Assessing the Infrastructure Readiness For Capital Markets Development in Ethiopia: Opportunities and Challenges
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Date
2025-03-24
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AAU
Abstract
This study assesses the infrastructure readiness for capital market development in
Ethiopia, highlighting key opportunities and challenges. Ethiopia has historically lacked
a formal capital market, but recent government initiatives aim to establish one. The
research evaluates the current state of infrastructure, the readiness of financial and
institutional systems, and the role of government and private sector initiatives in fostering
market growth. Using a descriptive research design, data was gathered from 32 experts
in the Ministry of Finance, Ethiopian Securities Exchange, insurance companies, and
private commercial banks. Findings indicate that Ethiopia’s financial market
infrastructure remains underdeveloped, with limited access to investment opportunities,
inefficiencies in securities trading, and insufficient market data availability. However,
advancements in financial technology and government policy support present significant
opportunities for development. Strengthening regulatory frameworks, investing in digital
trading platforms, and fostering public-private partnerships are crucial steps forward.
Key recommendations include introducing tax incentives, improving financial literacy
programs, establishing a stock exchange, and enhancing institutional collaboration to
create a sustainable capital market in Ethiopia.
This study assesses the infrastructure readiness for capital market development in
Ethiopia by examining key opportunities and challenges. The research aims to evaluate
the current state of infrastructure, the readiness of financial and institutional systems,
and the role of government and private sector initiatives in fostering capital market
growth. The study employed a descriptive research design, utilizing census sampling to
gather data from 32 experts from the Ministry of Finance, Ethiopian Securities Exchange,
insurance companies, and private commercial banks. Data were collected through
structured questionnaires and interviews, with quantitative data analyzed using
descriptive statistics and qualitative data analyzed through narration. Findings indicate
that Ethiopia's capital market infrastructure is underdeveloped, with limited accessibility
to investment opportunities, inefficiencies in securities trading, and insufficient market
data availability. The reliability of the settlement and clearing systems was found to be
neutral, while investor confidence in future market growth remains strong. The study
further reveals gaps in financial and institutional infrastructure, with the regulatory
framework perceived as inadequate and oversight capabilities questioned. Weak
institutional collaboration and insufficient government support hinder market
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participation. Major challenges include the absence of a stock exchange, inadequate
technological infrastructure, and a shortage of skilled professionals. However, financial
technology advancements and government policy support present opportunities for
development. The study concludes that strengthening regulatory frameworks, investing in
digital trading platforms, and fostering public-private partnerships are critical for
enhancing market infrastructure. Key recommendations include introducing tax
incentives, improving financial literacy programs, establishing a stock exchange, and
enhancing institutional collaboration. These measures are essential for creating a
sustainable and efficient capital market in Ethiopia