Addis ababa university department of accounting and finance. The world bank and international finance corporation washingto0n, d. The major formal financial institutions operating in ethiopia are banks, insurance companies and microfinance institutions. Ethiopia, the construction and business bank, and the development bank of ethiopia. The structure and performance of ethiopia s financial sector 3 commercial and central bank until 1963 when it was dissolved into todays national bank of ethiopia the central bank, re established in 1976 and the commercial bank of ethiopia, cbe henceforth. Uvadare digital academic repository financial market. The structure and performance of ethiopias financial sector 3 commercial and central bank until 1963 when it was dissolved into todays national bank of ethiopia the central bank, re established in 1976 and the commercial bank of ethiopia, cbe henceforth. History of microfinance mainly after the 1970s, some personal attempts had been made to build microfinance institutions, like accion, grameen bank etc. Oct 09, 2019 the roman empire eventually crumbled, but some of its banking institutions lived on in the form of the papal bankers that emerged in the holy roman empire, and with the knights templar during the.
In ethiopia, women account for a disproportionate share of the unbanked, and the gap is widening. Ethiopia, especially ato lakew lemma, ato getahun nana, ato muluneh alemu and the staff of other departments such as banking supervision and research. The history of banking and other financial institutions inethiopia. The case of the association of ethiopian microfinance. The bank revenue highly explained by price of fund than other input prices, that. Banksand other financial institutions act an act to regulate banking and other financial institutions and for matters connected therewith. Access to finance in ethiopia microfinance gateway. The history of currency and banking in ethiopia and the horn of africa from the middle ages to 1935. The fourth section gives a summary of the banking policy reform measures introduced by the current ethiopian government. The bank manages more than 346 branches throughout the country. The structure and performance of ethiopias financial. Oct 21, 2019 graph and download economic data for nonbank financial institutions assets to gdp for ethiopia dddi03eta156nwdb from 1998 to 2006 about nonbank, ethiopia, finance companies, companies, finance, financial, assets, and gdp.
These nonbank financial institutions provide services that are not necessarily suited to banks, serve as competition to banks, and specialize in sectors or groups. For anyone considering a banking career in ethiopia, this list of banks in ethiopia is a helpful guide on where to start. The other is the dominant role of stateowned banks. The structure and performance of ethiopias financial sector 5 clearly there is evolving structural shift when deposit is observed by institutions. To recommend appropriate actions to be taken to promote ebanking in ethiopia. Three stateowned banks still have a share of about 85% of all credits, six recently created private banks are mainly active in the urban areas. Insurance companies underwrite economic risks associated with death, illness, damage to or loss of property, and other risk of loss. These non bank financial institutions provide services that are not necessarily suited to banks, serve as competition to banks, and specialize in sectors or groups. Financial analysis of banking institutions 3 framework normally used in this process is a set of financial accounts.
In a collection of nine succinct essays, this volume looks at the role of finance in european history from the beginning of the 19th century to the period after the second world war. A bank is generally understood as an institution which provides fundamental banking services such as accepting deposits and providing loans. Ethiopia s formal financial sector is still underdeveloped and far from being liberalised. Development bank of ethiopia, formerly known as the agricultural and industrial development bank, operates as a specialized stateowned development financial institution in the country. He rose up the ranks to become chairman and chief executive in the late 1980s. Public disclosure authorized access for all world bank. The oromo moved north through the southern highlands, bypasssing the sidama on the west, and into the central highlands, where they settled in the center and west on land, some. The case of ethiopia ethiopia has conducted financial sector reform following the change in government and economic policy in 1991. The history of banking began when empires needed a way to pay for foreign goods and services, with something that could be exchanged more easily.
We can think of the activities of a financial intermediary in. The history of banking is intertwined with the history of money. Under english common law, a banker is defined as a person who carries on the business of banking by conducting current accounts for his customers, paying cheques drawn on himher and also collecting cheques for hisher customers. This paper discusses the role that has been played by the banking system especially after the arrival of private investors in the sector. Types and roles of formal financial institutions providing agricultural credit objective. Weve got lists of the most important financial services companies, banks, institutions, accounting firms, and. The production and export of cash crops such as coffee were advanced, and importsubstituting manufactures such as textiles and footwear were established.
As a regional institution and an integral part of the nations central bank, the federal reserve bank of kansas city places much emphasis on its role in monitoring developments within banking and promoting a stable and competitive financial system. The history of banking and other financial institutions in ethiopia the agreement that was reached in 1905 between emperor minilik ii and mr. In addition, some contend that banking regulation may impose excessive cost burdens that hinder banks in providing services to their customers and in competing with other financial institutions. These were banco di roma, banco di napoli and banca nazionale del lavora. The ethiopian banking system by arnaldo mauri ssrn. Factors affecting adoption of electronic banking system in. The paper examines the evolution up to the beginning of the 70s of the ethiopian banking system.
The structure and performance of ethiopias financial sector. Library of congress federal research division country profile. Ethiopian banking history started 2000 years ago, during axumite dynasty. In 1024, the first paper currency was issued by the state in sichuan.
Later, in ancient greece and during the roman empire, lenders based in temples gave loans, while accepting deposits and performing the change of money. All epayment methods share a number of common characteristics. A decades journey from deregulation to supervisory reregulation. The development bank of ethiopia dbe is a specialized bank in project financing and is not a deposit taking. Many financial institutions play the role of a financial intermediary. This article provides an overview of development of financial sector in ethiopia, including background and structure of the financial sector in ethiopia, rural financial systems in ethiopia, financial developments in ethiopia, major financial product services, suppliesdemand gaps in the financial sector, the legal and policy.
The national bank of ethiopia nbe is the central bank of ethiopia. Ethiopia, a growing economy with a population of over 100 million located in the conflict. The chapters have discussed the history, current state, structure, policy and. History of banking and finance goes back to the early stage of the human civilization, when it was growing in the cradles of different cultures. It should also be mentioned that barclays bank had opened a branch and operated in ethiopia during. A commercial bank is a type of financial institution that accepts deposits, offers checking account services, makes business, personal and.
The history of banking and other financial institutions i n ethiopia the. Origins and early development of banking in ethiopia. To learn more, see our list of financial institutions companies lists of the main players in corporate finance. The early history of banking in ethiopia, with its distinctive mixture of foreign and government financial institutions, is briefly described in section 2. The history of banking began with the first prototype banks which were the merchants of the world, who gave grain loans to farmers and traders who carried goods between cities. So we will mainly concentrate on the post 1970 era. Ethiopia started in 1905 with the establishment of abysinian bank based on a 50. Financial institutions this section will introduce you to the major kinds of financial institutions. Evaluation of the financial performance of banking sectors. The bank was authorized to combine the functions of central banking issuing currency notes and coins and commercial banking. The structure and performance of ethiopias financial sector in the. However, before the introduction of the modern banking system in ethiopia, traditional financial institutions such as equb and idir has contributed a lot in sharing risks, developing saving habits and by positively impacting on the economic.
The national bank of ethiopia was established in 1963 by proclamation 206 of 1963 and began operation in january 1964. With more than 60 million inhabitants, it has one of the largest populations in ssa. The case for financial sector liberalization in ethiopia. Nonbank financial institutions assets to gdp for ethiopia. National bank of egypt havingbeen entrusted of the project, the new institution was. The history of banking and other financial institutions in ethiopia free download as word doc. The association of ethiopian microfinance institutions, the coauthor if this study, and dr wolday amha and his staff have been a permanent and highquality supporting agency in this process.
Established in 1994, awash bank is the first of private commercial banks in ethiopia, created after the countrys post1991 financial deregulation. The chapter begins with an overview of the countrys economic status and describes the major social and macroeconomic performance for the study period 2004. Before that, several institutions had been working in many countries but the effect was too small. We identify two factors that may constrain ethiopia s financial development. As in other countries, ethiopia shows that the legislation is a strong motor for mfa creation. Headquartered in addis ababa, the bank aims to promote ethiopia s economic development by financing agriculture, commerce.
The new bank, bank of ethiopia, was a purely ethiopian institution and was the first. There were other financial institutions operating in the country like the. The financial sector in ethiopia consists of formal, semiformal and informal institutions. The unexpectedly limited impact of the post1975 policy changes on the quality of bank lending and management, and therefore solvency, is analysed in section 3. Ethiopia the agreement that was reached in 1905 between emperor minilik ii and mr. Electronicbanking in ethiopia practices, opportunities and. The financial in stitutions reform, recovery, and enforcement act of 1989. Addis ababa i think we do not have a competitive but rather a cooperative advantage, says meaza ashenafi, who is the chairperson of enat bank an ethiopian privately owned bank established with an intention of empowering women of ethiopia. We work toward a world in which microfinance is no longer viewed as a marginal or niche sectora world where poor people are considered valued clients of their countrys financial system, where an array of financial. A brief history of regulations regarding financial markets in the united states.
Thus by 1931 bank of abyssinia was legally replaced by bank of ethiopia shortly. Doc the history of banking and other financial institutions. Ma gillivray, representative of the british owned national bank of egypt marked the introduction of modern banking in ethiopia. A brief history of regulations regarding financial markets in. The informal and semiformal financial sectors in ethiopia. Now 26% of adults save at financial institutions as compared to 14% in 2014 and 11% borrow from financial institutions as compared to 7% in 2014. It has reestablished the national bank of ethiopia nbe as central bank and fi nancial market regulator and opened the banking and insurance sector s for domestic private inve stment through monetary.
This makes the analysis of the health and soundness of deposit takers central to any assessment of financial system stability. This is true even in the financial sphere, where, given the backward initial conditions, it was necessary to have large recourse to foreign assistance and cooperation in setting up banking institutions. The formal financial system is a regulated sector which comprises of financial institutions such as banks, insurance companies and microfinance institutions. History of banking in ethiopia, bank of abyssinia, bank of ethiopia 1. The sector is the backbone of economy in the country jain and jaiswal, 2016. The definition of a bank varies from country to country. The world bank public disclosure authorized ethiopia. To analyze the status of electronic banking in ethiopia to investigate the main challenges and opportunities for ebanking in ethiopia. Financial institution archives ethiopian legal brief. The history of banking and other financial institutions in. One of the main objectives of financial institutions such as banks is mobilizing resources in particular, domestic savings and channelling these to wouldbe investors. Fis 0112012 by abrham yohannes on march 9, 20 8 comments licensing and supervion of the business of financial instituions download. The early history of banking in ethiopia, with its distinctive mixture of foreign and.
Financial statements are therefore the starting point of bank financial appraisal. Ethiopia is one of the poorest and most underdeveloped countries of the world. We identify two factors that may constrain ethiopias financial development. G01,g2,g21,g22,g28,n2,n21,n22 abstract in the united states today, the system of financial regulation is complex and fragmented. Other financial institutions operating in the economy includes 17 insurance companies, one pension fund and about 31 micro finance institutions with a business focus mainly in the rural areas but in reality concentrated in urban area. The history of banking and other financial institutions in ethiopia. That is, they help connect borrowers and lenders of funds.
The history of currency and banking in ethiopia and the horn of africa from the middle ages to 1935, ethiopia observer, n. Liberalisation of the banking industry in tanzania. Its goals are to stabilize the nations currency, keep unemployment low, and prevent inflation. Ethiopia nationalized private banks and other financial institutions in 1974, but the banking sector remains small and dominated by the government with stateowned banks. History of finance globalization is circulating the western form of finance in the whole universe. Under haile selassie i reigned 193074, ethiopias economy enjoyed a modicum of free enterprise. Prior to this proclamation, the bank used to carry out dual activities, i. Regulation of mobile and agent banking services national bank of ethiopia directives no. British even in the unlikely event of a coalition among all other board members, european. See the relevant country pages for more information. It contrasts with regional and international peer countries where banking industries have a much higher share of private sector and foreign participation. History of financial institutions contributes to the analysis of how the modern corporation, business and finance have shaped and keep on shaping our world. The birth and development of banking services in ethiopia. With the italian occupation 19361941, the operation of the bank of ethiopia came to a halt, but a number of italian financial institutions were working in the country.
Especially after world war ii, tourism, banking, insurance, and transport began to contribute more to the. Thus, the notion of one size fits for all is not to do with banking competition, making it one of the most indistinct economic areas. The roots of modern banking can be traced, in some ways, back to 1960, when charles sanford joined bankers trust. In the late 1970s, the concept of microfinance had evolved. Pdf the short life of the bank of ethiopia researchgate. The fourth section gives a summary of the banking policy reform measures introduced by.
Pdf origins and early development of banking in ethiopia. The benefits and costs of banking regulation are also drawing. Regulations and procedures details written by 2m editor published on 07 february 2012 category. In general the trend is to move away form a dominant public sector towards a financial structure where the role of the private sector is becoming increasingly important. The 5 largest banks, which are all stateowned, account for 90% of all banking assets and just one commercial bank of ethiopia cbe owns 70% of deposits. Various issues and prospects in the industry are examined. Deepening the financial sector in the long run partly depends on financial institution s ability to track repayment history that requires. In fact, the history of banking in ethiopia dates back to the turn of the century.
Ethiopias history since the 1970s clearly shows the validity of this statement. Binyam teshomeworld bank the world bank group wbg, with private and public sector partners, set an ambitious target to achieve universal financial access ufa by 2020. Strong and integrative leadership is one of the keys for keeping mfas together. The roles of such banks are paramount in developing countries like ethiopia where the financial market is underdeveloped and none existed. The history of banking and other financial institutions. In fact, the history of banking in ethiopia dates back to the turn of the century, when, in1905, the bank of abyssinia was established in addis ababa, under the reign of menelek ii. This report is presented as received by idrc from project recipients. Section 4 focuses on entering of other financial institutions into the ethiopian. Insurance companies underwrite economic risks associated with death, illness, damage to or loss of property, and other. The world bank group wbg, with private and public sector partners, set an ambitious target to achieve universal financial access ufa by 2020. Explanations, types, and implications prepared by stijn claessens and m. Present the different types of financial intermediaries operating in the agricultural sector of developing countries with a specific accent on their institutional roles, typical performances and effectiveness in servicing the agricultural customer. The respective mfa in mali is aemfi association of ethiopian microfinance institutions. The saving and credit cooperative are considered as semiformal financial institutions, which are not regulated and supervised by national bank of ethiopia nbe.
A central bank is an independent national authority that conducts monetary policy, regulates banks, and provides financial services including economic research. Banks in ethiopia overview and guide to banks in ethiopia. Four other financial institutions, each one covering a specific segment of credit. An examination of the banking crises of the 1980s and early 1990s volume i 88 history of the eightiesslessons for the future 3 daniel gail and joseph norton. Section three summarizes studies that relate the association between financial lending institutions and economic growth. At the very hour, when the early people learned to exchange commodities, these two concepts were born. Ancient types of money known as grainmoney and food cattlemoney were used from a time of around at least 9000 bc, as two of the earliest things that could be used for the purposes of barter. Factors affecting adoption of electronic banking system in ethiopian banking industry ayana gemechu bultum1. The bank of abyssinia, a private financial institution established in 1905 in cairo under egyptian law, was given a 50years concession for carrying out banking activity in ethiopia by the emperor. The bank of ethiopia opened branches in dire dawa, gore, dessie, debre tabor and harrar. In ethiopian context, one cannot confidently argue that.
Following the agreement, the first bank called bank of abysinia was inaugurated in feb. One is the closed nature of the ethiopian financial sector in which there are no foreign banks, a noncompetitive market structure, and strong capital controls in place. First, what are the main factors explaining financial crises. Half strategy of gradualism in reform, 20012017 working paper pdf available. Origins and early development of banking in ethiopia request pdf.
This was around 2000 bc in assyria, india and sumeria. Yinager dessie is the current governor of the bank. The majority shareholders of the bank of ethiopia were the emperor and the political elites of the time. Graph and download economic data for non bank financial institutions assets to gdp for ethiopia dddi03eta156nwdb from 1998 to 2006 about nonbank, ethiopia, finance companies, companies, finance, financial, assets, and gdp. Unlike in other african countries, the distinguishing imprint of a single colonial. Banking in ethiopia started in 1905, with the establishment of the bank of. Chinese financial institutions conducted all major banking functions, including the acceptance of deposits, the making of loans, issuing notes, money exchange, and longdistance remittance of money by the song dynasty 9601279. This intermediation role of banks takes different forms in different economic systems. Its headquarters are in the capital city of addis ababa. Currently there are 17 commercial banks in ethiopia, one state owned and 16 private.