PROSPECTS AND CHALLENGES FOR THE ESTABLISHMENT OF CAPITAL MARKET IN ETHIOPIA

Abstract

Ethiopia currently does not have a stock market except treasury bills and government bonds; financial institutions, including saving institutions have accumulated equity capital; profitable projects are established and may establish to raise equity capital for stock market. In other hand more than a dozen of African countries have been established stock markets; Ethiopia is not one of them. This paper aimed to identify prospects and challenges for the establishment of capital market in Ethiopia especially in the banking sector. More specifically identify the role and responsibility of financial markets, including factors that affect the establishment of capital market such as, development of different infrastructure like information technology, human skill, government reaction towards stock market investment, financial sectors development, timing, and progress toward establishment had been assessed. Relevant primary data was collected using interview which include key respondents drawn from seven banks and two organization, the discussions were based on unstructured interview. The questionnaire data were analyzed descriptively; data from the interview and documentations were constructed qualitatively. Finally, the study conclude that even if there is a strong demand in financial sector to inaugurating capital market in Ethiopia, there must be a strong financial, Economical, and technological foundation at hand.