On March 21, 2025, the Ethiopian Capital Market Authority (ECMA) granted licenses to five firms set to join the securities trading ecosystem as Capital Market Service Providers (CSMPs).
The licensees include two investment banks—CBE Capital Share Company and Wegagen Capital Investment Bank Share Company—both of which are subsidiaries of major commercial banks, the state-run Commercial Bank of Ethiopia and Wegagen Bank, respectively.
The other three firms—HST Investment Advisory Services PLC, Equation Securities Investment Advisor PLC, and Ethio-Fidelity Securities Share Company—are signing on as investment advisors and a securities dealer, respectively.
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Investment banking, which tends to be viewed as an American phenomenon according to author Michale Fleuriet, dates back to May 17, 1792—the day the New York Stock Exchange was founded under a buttonwood tree outside 68 Wall Street.
Unlike traditional banks that focus on deposits and loans, investment banks offer specialized financial services such as raising capital, securities underwriting, mergers and acquisitions (M&A) advisory, and brokerage services.
Financial experts like Dakito Alemu (PhD) are hopeful that these investment banks will support businesses—from large corporations to small enterprises—in solving financial and operational challenges.
“For instance, when a company faces liquidity issues, an investment bank can guide it through capital-raising methods such as Initial Public Offerings (IPOs) or bond issuance,” Dakito noted, adding these institutions serve as intermediaries between companies seeking funds and investors looking for profitable opportunities.
“Selling and buying of shares and securities in the capital market will now be conducted more professionally by financial experts,” Dakito explains. “Previously, companies failed to raise adequate capital during IPOs, like Selam and Jano Banks, due to a lack of structured financial guidance and investor trust.”
A Professionally Regulated Landscape
Dakito believes the dawn of investment banking will help put an end to current practices in raising equity from the public, which rely heavily on using public figures and popularity rather than financial viability, often resulting in investor losses and project failures.
“In some cases, individuals disappeared after collecting money from the public to establish a share company. Now, capital mobilization will be handled by professionals who are accountable under the law,” said the expert.
He sees the regulatory oversight that comes with licenses investment banks as a critical advantage.
“These professionals are vetted and licensed by the ECMA. They are legally accountable and bound to meet strict operational standards,” said Dakito. “Only those who meet the necessary criteria will be granted licenses, and with this comes significant responsibility. When they raise capital, they must navigate a series of rigorous processes.”
He emphasized the critical role that investment banks can play in efficiently channeling capital by offering strategic guidance to investors and bringing about an essential semblance of legal accountability in the nascent Ethiopian securities market.
Dakito foresees the government can also benefit from the presence of investment banks.
“A case in point is the Millennium Dam (GERD) bond sale, where investment banks can help the government raise funds through their underwriting services,” he said.
Research indicates that 60 percent of the bond market is controlled by the government and supranational organizations such as the International Monetary Fund, World Bank, and African Development Bank.
Dakito is hopeful the introduction of investment banks and more rigorous legal protections will spur foreign investment.
Ethiopia has historically ranked poorly in the World Bank’s Ease of Doing Business Index—placing 159th out of 190 economies in 2023. One key factor behind this low ranking has been inadequate investor protection mechanisms.
“Without a proper institution to safeguard investor interests, people could raise capital and vanish without consequences,” Dakito says. “The 2021 Capital Market Proclamation gives the ECMA the legal authority to oversee and protect investors, a move that could greatly enhance Ethiopia’s appeal to foreign investors.”
Abebaw Zewdie, board chairman for Ethio-Fidelity Securities Share Company, is optimistic about his firm’s entry into the capital market scene.
“There’s a clear and ready platform for participation,” he said.
Abebaw reflected on Ethiopia’s investment banking history, tracing it back to the 1950s, during the reign of Emperor Haile Selassie I.
“We were pioneers in this field, but the Derg shut it down, and we had to take steps backwards,” he said.
Shareholders in financial institutions, in particular, stand to benefit from the Ethiopian Securities Exchange (ESX), argues Abebaw.
“They had to rely on informal brokers, often selling their shares at significantly lower prices,” he said. “Even after finding a buyer, the process was bureaucratic — you had to go through the National Bank of Ethiopia (NBE)’s share management department, the Documents Authentication and Registration Service and wait for approval, which could take a year.”
The coming of ESX, he argues, means significantly better efficiency.
“Under the new investment banking structure, a share transaction can be completed in minutes. It’s a win-win for both buyers and sellers,” said Abebaw.
Other experts like Etsubdink Sileshi (PhD), an independent economist, observe investment banks have the potential to unlock opportunities for small businesses and startups as well as large corporations and financial firms.
He hopes to see these banks provide crucial advisory support to youth-led ventures and startups with strong business ideas but limited funding.
“They can help raise capital through bond sales and equity offerings, giving entrepreneurs the financial runway to grow their businesses,” said Etsubdink.
Moreover, these banks are expected to facilitate not just domestic transactions, but also international expansions for Ethiopian businesses.
“Advisory services could guide local companies on branch openings both locally and abroad, international mergers, and joint ventures,” said the Economist.
While optimistic about the potential benefits, Abebaw is realistic about the challenges ahead. Among them is the lack of public awareness and knowledge about securities trading and investment.
“Regulatory institutions like the ECMA need to prioritize investment education, which is still lacking in Ethiopia,” he said.
The Board Chairman noted that company participation in the capital market since its establishment has not met expectations. He worries that institutions are taking too long to list on ESX and to reveal their actual market value
“Proper listing and professional valuation by investment advisors would ensure both buyers and sellers receive fair value,” he said. “Share companies and government-owned enterprises should actively join the market. This would help them raise capital, facilitate the transfer and sale of shares, and unlock great opportunities. As brokers and dealers, we are in a good position to benefit from this evolving market. However, it will take time for the market to become vibrant. All stakeholders need to be engaged for that to happen.”
While he praised efforts made towards investor protection, observing the previous lack of regulatory oversight led to the loss and embezzlement of investors’ money, he warned that reluctance to participate in the market could jeopardize ESX before it gets off the ground.
Abebaw believes that much of the hesitation stems from a lack of awareness among company leaders.
“There is a significant gap in knowledge about investment banking among both the public and institutional leaders,” he said. “ECMA and the Ethiopian Securities Exchange should lead efforts to raise awareness through targeted educational initiatives.”
