Ethiopian Capital Markets Authority (ECMA) and International Finance Corporation (IFC) launched a project to support the growth of the country’s domestic capital markets and increase access to local currency finance.
Director General of the Authority Brook Taye signed a collaboration agreement for a capital market development project with IFC Africa Director Aliou Maiga on Tuesday.
The signing marks the beginning of the four-year project that involves the development of a Local Currency Bond Market for the government and private issuers.
“A local currency bond market with strong participation from domestic institutional and retail investors has a significant impact on government finance and serves as an alternative source of finance for corporate entities,” ECMA Director General Brook said.
Brook further stated that his office “will work with all partners and stakeholders to develop a well-regulated capital market that will help actualize a functioning and burgeoning bond market in Ethiopia”.
Under the project, ECMA and IFC will work together with other partners and key actors to develop capital market regulations and increase the efficiency of the government securities market.
The collaboration also targets to develop the domestic institutional and retail investor base and increase the supply and issuance of capital market transactions.
Capital markets in Ethiopia have the potential to support the financing of key development sectors including housing, infrastructure, agribusiness, small businesses, and climate mitigation and adaptation activities.
“Liquid, diverse and well-regulated local capital markets are an essential source of local-currency financing for the government, financial sector participants, and for end users such as small businesses,” IFC regional Director Aliou noted.
“Stronger domestic capital markets in Ethiopia can help allocate investment more efficiently and allow for better risk-sharing, while providing an alternative funding source to complement bank financing,” he said.
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IFC works with governments and regulators to develop long-term capital markets and to create the conditions in which complex financial instruments, particularly bonds, can be traded to fuel growth and mobilize financing for development projects.
The capital market development project in Ethiopia is part of IFC’s wider program in Africa.