| Abstract: | With a view to attracting investors, the Government of Ethiopia has offered a
variety of incentives and financing schemes. However, the incentives or loan
options can be inadequate, susceptible to corrupt practices and inaccessible to many
business undertakings. This article examines other possible options of raising
investment fund privately from the general public by issuing debt security
(debenture). Instead of looking for hand outs of governments or sole reliance on
bank loan, investors can raise investment fund from the general public –even
beyond national borders– by offering debenture bonds for public subscription. A
debenture is debt security that entitles its holder to collect periodic interest until the
loan is paid back. Compared to bank loans, raising investment fund through the
instrumentality of debentures is more advantageous. The rate of interest, the volume
of loan needed for running business, and the time for repayment can be determined
by investors. Moreover, the loan is not generally subject to collateral. This article
highlights the nature, form, and class of debenture under Ethiopian law, and
discusses the legal requirements for the issuance of debenture, the amount of money
that can be raised by issuing debentures, the status of debentures in Ethiopia, and
legal safeguards for repayment of the loan. |
