In order to be influential and be a voice to the people, the economy takes the lion share in the way the world works. Every decision is passed based on the economic power that a country shows to the world. It is observable to everyone that countries like the US become the power house and shifts the world in any direction they want because of their economic power.
In the eyes of the world, government of any country must be strong in its economy and be modern. The term strong is explored by realizing an increase in GNP, Per Capita income, national efficiency and employment.
Based on a study by Tiruneh Legesse, the Reserve Bank of Australia defines financial markets as “a generic term for the markets in which financial instruments are traded. Financial instruments have no intrinsic value of themselves”. He also mentioned the four main financial markets as “the share or equity market, the fixed interest or bond market, foreign exchange market, and the derivatives market.”
To obtain a well- functioning financial system, both capital markets and credit markets are essential elements. They are powerful tools for economic growth and wealth creation. A well- functioning market can attract domestic institutional and retail investors. It also increases the availability of domestic pools of capital. This might also bring a blessing that reduces Ethiopia’s need for international loans. Well- functioning financial system has the potential to create additional job opportunities for citizens.
According to a report Financial Sector Deepening Ethiopia (FSD), as Ethiopia is one of the fastest-growing countries, the nation demands huge capital and funds from short and long term sources. Capital markets will bring tremendous advantages to a nation’s economy. They will play a key role in financing nation’s long term development priorities including the post COVID 19 economic recovery and emerging priorities such as rapid urbanization and climate change. It is believed that like many African countries, Ethiopia’s economy lacks all the building blocks of efficient financial markets. The country’s capital markets are underdeveloped with no formal capital markets and only nascent money markets.
Now a day, the question of becoming strong in economy becomes the life and death situation for most countries. Some African countries like Ethiopia have turned every stone to build their economic muscles. Recently, the essence of financial market has been flourishing in Ethiopia.
Funded by the UK Aid and the Bill and Melinda Gates Foundation, a new development agency, Financial Sector Deepening Ethiopia (FSD Ethiopia) has been established. The event was launched at Hyatt Regency Hotel, Addis Ababa, Ethiopia. FSD Ethiopia will build on FSD Africa’s initial efforts to strengthen the country’s financial sector.
The objective of developing such an agency is to support the development of accessible, inclusive, and sustainable financial markets for economic growth and development. The additional role of the organization is to identify the causes of financial system failure and provide technical and financial support. By addressing such obstacles, it helps institutions build a functional and effective sector that can generate economic gains for wider Ethiopian citizens and business firms.
In another expression, FSD Ethiopia can be taken as a market facilitator and technical assistance provider. Besides, it provides grants, networks, researches, and insights to the market actors in both public and private sector domains. Its vision is to give a hand in the process of creating a blooming financial system that can deliver tangible values to the country’s economy and the people of Ethiopia.
Speaking on the launching ceremony, Minister of Finance, H.E. Ahmed Shide said that Ethiopia welcomes the establishment of FSD Ethiopia and looks forward to its support to find solutions for some of the underlying challenges in the finance sector. The Minister said, “We hope that FSD Ethiopia’s work will strengthen our financial markets to be more accessible, inclusive, and contribute to the sustainable development of our economy.”
By the same token, Governor of the National Bank of Ethiopia, Yinager Dessie (PhD) has commented regarding the agency’s mission related to the transformation of financial sector in Ethiopia. The governor disclosed that the government of Ethiopia gladly accepted the establishment of FSD Ethiopia as a reliable development partner. He also added, “We look forward to working together to address our priority areas of financial inclusion, capital market development and institutional capacity development.”
According to FSD Ethiopia, CEO, Ermias Eshetu disclosed that it is an important step forward to build strong and inclusive financial markets in the country. He reaffirms that FSD Ethiopia will be an essential partner to support the government of Ethiopia in order to ensure that the economic growth of the country is inclusive. It also facilitates to achieve development goals. Ermias mentioned that Ethiopia has been registering the fastest growing economy. Owning a strong and more inclusive economy, it also will have the potential to lift millions of its citizens from the shackle of poverty. It delivers a long- term growth and prosperity in accordance with the right support and initiatives.
FSD Africa, CEO, Mark Napier noted, “This is the right time to establish an FSD program in Ethiopia.” He stressed that in Ethiopia there are opportunities in the country financial sector reforms, so are the challenges. From the fruits of FSD Ethiopia, decision makers from both public and private sectors will have the chance to access the neutral, technically informed advice and strong regional networks.
According to Development Director at British Embassy in Ethiopia, Paul Walters, it is important to obtain a robust, competitive, and inclusive financial market to secure development. To achieve the desired goal, FSD Ethiopia is an important vehicle for the economic development in Ethiopia. With the support of FSD Ethiopia, we envision an inclusive economic growth through functioning financial system. The support will help to reduce poverty and provide improved livelihoods for Ethiopian households and community.
Likewise, Deputy Director of Focus Country Implementation, Financial Services for the poor at the Bill and Melinda Gates Foundation, Jason Lamb commented, “We believe at the Gates Foundation that everybody should have the opportunity to pursue a healthy and productive life.” The deputy director added that digital financial services are the core tools to pave the way to pursue a healthy and productive life. Jason noted, “Ethiopia is a priority country for our foundation and we have seen good impact from working with the FSD network across Africa.”
To sum up, strengthening financial system of a country has a number of advantages. Creating a partnership with international and continental financial firms will enhance the overall development of the country’s financial system. As Ethiopia is striving to secure a stable economy, such partnership plays a vital role to achieve the goals set by the government.
BY DANIEL ALEMAYEHU
THE ETHIOPIAN HERALD SUNDAY EDITION 29 MAY 2022
