The National Bank of Ethiopia (NBE) has launched an electronic financial market that will allow bank loans.
The system will be managed by the Ethiopian Stock Exchange (ESX) to ensure security and transparency, trading in the banking sector will only be conducted through the NBE-approved, strictly regulated ESX trading platform.
It will facilitate banks to provide short-term loans to increase their revenues.
Banks will trade within an interest rate corridor based on the National Bank Rate (NBR), capped at NBR+3% and floor at NBR-3%. The NBE has reserved the right to intervene to maintain stability if market rates deviate from the NBR.
“This initiative enables banks to manage liquidity more efficiently within the banking system while allowing the NBE to influence short-term interest rates,” the NBE said in a statement.
The central bank is the most accurate in managing the money and currency coming from the country’s central bank, as it sets the currency as part of the currency exchange. In mid-October, the NBE implemented additional measures to address the problems in the foreign market after opening in July.
These measures include a 2 per cent limit on foreign exchange, including fees and commissions, and transparency. The company had previously made $175 million in foreign trade sales and was authorized by five foreign bureaus. In July, the country’s Cabinet approved two decrees allowing foreign banks to invest in Ethiopia’s financial institutions.
Online banking is profitable and allows commercial banks to engage in short-term trading to balance revenue and maintain stability in the Ethiopian banking ecosystem.
This interbank platform launched by NBE complies with international standards and aims to provide Ethiopian banks with more independent and transparent tools to manage the market. This online platform allows banks to adjust interest rates on time and combines market stability with the country’s macroeconomic objectives, benefiting the broader economy.
NBE Minister said the platform is a significant change in Ethiopia’s approach to financial stability and forms the basis for a strong policy intervention. By facilitating bank lending on a centralized basis, NBE is working to strengthen Ethiopia’s financial ecosystem and ultimately support economic growth
