Ethiopia is within an ace of launching its first investment bank, a significant step aimed at enhancing its economic aspirations and improving financial services. Experts have commended the move as a breakthrough to stimulate the economy.
In an exclusive interview with The Ethiopian Herald, a former Wall Street banker and founder of several businesses in Ethiopia, Ermias Amelga described the announcement by the Commercial Bank of Ethiopia to launch an investment bank as a landmark event for the country’s financial landscape.
According to him, through pursuing regulatory reforms and facilitating the establishment of investment banks, Ethiopia is to making significant progress towards developing a robust capital market infrastructure. “I believe, this makeover is expected to stimulate economic growth, create job opportunities, and improve the overall financial health of the nation.”
Ermias noted that Ethiopia’s evolving economy presents considerable opportunities for both local and foreign players. Major Banks, in public and private are well positioned to become active market participants by leveraging their financial expertise and networks.
Additionally, he said that microfinance institutions and cooperatives can help democratize market access by mobilizing small-scale investors. The opening of the wholesale and retail sectors to foreign investors is expected to increase demand for commercial properties, creating infrastructure for financial institutions and traders. High rental rates and strong demand for office and commercial spaces indicate a favorable environment for market participants.
International firms specializing in investment banking, asset management, and securities trading are likely to be drawn by Ethiopia’s untapped market potentials.The recent opening of wholesale and retail sectors to foreign investors creates synergies, enabling global firms to establish local offices and invest in infrastructure.
Addis Ababa Chamber of Commerce, Trade and Investment Acting Director Mebratu Belachew told The Ethiopian Herald that small and medium-sized enterprises (SMEs) have struggled to access adequate financial services, despite contributing about 30 percent to the country’s GDP.
“The establishment of an investment bank by the Commercial Bank of Ethiopia could help bridge these gaps and stimulate economic growth,” Mebratu said.
He believed that the new bank could play crucial roles, such as providing essential capital for SMEs to grow and innovate, and offering advisory services’ seed money for mergers and acquisitions to attract foreign direct investment, which is vital for economic diversification.
The success of the investment bank will hinge on a supportive regulatory framework and its ability to manage risks effectively. A vibrant entrepreneurial ecosystem could lead to job creation and enhanced economic stability. Mebratu acknowledged the investment bank’s potential but noted persistent challenges, particularly the underdeveloped capital market and low financial literacy, which must be addressed systematically.
He commented, “While the potential is significant, the bank must navigate the complexities of the Ethiopian financial landscape to achieve its goals.”
Establishing an effective investment bank requires compliance with regulatory frameworks, including necessary licenses, capital requirements, and reporting obligations. Engaging legal experts who specialize in financial regulations will be crucial for navigating these complexities.
Mebratu described Ethiopia’s initiative to create an investment bank a critical step in its economic development journey. It promises to enhance innovation and entrepreneurship by improving financial access for SMEs and providing guidance for startups. Nevertheless, careful implementation and strategic planning will be essential to realize its full potential and ensure sustainable growth in the years to come.
BY MENGISTEAB TESHOME
THE ETHIOPIAN HERALD SATURDAY 30 NOVEMBER 2024
