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Markets in Ethiopia where the findings highlighted the significance and inevitability of financialmarket in Ethiopia.I.2METHODOLOGY, DATA COLLECTION AND ANALYSISThis study fully relied on secondary data obtained from various sources. These sources mainlyinclude publications of scholars from academia, financial institutions, Addis Ababa Chamber ofCommerce and Sectoral Association (AACCSA), and articles posted in different websites. Theresearch approach applied is qualitative methods depending on the nature of data used. Thequalitative approach as used in this article is characterized by more of descriptive and aimed atcreating a common understanding of the subject being under discussion. II.LITERATURE REVIEW AND DISCUSSIONSEthiopia has conducted financial sector reform following the change in government andeconomic policy in 1991. It has re-established the National Bank of Ethiopia (NBE) as centralbank and financial market regulator and opened the banking and insurance sectors for domesticprivate investment through monetary, banking and insurance supervision laws that are enacted in1994 and amended in 2008. It has made inter-bank money and foreign exchange marketsoperational as of 1998. It has also introduced a regulatory regime for microfinance, required theformal establishment of the microfinance institutions within the financial system, and requiredthe NBE to promote development of the traditional savings institutions of the society along withthe microfinance institutions and to encourage participation of the banks and other financialinstitutions 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 aresimilarly fashioned and complementary to one another. It also allows the transformation of the3
microfinance institutions into formal banks and the direct engagement of the formal banks andinsurers in the provision of microfinance. It has licensed twelve private banks, eleven privateinsurers, thirty microfinance institutions and more than one thousand insurance auxiliaries underthis regime. There are also government owned three banks and one insurer.The country has not, however, achieved desirable level of banking, insurance and microfinanceservices. All the services are at their beginning stage of development and a substantial size of theEthiopian population still lives without them. The banks, insurers and microfinance institutionsare also weak in their fixed capitals, service types, governance and competitiveness. They havenot diversified, modernized, automated and networked their services. The banks, other than theDevelopment Bank of Ethiopia, also concentrate on short and medium term trade finance whilethe insurers concentrate on short term general insurance making the total long-term insuranceless than six percent of the total insurance business in the country. The microfinance institutions