Country: Ethiopia

CAHF 2018 housing finance in Africa yearbook (9th edition)

FSD Africa’s partner, the Centre for Affordable Housing Finance has produced the 2018 Housing Finance in Africa Yearbook

The 9th edition of the Housing Finance in Africa Yearbook covers 54 African countries and five regions, and is produced in both English and French. Targeted at housing finance practitioners, investors, developers, researchers and government officials, the 2018 Yearbook provides an up-to-date review of practice and developments in housing finance and delivery in Africa, reflecting the dynamic change and growth evident in the market of each country over the past year. In addition to 54 country chapters, regional profiles for Southern, West, North, Central and East Africa discuss trends and provide useful reviews of regional developments, including infographics to present and summarise critical data points, including mortgage lending terms, the price of the cheapest newly built house, and rankings on the ease of doing business.

The publication is produced annually by FSD Africa’s partner, the Centre for Affordable Housing Finance (CAHF), with the contributions of over 30 local experts throughout the continent.

This year, CAHF focus on the theme of innovation, and highlight the examples of innovation that can be found along each link in the housing value chain, as government, the private sector, households and communities find their places in the housing ecosystem. Each of these innovations is identifying a market niche and then working with the opportunities provided by new technologies, adaptive experience, and entrepreneurial curiosity to develop real products and services that are essentially creating brand new markets. Innovation along the value chain and at the local level is making headway and creating precedent that is bankable. The 2018 Yearbook highlights these potential investment opportunities available in each country context, and helps practitioners find one another as they strive to participate in, and advance, the sector.

Download the yearbook here.

Blockchains and distributed ledger technology can reduce the cost of remittances to Africa

Nairobi, Monday 14th August 2017 – The volume of remittances to Africa is growing year by year but prices for international transfers are still relatively high. Blockchain and Distributed Ledger Technology (DLT) can assist to; reduce the cost of remittances, increase speed of settlement, reduce settlement risk, decrease entry barriers for financial institutions, improve the interoperability of different financial instruments and enhance the regulatory frameworks that oversee funds transfers such as Know Your Customer (KYC) and Anti-Money Laundering (AML) processes.

This is according to a new report, entitled ‘Blockchains, Distributed Ledgers and Funds Transfers: An Overview’, published today by the Financial Sector Deepening Africa (FSD Africa) in partnership with Consult Hyperion. The report states that DLT presents opportunities for new ways of performing funds transfers, payment settlement and regulatory oversight, due to its decentralised, replicated and transparent nature.

It comes at a time when FSD Africa has just released a report on ‘Reducing Costs and Scaling UP UK to Africa Remittances through Technology.’ The report finds over 1 million people born in Africa and living in the UK are paying more than £300 million a year to send money to friends and family back home. Nine out of ten send money through agents and just one in ten send money digitally, which makes Africa the most expensive place to send money in the world.

Commenting on the report, Salome Parulava, Associate Consultant at Consult Hyperion and the author of the report said: “Blockchain and DLT can provide a foundation for needed infrastructural changes in expensive and inflexible funds transfer models. But although opportunities are promising, there are many issues that arise when considering the widespread adoption of the technology, which should be taken into account. The report aims to give an overview of both benefits and problems of the DLT usage in funds transfers.”

The report concludes that, DLT has the potential to act as a reliable ‘store’ of identity information available in near real-time and as a generator of dynamically changing identity attributes (such as creditworthiness). However, this is not straightforward. Reliability comes from intrinsic DLT characteristics (such as amend-only transaction history across parties and cryptographically secured transactions), but not exclusively from them.

To ensure trust and reliability, it is important that DLT solutions are developed in accordance with national laws and security standards, and take into consideration the views of all stakeholders.

Exploring new frontiers in fintech investments in East Africa 2018

FSD Africa in partnership with East Africa Venture Capital Association (EAVCA), Intellecap and FMO have published the findings of their sector study on the investment opportunities in FinTechs within East Africa.

The report’s core explores the funding options currently available for the sector: ranging from debt offering, grants and equity provision. With the increased success of FinTech players in East Africa, investors are keen to understand the opportunities available for capital deployment in East Africa’s FinTech space. The report assesses the financing options currently available in the market for target investors. It also explores the risks associated with the sector and how other investors deal with such risks. Finally, the report has explored returns available for FinTech investors in East Africa, to provide guidance on the region’s earnings potential.

Some highlights from the report:

  • Africa is the second fastest growing region for Fintech investments, with an 87% Compound Annual Growth Rate (CAGR), after Asia Pacific;
  • US$ 200 million was raised for Fintech businesses in East Africa in 2017;
  • 98% of funds raised in East Africa went to Kenyan companies;
  • Lending segment of Fintech sector attracted the highest number of funds raised between 2010 – 2017; and
  • Equity financing accounted for 71% of total funds raised; debt financing 6% and hybrid financing 23%.

Reducing costs and scaling up UK to Africa remittances through technology

The objective of the report is to assess whether the appropriate application of ‘new’ technologies could be leveraged by donors and other development agencies to increase formal remittance flows into Africa and/or reduce the cost of sending money home.

Fragile and conflict-affected states (FCAS) are of particular interest given the importance of remittances to livelihoods and post-conflict development, as well as the exacerbated challenges that are often faced in these jurisdictions.

The art of market facilitation: learning from the financial sector deepening network

Market facilitation (M4P) is an approach to promote systemic change—change that goes beyond individual players and that is relevant to the wider environment, affecting many. Market systems development requires that organisations play a facilitating role. Standing outside of the market system, facilitators work with different players within the system, to make it work more effectively. Their essential role is active and catalytic, to enable others to do rather than do themselves—stimulating changes in a market system without becoming part of it.

Understanding this concept and applying it in market systems development initiatives is no mean feat. Market facilitators, donors and practitioners must draw from a wide range of tools and techniques to put market facilitation into practice. Developing and maintaining partnerships, managing risks, deploying flexible intervention tactics, establishing a measurement system and communicating effectively are all useful learning points for those working in this field. Knowing when to exit an intervention is just as critical as identifying and selecting the right partners to work with and understanding these complexities can have an impact on the effectiveness of interventions. Market facilitation as a practice is more of an art than a science, directed by principles rather than lists of actions, which can make it difficult to translate the theory into practice.

There is limited evidence from the field on how to apply this approach in a way that ensures interventions are both scalable and sustainable. In June 2015, FSD Africa commissioned the Springfield Centre to produce: a) one
comprehensive case study of FSD Kenya—a financial market facilitation agency in Nairobi, Kenya; and b) six minicase studies of financial market facilitation interventions from the wider FSD Network, by the FinMark Trust, FSD Kenya, FSD Tanzania and FSD Zambia. The aim of this process was to build the knowledge base around the art of market facilitation in the field. These case studies revealed a lot of insights about effective market facilitation, the challenges the Financial Sector Deepening (FSD) Network faced while designing and delivering interventions using the M4P approach and the lessons they have learned so far.

The M4P synthesis paper (this publication) explores the art of market facilitation in action through the lens of the FSD network and synthesises learnings gained from these case studies to build understanding around the M4P approach. The paper examines the wider lessons and challenges that emerge for organisations addressing the dilemmas of developing financial markets for the poor and how they differ significantly from other conventional approaches.

Reducing costs and scaling up UK to Africa remittances through technology

The objective of the report is to assess whether the appropriate application of ‘new’ technologies could be leveraged by donors and other development agencies to increase formal remittance flows into Africa and/or reduce the cost of sending money home.

Fragile and conflict-affected states (FCAS) are of particular interest given the importance of remittances to livelihoods and post-conflict development, as well as the exacerbated challenges that are often faced in these jurisdictions.

Ethiopia’s new securities exchange aims to unlock interbank liquidity

Posted on by Kihingu Inc
By Michael Habte is ESX’s chief operating officer and Victor Nkiiri is a senior specialist – capital markets at FSD Africa

Ethiopia, Africa’s second most populous country, is among the fastest-growing economies in the world, with GDP growth projected at 6.5 per cent in 2025. The country has adopted a bold vision to achieve lower-middle-income country status by 2030, underpinned by sweeping economic reforms to transition from a state-controlled to a market-driven economy. 

Among the new economic initiatives recently rolled out is a new securities exchange, the Ethiopian Securities Exchange, or ESX, planned for launch on January 10. For decades, Ethiopia’s financial an interbank trading platform. Simply put, banks could not effectively lend to one another, resulting in high interest rates to borrowers and significant inefficiencies in bank liquidity management. Such inefficiencies have constrained businesses, particularly the small and medium-sized enterprises which are the backbone of Ethiopia’s economy. 

The new exchange is already addressing this challenge. An interbank trading platform which is part of the exchange is optimising liquidity and improving credit flow in the banking system. Since its pilot in late October, the platform has facilitated trades exceeding 135bn birr($1.1bn), demonstrating robust uptake by the banking sector. 

Regulatory reforms

This milestone reflects the effectiveness of reforms such as the Interbank Money Market Directive issued by the National Bank of Ethiopia, which created the necessary regulatory framework. By enhancing price transparency and reducing transaction costs, the platform is already improving credit accessibility for businesses, enabling them to grow, innovate and drive economic activity.

The impact of the ESX extends far beyond the banking sector. A functional interbank market itself is the foundation for developing critical financial instruments such as treasury bills, corporate bonds and commercial papers. These instruments rely on liquid money markets for effective pricing and execution. With its state-of-the-art electronic trading platform that is integrated with the central securities depository, the ESX is well-positioned to facilitate the efficient issuance and trading of these instruments.

The exchange is also a critical enabler of economic diversification. By reducing borrowing costs and expanding access to finance, it empowers businesses to invest in new projects, expand operations and create jobs. These outcomes align with Ethiopia’s ambitions to achieve middle-income status and build a globally competitive economy. 

Establishing the new securities exchange has been a challenging yet rewarding endeavour. To succeed it needed support from a wide spectrum of actors. The public-private partnership model facilitated this, tapping the power of collaboration to drive financial innovation. Ethiopian Investment Holdings, in partnership with FSDAfrica and the Ministry of Finance, worked hand in hand to develop the exchange, in an approach that prioritised market development initiatives that addressed local challenges while adopting global best practices. This ensures that the ESX is not only tailored to Ethiopia’sunique needs but also equipped to compete on the global stage.

Blueprint for innovation
As Ethiopia integrates into global financial markets, the ESX has the potential to position the country as a regional hub for capital market activity. This integration will strengthen Ethiopia’s appeal to foreign investors, unlocking new opportunities for economic growth. Beyond its immediate economic impact, the ESX also serves as a powerful symbol of Ethiopia’s ambition and potential. It exemplifies the transformative role that well-structured capital markets can play in fostering inclusive growth and economic resilience.

The new bourse is also anticipated to inspire other African nations to pursue similar reforms, unlocking the continent’s immense economic potential. Institutions like FSD Africa, which has been instrumental in supporting the ESX, are poised to replicate these lessons in countries that lack functional capital markets. Such efforts are vital for modernising Africa’s financial systems and driving sustainable development.

The launch of the ESX is not just a win for Ethiopia but a blueprint for capital market innovation across the continent.

Ethiopian Securities Exchange Launch Marks a New Dawn for Ethiopia

Posted on by Kihingu Inc

The Ethiopian Securities Exchange (ESX) was officially launched today in a colorful event officiated by Prime Minister Dr. Abiy Ahmed. The exchange, established by the country’s sovereign wealth fund, Ethiopia Investment Holdings (EIH) in partnership with the Ministry of Finance and FSD Africa, marks a historic milestone in Ethiopia’s economic development.

Licensed by the Ethiopian Capital Market Authority in December 2024 to operate as a Securities Exchange and Over the Counter (OTC) market, ESX is set to revolutionise the nation’s capital markets. By providing equitable access to capital and enhancing liquidity, it aims to support private sector growth in Ethiopia, the second most populous country in Africa and one of the fastest growing economies globally, with projected GDP growth of 6.5 in 2025.

For decades Ethiopia’s financial sector has lacked a strong mechanism for equitable access to capital and liquidity for the private sector. In particular, the lack of an interbank trading platform has meant banks could not effectively lend to one another. This resulted in high interest rates to borrowers and significant inefficiencies in bank liquidity management which has in turn constrained businesses, particularly small and medium-sized enterprises (SMEs).

The new exchange is already addressing this challenge. An interbank trading platform, which is part of the exchange, is optimising liquidity and improving credit flow in the banking system. Since its pilot in late October 2024, the platform has facilitated trades exceeding ETB 135 billion (USD 1.1 billion), demonstrating robust uptake by the banking sector. By enhancing price transparency and reducing transaction costs, the platform is already improving credit accessibility for businesses, enabling them to grow, innovate, and drive economic activity.

ESX’s state-of-the-art multi-asset Electronic Trading Platform, which is integrated with a modern Central Securities Depository for post-trade settlement and clearing, will also support more efficient issuance and trading of financial instruments such as Equities, Treasury Bills and Bonds, Corporate Bonds, Commercial Papers, Repos, and Derivatives. This is expected to attract both domestic and international investors, further strengthening Ethiopia’s financial markets.

ESX CEO Tilahun Esmael Kassahun was optimistic that the new bourse would inject dynamism in the economy and deepen especially the debt market to the benefit of all actors in the ecosystem.

“We see the new securities exchange as a multi-faceted financial infrastructure, providing multiple markets and variety of products, catering for different types of issuers and investors. The Fixed income market will provide a platform to list and trade debt instruments including treasury bills and bonds, corporate bonds and Shariah compliant securities such as Sukuk Bonds.”

On his part, FSD Africa CEO Mark Napier underscored the role of modern and deep capital markets in accelerating the already impressive economic growth momentum of Ethiopia.

“The launch of the ESX is a true game-changer for the country. As an organization running development finance programmes in well over thirty African countries, we know only too well the impact well-functioning and modern capital markets can have in catalyzing economic growth. We are proud to have played a role in the development of this exchange, that will undoubtedly spur equity, fixed income and other innovative financial instruments,” noted Mark.

The launch of ESX follows significant economic reforms in Ethiopia over the past year, including floating the national currency, the Birr, opening the banking sector to foreign competition, and advancing capital market development. The exchange is poised to become a vital platform for raising capital, trading securities, and driving economic transformation.