monthly movement
of the money supply and of prices and other
statistical series and economic studies useful for
the formations and analysis of monetary, saving
19
and exchange policies
O. Participate in the formation of the finical plan of
the government
P. Perform such other function and carry out such
other activities as central banks customarily
perform The foreign exchange is supervised by
the exchange control of the national bank.
Without the approval of the exchange control
Division or its branches, no persons authorized to
but and sell or to exchange foreign currency

20
 COMMERICAL BANK OF
ETHIOPIA (CBE)
The commercial bank of Ethiopia (S.C) was
incorporated as a share company on December
16, 1963 pr proclamation no 207-1955 of October
1963 to take over the commercial banking
activities of the former sate bank of Ethiopia.

Under this name, it began operation on January

1, 1964 , with a capital of Eth $ 20,000,000 and
served for about 16 years.
21
 The Bank wholly owned by state operated as
an autonomous institution under the commercial
code of Ethiopia.
The commercial bank of Ethiopia Share
company and Addis bank had identical
objectives, powers and duties . hence, it was
necessary to merge them.
Consequently, the present day commercial bank
of Ethiopia was established under proclamation
No .184 of August 2, 1980.
According to this proclamation the main
objectives of the commercial bank of Ethiopia
22
some of them are follows:-
1.To extend commercial banking services
throughout the country;
2.To encourage the mobilization of saving by
making the people aware of the of banking ;
3.To extend loans , credits and all other banking
facilities to any person for specific purpose and
periods
4.To extend loans, credits and all other banking
facilities to any person for specific purpose and
periods;
5.To spread widely banking habits among the
people
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 Moreover, according to this proclamation, the
bank shall have the responsibility to perform the
following duties in accordance with general
directives issued to it by the supervising authority
namely, the national bank of Ethiopia.
1. Receive savings , demand and time deposits;
2.Make loans and advance;
3.Draw , accept discount buy and sell bill of
exchange, drafts , and promissory notes payable
within or outside Ethiopia
4. Issue letters of credits ;
5.Buy, sell, hold or otherwise deal in foreign 24
exchange;
6.Undertake functions performed by executer and
trustee;
7. Hold , acquire and sell negotiable instruments
and securities by the government or Private
person
8.Keep in safes or otherwise ,securities , jewels,
precious metal and other valuables;
9.Issue cheques and travelers cheques, and
generally deal with cheques;
10.Negotiate, underwrite or issue bounds;
11.Act as an agent for persons and, in this capacity,
engage in the sell of money and shares 25
12.Control the end use of credits loans, and other
facilities that it provides to its customers;
13. Acquire , posses , own mortgage, sell exchange
and dispose of properly for the purpose of
attaining its objectives and the proper
functioning of its operations.
14.Enter in to contracts;
15.Sue and be sued; and
16.Perform such other banking activities as were
customarily carried out by commercial banks

26
 The commercial bank of Ethiopia has a capital
of birr 65,000,000 and 155 branches. During
the sate bank days there were a relatively and
assorted large number of foreigners mainly
Indians, Europeans, Armenians , Egyptians
and other expatriates working for the bank.

27
OTHER BANKS AND FINCIAL
INSTITUTIONS
proclamation No .206 of 1963 provided, for the
first time in the history of baking in Ethiopia, for
the separation of the functions of central banking
and commercial banking.
The state bank of Ethiopia was split into two
functionally difference banks, namely, the
national bank of Ethiopia and the commercial
bank of Ethiopia share company.
it allowed foreign banks to operate in Ethiopia ,
provided that at least 51% of their capital is
owned by Ethiopian nationals 28
 ADDIS ABABA BANK SHARE COMPANY
The Addis Ababa banks which was the first
privately established bank with Ethiopia
initiative began perpetration in 1963 and started
operation in October 1964
The association of National and Grind lays
bank, London, under the new banking law where
a new bank is to set up with the association of a
foreign bank it must have at least 51% Ethiopia
capital.

29
 It was on this basis that the National and grind
lays Bank took up 40% of the shares of the Addis
Ababa bank and the balance of 60% (51+9%) of
the shares which where locally raised form
Ethiopian and foreign nationals.
After completing its formalities, the Addis Abba
bank (S.C) obtained its banking license form the
national bank and started operating with a paid
capital of Eth $ 2,000,000.
In 1968 the original capital of the Addis Ababa
bank was increased to 5,000,000. It had 26
branches and a staff of about 300 when it ceased
its operation. 30
BANCO DI ROMA (Ethiopia)S.C
A branch of Banco di roma of Italy had been
opened in Asmara during the inoccupation of
Eritrea and since then had been doing business
for more than 60 years with its sub-offices in
massawa and Asseb.
After the re-organizing of banking in Ethiopia in
December 1963 it was registered as share
company with a fully paid up capital of Eth $
2,000,000 shared among Ethiopia and Italian
shareholders, reach 4mill in 1975 and 150 staff
A license to continue carrying on banking business
in Ethiopia was issued to it on February 20, 1967
31 .
BANCO DI NAPOL (ETHIOPIA )S.C
Banco di Napoli (Ethiopia)S.C was established
with banco di Napoli head office in Naples.
Ethiopians and foreign investor . It had a staff of
30 with no branch office and was operating in
Asmara.

32
Addis bank
Addis Bank was created by a merger of the
former Banco Di roma (Ethiopia S.C and Baco Di
Napoli (Ethiopia) S.C with the former Addis
Ababa bank as of January 1, 1976 under
proclamation No .69 of 1975.
With a capital of Eth$ 20,000,000 and a net work
of 34 branches and staff of 480 Addis Bank
emerged as the second largest commercial bank
next to the Commercial Bank of Ethiopia.

33
Addis bank Merged with CBE
Finally as mentioned already and according to
proclamation No.184 of August 2, 1980, the Addis
bank and the former CBE S.C were merged to
form the sole commercial bank in the country,
the present day CBE.

34
THE AGRICULTURAL AND INDUSTRIAL
DEVELOPMENT BANK
There was the agricultural bank which was
established in 1945 and was later replace by the
development bank of Ethiopia in 1951.
To enhance industrial development the
investment bank of Ethiopia was established in
July 1963 in accordance with the commercial
code of Ethiopia.
Ministry of finance was the main share holder
and was managed by a Board of directors.

35
 It was registered with a capital of Eth. Dollars 10
million , Ins September 1965 the name of the
bank was changed to Ethiopian investment
corporation S.C. and the capital was raised to
Eth. Dollars 20 million which was fully paid.
This bank was created to engage in providing
banking facilities for industrial firms ,, to
modernize machinery and to improve buildings
housing the machinery, for active farmers to
improve their farming methods .

36
 The agricultural and Industrial development
bank which was established as a 100% state
owned sc in November 1970 ,
taking over the activities of the former
development bank of Ethiopia and the Ethiopian
investment Corporation , was brought under the
umbrella of the national bank of Ethiopia by
proclamation No.99 of 1976 .
It had six branches and a capital of birr
100,0000,00 (One hundred Million) full paid up.

37
THE IMPERIAL SAVING AND HOME
ONWERSHIP PUBLIC ASSOCIATION
The Imperial saving and Home ownership public
association was established under negarit gazeta
Decree No 47/61 proclamation No. 188/63 on
April 30, 1962
At the time of establishment, the association
receive Eth $. 100,000 from the former state
domain and a grantee of Eth $ 500,000 from the
united state government.

38
 The aims and duties of the association were to
encourage saving habits of the Ethiopian people;
provide loans for the construction of residential
houses at a low interest rate; and provide loans to
individuals under the guarantee of their savings.
There was also the saving and Moratege
corporation of Ethiopia S.C established in 1965.
This was a dominantly owned subsidiary of the
commercial bank of Ethiopia, with branches in
Addis Ababa and Asmara
The working capital of this corporation being
Eth $ 3,000,000 was divided to 30,0000 shares of
39
Eth $ 100each
 Holders are CBE owned 29,996 share ; Ethiopian
airline, Ethiopia cement factory ,Ethiopian
electrical light and power and Authority and the
agricultural and Industrial development bank
owned one (1) share each.

The main reasons for establishment of housing

and saving bank was the need to encourage and
further accelerate the rate of housing
construction for the improvement of the living
standard and the conditions of the urbanite
Ethiopians.
40
 Its working capital is Birr 6,000.0000- and all
rights, privileges, credits , assets and liabilities of
the amalgamated two former finical institutions
were transferred to it by the proclamation No .60
of November 8, 1975 which established it.

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