A New Chapter for Ethiopia’s Financial Markets: The Impact of ECMA’s Directive 1030/2024 and Comparative Insights from Other African Countries

• Introduction

In November 2024, the Ethiopian Capital Markets Authority (ECMA) introduced Directive No. 1030/2024, a transformative regulation under the Capital Market Proclamation No. 1248/2021. This directive lays down a comprehensive legal framework for the registration of securities, public offering, and ongoing disclosure by issuers. By doing so, ECMA aims to build trust, promote transparency, and catalyze the development of Ethiopia’s nascent capital market.

What makes this moment especially significant is that some of Ethiopia’s major financial institutions notably several banks and insurance companies have begun registering their securities following the introduction of Directive No. 1030/2024. Rather than starting from zero, these institutions are now aligning themselves with the new regulatory requirements established by the Ethiopian Capital Market Authority. Some have already completed the registration process, while others are actively preparing to comply. Their participation underscores growing confidence in the potential of Ethiopia’s emerging capital market and reflects a strategic recognition of both the opportunities and responsibilities that come with operating under a formal, transparent regulatory framework.

This article examines the importance of Directive 1030/2024, analyzes how banks and insurers are navigating the transition, draws comparisons to regulatory experiences in other countries, and explores the likely benefits and risks.

• What Directive 1030/2024 Requires




Directive 1030/2024 fulfills key mandates under the Capital Market Proclamation No. 1248/2021 by setting out detailed requirements for registration of securities and ongoing reporting.  

Here are its core provisions:

• 1. Registration Statement: Issuers must submit a registration statement to ECMA, which includes a prospectus and supporting documents detailing financials, business operations, risk factors, and more.  

  2. Disclosure: Public companies (or those issuing to the public) must file semi-annual financial statements and also report any “material information” (i.e., price-sensitive or market-moving events).  

  3. Transitional Provisions: For securities already issued before the directive’s effective date, issuers have 12 months to register under the new regime.  

  4. Prospectus Approval: Any new public offering requires a prospectus approved by ECMA before advertising or sales.  

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ECMA’s regulation applies across all sectors, including banking and insurance this is not limited to new companies or IPOs. 




• Banks and Insurance Companies: Who Has Registered and Who Is Coming

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One of the most striking elements of this capital market reform is the participation of banks and insurance companies, both strategic and long-established financial actors in Ethiopia’s economy.

• • According to some legal analysis, publicly held companies defined under the Directive as those with more than 50 shareholders and a substantial capital base must register their already issued shares within one year. This explicitly includes banks and insurance companies.  

  • Some banks have already taken steps to comply. For example, there are reports (in public commentary) of banks working to list via introduction, meaning their existing shares will be registered rather than a new issuance.  “Gada Bank has registered over 1.23 million shares with listing by introduction.”  

  • Other financial institutions, likely including insurance firms, are in the pipeline, preparing their registration statements, prospectuses, or fulfilling disclosure obligations under the directive.

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The fact that these significant players are engaging with ECMA’s new framework is a powerful signal: they see real value in operating within a regulated capital market environment, potentially tapping into new sources of capital and improving governance and transparency.

• Comparative Perspective: Lessons from Other Jurisdictions

To better understand the stakes and the path ahead for Ethiopia, it is useful to compare with other countries’ regulatory experiences, particularly those with emerging capital markets.

Kenya

Kenya’s regulatory regime under the Capital Markets (Public Offers, Listings & Disclosures) Regulations, 2023 provides a useful benchmark. In Kenya:

• • Issuers must file detailed offers, obtain approval from the Capital Markets Authority (CMA), and commit to ongoing disclosures.

  • Brokers and capital market intermediaries are subject to “fit-and-proper” criteria, ensuring that institutions are financially sound and well-governed.

  • CMA encourages technology adoption and self-regulation to enhance both efficiency and investor protection.

For Ethiopia, Kenya’s model underscores the importance of balancing stringent disclosure with capacity building for intermediaries  especially new brokerages, investment banks, and advisory firms.

Nigeria

Nigeria’s recent reforms via the Investments and Securities Act (ISA) 2025 are also instructive. Key reforms include:

• • Strengthened powers for the Securities and Exchange Commission (SEC), especially in enforcement.

  • Establishment of an Investor Protection Fund, to compensate investors under certain adverse events.

  • Use of Legal Entity Identifiers (LEIs) for market participants, improving transparency.

Ethiopia could learn from Nigeria by emphasizing robust investor protection mechanisms (perhaps including a compensation fund) and by exploring global identification systems that improve traceability. These tools can help build trust, especially among institutional and foreign investors.

• Positive Impacts of Directive 1030/2024 (Especially for Banks & Insurers)

1. Enhanced Credibility and Governance : By registering and disclosing, banks and insurance companies demonstrate transparency, which can increase trust among both retail and institutional investors.

2. Access to Capital: Rather than relying solely on deposits (in the case of banks) or underwriting risk (insurers), these institutions gain access to public capital markets. This could provide more flexibility for expansion, innovation, and risk diversification.
3. Market Building: Participation by reputable financial firms helps anchor the market. As large institutions register, they can attract other companies, intermediaries, and eventually investors, helping create liquidity.
4. Investor Trust:For investors, especially local retail investors, seeing well-known financial institutions comply with disclosure rules may lower the perceived risk of investing in the nascent capital market.
5. Regulatory Maturation: ECMA’s role is strengthened as it oversees high-profile institutions. As these banks and insurers comply, ECMA builds institutional capacity, sets precedents, and refines its supervisory mechanisms.

• Risks, Challenges, and Negative Impacts

Despite the potential, there are notable risks and challenges:

1. High Compliance Costs : Preparing a registration statement (with a detailed prospectus), meeting auditing standards, and establishing ongoing reporting systems are costly — particularly for smaller financial institutions or those without experience in capital markets.
2. Regulatory Capacity: ECMA may face difficulty reviewing and approving registration statements, especially given the technical complexity of financial institutions' operations (e.g., risk exposures, insurance liabilities, reinsurance, investment portfolios).
3. Shallow Liquidity Risk : Even after registration, there is no guarantee of liquid secondary trading. If too few investors participate, or if there are limited market-makers, banks and insurers’ shares may not trade frequently reducing the incentive to participate.
4. Information Asymmetry : While disclosure helps, many retail investors in Ethiopia might lack sophistication. They may not fully grasp financial statements, risk disclosures, or valuation metrics, risking mispricing or reactive trading.
5. Macroeconomic Vulnerabilities : Ethiopia’s economic environment including inflation, currency risk, and regulatory uncertainty could dampen investor appetite. For financial institutions, sudden macro shocks can undermine valuations or increase risk premiums.
6. Concentration Risk : If only a few large institutions (banks, insurers) list, the market could become concentrated, limiting diversification opportunities for investors.

• Strategic Recommendations

To maximize the benefits of Directive 1030/2024 — especially in the context of banks and insurance companies — policymakers, ECMA, and market participants might consider the following steps:

1. Capacity Building for Issuers : ECMA could run workshops and training sessions for banks and insurers on how to prepare prospectuses, handle risk disclosures, and structure their registration statements.
2. Simplified Regime for Smaller Issuers : Consider a tiered approach: for smaller institutions or those with fewer resource constraints, ECMA could allow lighter disclosure regimes or streamlined approvals, to reduce cost burden.
3. Investor Education : Launch public campaigns (webinars, media, investor roadshows) to educate local investors on how to read financial disclosures, understand risks, and make informed decisions.
4. Facilitating Market Making : Work with licensed intermediaries (investment banks, broker-dealers) to encourage market-making, which will improve liquidity for newly registered securities.
5. Robust Enforcement : Strengthen ECMA’s enforcement mechanisms with clear penalties for non-disclosure, false reporting, or insider trading to build credibility.
6. Explore Investor Protection Funds : Drawing inspiration from other markets (like Nigeria), Ethiopia could consider establishing a fund to compensate retail investors in certain adverse scenarios, improving trust.
7. Coordination with Macro Policy : Align capital market reforms with monetary and fiscal policies to ensure macro stability e.g., policies to manage inflation, currency risk, and capital controls.

Conclusion

Directive No. 1030/2024 is a watershed in Ethiopia’s financial evolution. By laying down a structured, transparent system for securities registration, ECMA is not only regulating but also nurturing the capital market. The active participation of banks and insurance companies is especially promising: these institutions bring scale, credibility, and capital essential ingredients for a vibrant market.

Nonetheless, the success of this initiative is not guaranteed. High compliance costs, limited regulatory capacity, and the risk of shallow liquidity could undermine the directive’s potential. The way forward will depend on balanced implementation: supporting issuers, protecting investors, and strengthening ECMA’s supervisory role.

If done well, Ethiopia’s capital market could become a powerful engine for economic growth, attracting not just domestic but possibly regional or even international investors and fueling the next phase of financial and industrial development in the country.







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