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Leadstar College of Management and LeadershipFaculty of Business and LeadershipGraduate Department of Business AdministrationIndividual Assignment:- Emerging Financial Markets (50%)Prepared By: - Mulualem Endalamaw TemesgenID No. LMBA 7032/085thTerm MBA studentDecember, 2016Bahir Dar
AbstractThis paper intends to examine the prospects and challenges of financial market in Ethiopia. Moreattention is given to identify the roles that financial markets can play in expediting Ethiopianeconomy, the environmental factors that need to be analyzed the current situation of Ethiopia interms of each factor. An exhaustive analysis of literature has been made on the secondary dataobtained from different sources. The research method employed in the study has both qualitativeand quantitative features. The findings of the study are presumed to be of paramount importancein providing input information for management body of financial institutions towardsestablishing financial markets in Ethiopia. As a way forward the Government body of Ethiopianeed to take timely actions to further investigates the environmental situation to establishfinancial markets, appreciate the potential opportunities and make preparations towardsaddressing the direct challenges.
Chapter OneIntroduction1.1 Background of the studyPrevious studies tell that financial market has existed in Ethiopia during the Imperial regime.Before the nationalization of private property in 1975, there had existed a rudimentary financialmarket in Ethiopia. Financial dealing was handled by the National Bank of Ethiopia, departmentof the bank allowed other financial institutions and few private financial dealers participate infinancial trading. The financial Dealing Group was engaged in facilitation of transaction offinances and other services in the financial markets. The financial institutions that played anintermediary role in transferring and delivery of traded finances were in the Commercial Bank ofEthiopia and the Ethiopian Investment Corporation. They providefinancial dealing services andenjoyed a significant confidence of the private investing community. The volume of sharesexpanded at a faster rate from Birr 152,300 in 1959 to Birr 1,159,090 in 1963. The majordevelopment seen during this period was that there had been an excess of sales to the public overpurchases from the public exhibiting an increasing interest of the private saving community inthe investment of shares. A short-lived stock market started informally in the late 1950s and was formally instituted in1965. The stock market was administered by the National Bank of Ethiopia which was theknown regulatory body in the Ethiopian financial sector. The Imperial government tried to improve resource mobilization through the National Bank triedby establishing a Finance-dealing group – which served as the connecting link for buyers andsellers in an auction process. The National Bank laid out the rudimentary rules and regulationsfor the auction market. According to Asrat (2003) the stock market was moderately successful in