By our staff reporter
The Ethiopian Capital Market Authority (ECMA) and the World Bank Group private sector wing, International Finance Corporation (IFC) agree to work hand in hand to pave way for the upcoming securities exchange, including being actively involved in investments to boost players trust in the alternative financing scheme.
As per the deal signed by Brook Taye, Director General of ECMA, and Aliou Maiga, Director of IFC Africa, under the four-year Ethiopia Capital Market Development Project, IFC, which has played similar roles in other African capital markets, will work with ECMA and other key stakeholders to develop capital market regulations, increase the efficiency of the government securities market, develop the domestic institutional and retail investor base, and increase the supply and issuance of capital market transactions.
Brook said that besides providing technical support IFC will also be involved in trial transaction.
When the securities exchange kick starts operation, players including private actors will mobilize resources whilst IFC on its end will provide the much needed technical support.
“Their support will be very wide. This may include investing on the government bonds as an anchor investor, which will be a testament for others,” Brook showed how vital the IFC will be whilst addressing the media.
“Similarly, when the listed private companies float their shares, retail and institutional investors; of whom institutional investors are dominant compared to retail investors, will be major investors and the IFC will then invest through institutional investors that will build trust for retail investors to do the same,” the Director General explained.
The international partner has had similar success in its resume including that of other African capital markets like Egypt’s secondary market.
“A local currency bond market with strong participation from domestic institutional and retail investors has a significant impact on government finance and serves as an alternative source of finance for corporate entities. ECMA will work with all partners and stakeholders to develop a well-regulated capital market that will help actualize a functioning and burgeoning bond market in Ethiopia,” stated Brook.
“Liquid, diverse and well-regulated local capital markets are an essential source of local-currency financing for the government, financial sector participants, and for end users such as small businesses. Stronger domestic capital markets in Ethiopia can help allocate investment more efficiently and allow for better risk-sharing, while providing an alternative funding source to complement bank financing,” said Aliou Maiga, IFC regional Director in Africa for the Financial Institutions Group.