The Capital Market Authority has issued a stern warning against fraudulent share sellers, highlighting recent concerns over deceptive practices within Ethiopia’s financial sector.
This caution comes amidst a significant development in Ethiopia’s banking landscape, as four international investment banks have expressed keen interest in entering the country’s banking sector.
Director the Ethiopian Capital Market Authority Brook Taye, emphasized the institution’s commitment to fostering a transparent and regulated investment environment.
Brook announced that starting February 12, 2023, licenses will be granted to both local and foreign entities seeking to participate in Ethiopia’s capital market sector.
“We have received considerable interest from numerous Ethiopian and foreign companies looking to engage in investment banking,” Brook stated, revealing that “three globally recognized foreign investment banks and two local institutions are actively pursuing licensure.”
However, Brook refrained from disclosing the names of the international banks seeking to establish investment operations in Ethiopia.
Notably, South Africa’s Standard Bank recently expressed interest in investing in Ethiopia’s investment banking sector, signaling growing international confidence in Ethiopia’s financial opportunities.
To secure an investment bank license in Ethiopia, foreign banks must maintain a minimum paid-up capital of 100 million birr, while non-bank financial institutions are required to have a capital of 25 million birr.
Ethiopia’s National Bank announced plans last May to issue five banking licenses to foreign investors interested in the country’s banking sector over the next five years.
Ethiopia has a long history of legislation enabling the establishment of investment banks, dating back to 1955 during Emperor Haile Selassie’s reign.
Despite this, foreign banks faced restrictions on entry following the dissolution of the Ethiopian Investment Law during the Derg regime’s rule three decades ago.
Brook underscored the Capital Market Authority’s efforts in formulating guidelines for licensing and supervising capital market service providers.
He emphasized the importance of upholding law and order to assist institutions with viable investment ideas but facing financial challenges.
In the coming six months, the Authority plans to release guidelines for public share offerings, ensuring transparency and investor protection.
When questioned about the treatment of existing institutions selling shares under the Authority’s new regulations, Brook assured that they would receive transitional support and supervision to align with the new capital laws.
Furthermore, Brook clarified that investment banks previously approved by the National Bank of Ethiopia would not be eligible for additional licensing from the Capital Market Authority.
The Authority is actively addressing concerns related to fraudulent share sales, collaborating with legal institutions to uphold accountability and protect investors from misleading advertisements promising inflated profits.
