Markets in ethiopia where the findings highlighted

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Markets in Ethiopia where the findings highlighted the significance and inevitability of financial market in Ethiopia. I.2 METHODOLOGY, DATA COLLECTION AND ANALYSIS This study fully relied on secondary data obtained from various sources. These sources mainly include publications of scholars from academia, financial institutions, Addis Ababa Chamber of Commerce and Sectoral Association (AACCSA), and articles posted in different websites. The research approach applied is qualitative methods depending on the nature of data used. The qualitative approach as used in this article is characterized by more of descriptive and aimed at creating a common understanding of the subject being under discussion. II. LITERATURE REVIEW AND DISCUSSIONS Ethiopia has conducted financial sector reform following the change in government and economic policy in 1991. It has re-established the National Bank of Ethiopia (NBE) as central bank and financial market regulator and opened the banking and insurance sectors for domestic private investment through monetary, banking and insurance supervision laws that are enacted in 1994 and amended in 2008. It has made inter-bank money and foreign exchange markets operational as of 1998. It has also introduced a regulatory regime for microfinance, required the formal establishment of the microfinance institutions within the financial system, and required the NBE to promote development of the traditional savings institutions of the society along with the microfinance institutions and to encourage participation of the banks and other financial institutions in the provision of microfinance by a law enacted in July 1996 and amended in 2009. It currently subjects the banks, insurers and microfinance institutions to supervision laws that are similarly fashioned and complementary to one another. It also allows the transformation of the 3
microfinance institutions into formal banks and the direct engagement of the formal banks and insurers in the provision of microfinance. It has licensed twelve private banks, eleven private insurers, thirty microfinance institutions and more than one thousand insurance auxiliaries under this regime. There are also government owned three banks and one insurer. The country has not, however, achieved desirable level of banking, insurance and microfinance services. All the services are at their beginning stage of development and a substantial size of the Ethiopian population still lives without them. The banks, insurers and microfinance institutions are also weak in their fixed capitals, service types, governance and competitiveness. They have not diversified, modernized, automated and networked their services. The banks, other than the Development Bank of Ethiopia, also concentrate on short and medium term trade finance while the insurers concentrate on short term general insurance making the total long-term insurance less than six percent of the total insurance business in the country. The microfinance institutions

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