The Ethiopian Capital Market Authority (ECMA) on Thursday licensed the country’s first investment banks, marking a major milestone in the financial sector. The newly approved institutions, CBE Capital Stock Company and Wegagen Capital Investment Bank Stock Company are poised to introduce a new era of investment banking in Ethiopia.
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Other capital market operators licensed by ECMA
Alongside the two investment banks, ECMA has granted licenses to other key capital market players. HST Investment Advisory Services and Equus Securities Investment Advisor are now officially accredited as Securities Investment Advisors, while Ethio-Fidelity Securities Stock Company has been authorized as a Securities Market Operator.
Significance influence of capital market on Ethiopia’s economic development
The National Bank of Ethiopia’s governor and chairman of the Capital Market Authority, Mamo Mihret, emphasised the significant influence that a robust capital market might have on Ethiopia’s economic development.
He stated, “A developed capital market is essential for the country’s economic growth and prosperity. It holds great potential, particularly in solving financial challenges in sectors like manufacturing, while also addressing the government’s budgetary needs.”
“This development will empower society by enabling broader public ownership in state-owned enterprises,” Mihret added, highlighting the role of the capital market in the privatisation of state-owned businesses.
The Capital Market Authority’s Director General, Hana Tehelku, was upbeat about the entry of these new participants.
She noted, “The expansion of services, from investment banking to securities transaction execution, will significantly diversify and strengthen the capital market.”
Tehelku added, “Until now, the capital market was limited to just four licensed investment advisors. This expansion will provide broader access to essential services, enhancing investor confidence, promoting fairness, and offering better opportunities for raising capital.”
Ethiopia’s market diversification
These new capital market service providers’ arrival is essential to Ethiopia’s market’s diversification and provision of essential services to the general population.
Investment banking, advisory services, and securities transaction execution are among the services offered.
Better capital-raising and investment opportunities will become possible as a result of this expansion, which will provide the market new depth and efficiency.
It is anticipated that these new service providers will increase investor confidence, advance market equity, and offer improved capital-raising instruments, hence opening up the market to institutional and individual investors.
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Wegagen Capital and CBE Capital’s impact
The entry of Wegagen Capital and CBE Capital, both majority-owned by major commercial banks, is significant for the development of Ethiopia’s capital market.
Recent regulatory changes, including National Bank of Ethiopia Directive No. SBB/92/2024 now allow banks to own up to 100 per cent of shares in capital market service providers, facilitating their entry into this sector.