Radar | Nov 27,2018
March 12 , 2022
By Asseged G. Medhin ( Asseged G.Medhin, deputy CEO of Global Insurance Company. )
Ethiopia has been observing emerging risks for over half a decade, from political uncertainty to the COVID-19 pandemic. The broad spectrum of risk has mainly been affecting the financial sector. The relevance of the insurance sector for the overall stability of the financial system by outlining the sources of risk and vulnerability facing the industry, at this juncture, is not only the prerogative of players in the financial sector. We need to craft a seasonal strategy to manage emerging and existing risks, integrating our maximum assessment and treatment.
Our financial litmus paper should indicate whether there is a growing inter-linkage between insurers and banks, if socio-economic balance can be maintained during unrests, and whether risk behaviour of individuals and organisations can be analysed in a different scenario. We have to decide if we need an integrated effort under public-private modality, discussion, orientations and creating the way forward for financial stability.
These approaches and strategies will save national resources from human-made catastrophes, and provides a comprehensive input to catalyse transformation. The rationale behind this is all about pinpointing and identifying some key challenges for the insurance industry.
During unrest, financial systems become ever more complex. Other stockholders, including the media, should play important roles in financial stability by creating awareness on risk management, deposit mobilisation and the consequences of unrests in the economy. The government should also provide more space for discussion to derive new insights.
How can situations of financial stability and the role of the central bank be characterised?
It has too often been taking care of daily routines. A different thought process needs to take root in terms of operational standards to utilise the optimum benefits from transformational agendas and the enhancement of stringent criteria to safeguard the most liquid assets in the financial sector, which are highly exposed during unrest. The country's economic foundations can only be sustainable if its roots are stronger than ever during times of risk, such as national elections.
The sources of risk and vulnerability facing the banking and insurance industries are not only political, as new entrants to the sector are increasing with potential resources. A dynamic approach of regulation and management has to be vigilantly expedited.
If we review recent developments in the Ethiopian insurance industry, especially compared to commercial banking, we find that it has become more inefficient, and the growth is tamed. This implies that less attention is given to the insurance sector in terms of the broader capability of the sector for the economy and the institutionalising of risk management.
Financial stability is a somewhat elusive concept as it is demonstrated by the absence of a widely recognised definition. While it is evident when a financial system is unstable or in a crisis situation, it is much more difficult to assess whether the system is moving towards instability in normal circumstances. The perspective underpinning financial stability work at any central bank is whether the system can withstand shocks without giving way to processes that impair the allocation of savings to investments and the processing of payments in the economy.
This emphasises that in a situation of instability, the financial system is unable to perform its basic task of providing the financing needed to support real economic processes. It also stresses that the system should be resilient to potential shocks to safeguard financial stability.
Central banks have a natural role to play in ensuring financial stability and have a strong interest in fostering it for several reasons. A stable financial system, sufficiently vigorous to efficiently allocate financial resources in the economy, is a precondition for successful monetary policy implementation.
We do not need to invent a new machine or establish a new system, but there must be integration. Different stakeholders should challenge the system positively without any fail at this season, if we all want to prosperity. True wealth is achieved by understanding the contexts of all stakeholders in the economy, particularly the financial sectors. We should be more vigilant to manage any unrest which has a paramount effect on the nation as a whole since those unrests and emerging risks devastate the economy and destabilise the financial sector.
The Ethiopian financial system is overdue for a transforming, liberalising shock. It is a must. We deserve a dynamic financial system supported by modern and digitised networks and platforms, which would best help us address risks.
PUBLISHED ON Mar 12,2022 [ VOL 22 , NO 1141]
Radar | Nov 27,2018
Fortune News | May 14,2022
Radar | Apr 22,2022
Films Review | Jun 20,2020
Commentaries | Dec 04,2020
Radar | Sep 28,2019
In-Picture | Feb 15,2020
Commentaries | Sep 28,2019
Fortune News | Jun 23,2019
Commentaries | May 23,2021
Photo Gallery | 54291 Views | May 06,2019
Fortune News | 46870 Views | Jul 18,2020
Photo Gallery | 46104 Views | Apr 26,2019
Fortune News | 45857 Views | Sep 01,2021
Commentaries | Aug 06,2022
Life Matters | Aug 06,2022
My Opinion | Aug 06,2022
Sunday with Eden | Aug 06,2022
Agenda | Aug 06,2022
Editorial | Aug 06,2022
July 2 , 2022 . By RUTH TAYE
On a rainy afternoon last week, a coffee processing facility in the capital's Akaki-Qality District was abuzz with activ...
November 27 , 2021
Against my will, I have witnessed the most terrible defeat of reason and the most sa...
November 13 , 2021
Plans and reality do not always gel. They rarely do in a fast-moving world. Every act...
October 16 , 2021 . By HAWI DADHI
Residing in a country with no capital market, an organised marketplace for trading se...
Leaders of the National Election Board are in a charm offensive mood, of a sort. Last week, they organised a rare tour for members of the me...
When the country’s most senior diplomats and envoys return back to their posts after two-week debriefings, they leave behind a point or tw...
August 6 , 2022
Few initiatives by the administration of Prime Minister Abiy Ahmed (PhD) have been pu...
July 30 , 2022
Ethiopia’s banking industry is not merely underdeveloped. It has historically regre...
July 23 , 2022
The flip side of a government spending plan is financing. Behind the campaign promise...
July 17 , 2022
Messrs Ahmed Shide and Eyob Tekalegn (PhD), minister and state minister for Finance,...
PM Abiy Ahmed (PhD) at a Gala Dinner Called for the Awarding of the Félix Houphouët-Boigny Peace Prize
May 6 , 2019
As the rainy season gets wetter, accompanied by heavier rain showers, it is not unusual to see folks with umbrellas. Little do they know tha...
August 6 , 2022
Champagne popped and poured; and a cake was cut to celebrate another milestone for Ethio telecom, still the only active operator in the coun...
August 6 , 2022 . By RAHEL BOGALE
The hospitality industry has entered the list of economic sectors that enjoy tax exemptions and incentive...
August 6 , 2022 . By RAHEL BOGALE
Federal authorities are contemplating the reversal of a decade-long ban on maize export. A team of expert...
August 6 , 2022 . By RUTH TAYE
Yodahe Zemichael seems determined to push the national ID project past the pilot stage, onboarding up to...
Or see contact page