Prime Minister Abiy Ahmed had met with heads and representatives of financial institutions to discuss the current reforms within the sector. The discussions specifically explored the key milestones in financial sector reforms thus far; identification of policy, procedural and governance bottlenecks within the sector; identification of roles and responsibilities of the financial sector in strengthening the country’s economy; and the important role played by the sector in financing public projects.
The discussions concluded with financial institutions committing to broaden their support to national public sector projects. Following this, The Ethiopia Herald approached various academicians to comment on efforts made so far and other related issues of finical points. Shiferaw Shitahun Economist and Analyst said that nation has to refine the financial development efforts that could comply with realities happening in public and private once as well in micro financial institutions.
Financial services should be governed by laws and regulations that govern the services and transactions of investment banks, hedge funds, investment advisors, insurance carriers, brokerages and trading firms, securities and futures exchanges, selfregulatory agencies, business entities issuing securities, and consumer finance businesses.
The National Bank of Ethiopia (NBE) which is the Central Bank should execute responsibilities accordingly as well inform the public before any kind of economic panic surfaced. Higher officials who are assigned in the financial institutions and at board membership rank must be alert to be sure that each of the members is free from any kind of conflicts of interests that could harm the healthy development of the sector, he said.
Financial institutions serve most people in some way, as financial operations are a critical part of any economy, with individuals and companies relying on financial institutions for transactions and investing.
Government should consider it imperative to oversee and regulate banks and financial institutions because they do play such an integral part in the economy. Pertinent stakes like commercial as private banks and insurance firms should push efforts to tune fine the institutions’ to the right direction of practices. International practices also should be scaled up to nation financial system. In addition to staying compliant, today’s financial institutions need to keep up with new regulations, deal with new issues including those created by social media and emerging technologies and manage the human resources and technological requirements to get the job done.
The speed of change is rapid and the demands are increasing, he added. Mentioning that financial crisis have particularly severe effect on developing countries, Shiferaw said that the discussion the Premier held could pave ways how the financial institutions should shape and support the investment as well control risks early. Even those that were in good financial health were dramatically affected by the sudden withdrawal of foreign investment and the escalating costs of funding worldwide.
“In my view, we are witnessing that the environment is growing increasingly risky, so banks needed to strengthen their financial positions.” While talking the ways how to bar money laundering, Messay Mulugeta (PhD) Associate Professor at collage of Development studies, Addis Ababa University said that the sources of this financial eliciting is the ill practice that once taken as normal in the public system and the business communities partners who had been shaded under the corrupted politicians coupled with international companies.
According to him, political position had been not only the sources of power but also wealth. Following these perceptions, transactions as well export and import engaments exploited out of the rule and professionalism. “It is important to acknowledge the fact that money laundering is a crime like other crimes, and therefore it affects all of us. The consequences of such crimes are appalling for business, development, and the general rule of law; once nation reached to vicious circle to the point of no returning it could ruin nation stability”.
According to him, effort to put in place rule of law is commendable, but the magnitude as well the swiftness should have been done in urgency as it could pose severe threat. “Following the reform, a few are in resentment as discontented are putting their hands in any form to harm the reform happening,” he noted. Ethiopia is found in the new chapter of reforms that many regional and international communities are appreciating the change, but the pseudo of the political system beneficiaries who had been grabbed the power for about three decades are posing danger in injecting dirty money in money laundering acts that could lead to instability and endangering the reform. Misganaw Gashawbeza Asst.
Prof. of Laws and PhD student at Bahir Dar University, School of Law, for his part stated the challenges the financial sector encountered.
He said that the risk of money laundering could be catastrophic as it reduces nation’s development unless curbed on the double. Likewise, the activities of real estate companies’ transactions and items with high prices should be well controlled by respective institutions based on legal frame work established nationwide. He keeps saying, undermining of the legitimate private sector is the first, some criminals will use front companies to launder illicit funds and mix legally obtained money with illegal cash. This is done to disguise their source.
Due to criminal’s ability to draw on these excess funds, they are able to “subsidize” their products, offering them at below market levels. Some criminals have been known to offer their products at prices below the manufacturer’s cost. Consequently, the front companies have a competitive advantage over the legal enterprises that borrowed capital from financial markets, making it difficult for these legal firms to compete. He disagrees the assumptions given on changing the currency, as to him nation is in dire demand of foreign currency so in this middle of the all demands actualizing new currency could incur huge sum of capital, that turns to be an insult on the injury. Since healthy financial institution development is a cornerstone for all parts of the economy, financial institutions should be equipped with skills, knowledge as well ethics.
Herald January 23/2019
BY MENGISTEAB TESHOME
