Ethiopia’s New Financial Sector and its Regulation

Abstract

Ethiopia is one of a number of SSA economies that adopted state-led development strategies in the 1970s (others include Angola and Mozambique), and suffered from intense conflict (leading to the fall of the Derg regime in 1991). The new government was therefore faced with the twin tasks of reconstructing the economy, and embarking on the transition to a market economy. As part of this process, state banks have been reorganised, the role of the private sector in the financial system has been expanded, interest-rate controls have been liberalized, and the central bank has been given new powers of financial supervision. Financial reform has been gradual, but nevertheless determined despite disagreement with the IMF over restrictions on the entry of foreign banks and the role of the largest state bank. …/… Keywords: sub-Saharan Africa, Ethiopia, conflict, economic reform JEL classification: O10, O55This paper argues that gradual financial liberalization-while simultaneously investing in regulatory capacity-is the appropriate strategy for maintaining macro-economic stability and growth in Ethiopia. In this regard, the Chinese transition strategy-in which significant control was retained over the financial sector-can be a useful guide to strategy design in SSA, provided that rent-seeking can be contained.

Determinants of financial development in Ethiopia: ARDL approach

“…After the overthrow of the socialist regime in 1991, Ethiopia started market economy. Following this, new financial institutions have emerged and private sector becomes active players in the financial system (Addison & Fole, 2001).…”

Impact of Economic Reforms on Economic Issues: A Study of Ethiopia

“…But such financial reforms are not worthy to accompany the reforms in general. Financial reforms may be sidelined to some extent if the economy grows fast, as in the case of China where the efficiency losses associated with the financial sector controls are said to have been borne by the fast growth (Addison and Alemayehu, 2001). This model also does not support Ethiopia because the growth rate is found to be insignificant to substitute the flaws of financial reforms.…”

Banking Sector in Ethiopia: Origin and Present State

“…SBE was also the principal provider of all commercial banking services in the country until it was liquidated in 1963. Hence, over the period 1942 to 1963, SBE had dual fundamental banking functions in the country: acting as the country's central bank as well as a main commercial bank (Addison & Geda, 2001). Over the same period, the two Italian bank branches, Banco di Roma and Bank of di Napoli, operating in the state of Eritrea were placed under the supervision of the SBE (Harvey, 1996;Mauri, 2008).…”