Ethiopia has officially launched its first stock exchange, the Ethiopian Securities Exchange (ESX), marking a significant milestone in the country’s economic development. As the most populous country without an exchange—home to some 130 million people—this launch addresses a critical gap in Ethiopia’s financial infrastructure. Established in collaboration with Ethiopia Investment Holdings, the Ministry of Finance, and Nairobi-based FSD Africa, the ESX is part of broader macroeconomic reforms, which also include the central bank floating the birr after half a century of control and allowing foreign banks to operate in the country.
The ESX aims to enhance governance and transparency, enabling domestic businesses to raise capital without relying solely on bank loans. This new platform is expected to drive consolidation in sectors like banking and insurance while providing entrepreneurs with exit strategies through IPOs. Additionally, the exchange hopes to attract 50 listings within the next five years, further expanding opportunities for businesses and investors. It will also play a crucial role in funding infrastructure projects and creating a virtuous cycle of growth for listed companies, pension funds, and Ethiopia’s broader capital market.
To promote inclusivity, the ESX has been granted an Over-the-Counter platform by the Ethiopian Capital Market Authority, allowing smaller businesses to access capital despite not meeting the stricter requirements for the main exchange. This approach democratizes Ethiopia’s capital markets, fostering broader participation and enabling businesses of all sizes to thrive in the evolving financial landscape.
Despite its potential, the ESX faces challenges due to Ethiopia’s historically public sector-driven economy. A cautious approach is required to liberalize the banking sector, insurance, and payment systems, with clear regulatory timelines to instill investor confidence. Investments in infrastructure, information dissemination, and talent development will also be critical in ensuring the success of the ESX and Ethiopia’s transition to a more liberalized and dynamic economy.
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