Micro-Financing Institution Laws

A Proclamation to provide for the Licensing and Supervision of the business of Micro-Financing Institutions No. 40/1996 defines the requirements for licensing micro-financing institutions that cater for the financing needs of small businesses. This Proclamation also empowers the National Bank of Ethiopia to license and supervise micro-financing institutions and, to this end, issue relevant Directives.

Conditions that should be fulfilled to engage in micro-financing business are:

  • obtain a license from the National Bank of Ethiopia;
  • be formed as a company; (a company means a share company the capital of which is owned fully by Ethiopian nationals and/or organizations wholly owned by Ethiopian Nationals and registered under the laws of, and having its head office in, Ethiopia);
  • deposit with a bank the minimum initial capital required by the National Bank of Ethiopia (the minimum capital is Birr 200,000);
  • the directors and other officers of the micro-financing institution meet the requirements set by the National Bank of Ethiopia.

Most of the Directives (regulations) to be issued by the National Bank of Ethiopia are specifically stated in each Proclamation and have been issued by the Bank.

However, the National Bank can issue other Directives which are consistent with the spirit of the Proclamations even if they are not specifically mentioned therein.


Source:
"Banking and Finance" - Embassy of Ethiopia, Washington DC
Hari Srinivas - hsrinivas@gdrc.org
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