Licensing of Capital Market Service Providers
Considering the economic reform and market liberalization efforts of the government, the Ethiopian Capital Market Authority (ECMA) was established with the aim of creating an enabling environment for supporting business growth, enhancing public finance, and promoting sustainable financial inclusion.
Against this backdrop, the ECMA issued the Capital Market Service Providers Licensing and Supervision Directive Number 980/2024 (“the Directive”) in January 2024. The Directive covers a range of issues including licensing, corporate governance, code of conduct, reporting, and other obligations of service providers. The table below summarizes the license categories and general requirements under the Directive. It needs to be noted that license-specific requirements are not covered in this brief.
Table: License Categories for Capital Market Service Providers
Reflections
We expect this Directive to attract the participation of domestic and foreign service providers in the capital market ecosystem. Among the various capital market services available, it appears that the investment banking space could be a low-hanging fruit for licensed Ethiopian banks. In addition, the possibility of major public enterprises such as Ethio-telecom and Ethiopian Airlines Group or other major private companies potentially going public with an initial public offering (IPO) could increase the appetite of major global and regional capital market service providers to invest in the sector.
In order to ensure that the licensing process of service providers is efficiently managed, the ECMA needs to continue its current efforts/engagement with the Ethiopian Stock Exchange, the Ministry of Trade & Regional Integration, the National Bank of Ethiopia, and the Ethiopian Investment Commission. As an outcome of this process, we expect various ways of workings to be established among regulators and legislative amendments to surface, among others, to allow local banks to set up subsidiaries; and to actualize the collective investment schemes among others.
