The IFC and Ethiopian Capital Market Authority (ECMA) have announced a programme to support growth of the country’s domestic capital markets and increase access to local currency finance.
Under the four-year Ethiopia Capital Market Development Project, IFC will work with ECMA and other key stakeholders to develop capital market regulations, increase efficiency of the government securities market, 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 financing for key development sectors: including housing, infrastructure, agribusiness, small businesses, and climate mitigation and adaptation activities.
“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 will work with all partners and stakeholders to develop a well-regulated capital market that will help actualise a functioning and burgeoning bond market in Ethiopia,” said Dr. Brook Taye, Director General-Ethiopian Capital Market Authority.
“Liquid, diverse and well-regulated local capital markets are an essential source of local-currency financing for government, financial sector participants and end-users such as small businesses. 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,” said Aliou Maiga, IFC regional Director in Africa for the Financial Institutions Group.
IFC works with governments and regulators to develop long-term capital markets and create the conditions in which complex financial instruments, particularly bonds, can be traded to fuel growth and mobilise financing for development projects. The project in Ethiopia is part of IFC’s wider programme in Africa.
IFC’s support will enable Ethiopia’s local capital market to play a key role in supporting the country’s economic development by improving the framework for market-based issuance of government securities, and improving the capacity of institutional investors, regulators and market participants to participate in capital market transactions and new asset classes such as green bonds.