New Capital Market Pledges Power to the People But Finds Few Ready to Trade

May 23 , 2026. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

The nascent capital market now has a platform, rules and ambition. What it lacks is the habit of trading. The test is whether infrastructure can become a routine exchange among companies, institutions and households, reports BEZAWIT HULUHAGER, FORTUNE STAFF WRITER

The test arrived not in the trading hall, but at the regulator’s desk. The young capital market found itself sapped by paperwork.

Of the 71 registration statements submitted to the Ethiopian Capital Market Authority (ECMA), 66 reached the Authority either on deadline day or during the preceding 24 hours. The pileup pushed the regulator into overdrive, forcing it to reorganise operations, pull reviewers from across departments and deploy specialised teams to accelerate the examination of prospectuses.

The administrative rush has exposed a larger imbalance. The pressure point is no longer theoretical for regulators or issuers either. The country's financial ambitions have outpaced the institutions being assembled to support them. The Ethiopian Securities Exchange (ESX) opened with the promise of remaking domestic finance, broadening ownership and redirecting idle savings into productive investment. Newly issued shares have failed to meet subscription targets without extensions. Trading has begun, but the market is still searching for a habit of participation.

The pattern is not unfamiliar. Ethiopia has mobilised citizens around large financial projects before, most visibly with the Grand Ethiopian Renaissance Dam (GERD). Over 14 years of construction, more than 20 billion Br was mobilised for the four-billion-dollar project, yet the bulk of financing came through loans. Bond sales and public contributions accounted for all but two billion Birr, while diaspora contributions and overseas bond purchases brought in more than one billion Birr.

The same tension is now visible in the capital-market era.

Ethio telecom, the flagship state-owned company expected to draw retail investors, sold only three percent of the shares it offered, reaching about 43,000 shareholders. Treasury bills are publicly marketed, but the best returns remain concentrated among financial institutions, where shareholders earn profits above inflation. The public is being invited into investment, but the financial system still favours large capital over ordinary savers.

The scale of what could emerge remains large, with the 32 commercial banks having a combined paid-up capital of nearly 422.5 billion Br, and 3.2 trillion Br in assets. However, only three banks are listed and Dashen Bank, which has 14 million shares registered, with another 2.2 million newly registered shares entering the market. For now, its tradable universe is narrow, its shares traded at 2,900 Br last week.

Market data tells the story of a platform with uneven traffic. In the second week of May, transactions climbed to 54 million Br after an erratic opening phase in which weekly sales swung between five million Birr and 118 million Br. A week later, activity fell to 15.8 million Br, with 5,300 trades executed by 85 traders. Awash Bank (traded at 2,999 Br) dominated the early cycle, accounting for nearly 90pc of all shares traded. Wegagen was trading at 1,191 Br last week, while Gaddaa Bank was at 1,160 Br.

Zemedeneh Negatu, chief executive of CBE Investment Bank, one of the three investment banks affiliated with commercial banks, has sought to temper the public conversation. His focus is on the gap between passive savings and active investment. Bank deposits still pay close to seven percent, while investment-oriented sectors deliver returns of about 19.4pc. Profitability, in this reading, is increasingly tied to where capital is deployed, not merely where deposits are held.

For the architects of this market, the objective is not only to create a venue for trading but also to democratise investment. Entry levels for shares such as Dashen Bank’s have been set at 5,000 Br to prevent the Exchange from becoming a preserve of wealthy investors. Zemedeneh argued that without heavyweight institutions such as Awash Bank, the market could have remained “solo,” deprived of the early trading momentum needed to build confidence.

The ambition is codified in the Exchange’s roadmap to 2029. Insiders describe its targets of 50 listed companies, one trillion Birr in equity market capitalisation and cumulative transactions of 5.7 trillion Br, as “delicate numbers”. The plan assumes liquidity will rise to 15pc, and investor accounts will reach three million. Regulators and market operators are trying to move awareness campaigns beyond LinkedIn posts and English-language financial messaging to citizens with little exposure to capital markets.

According to Mekdes Tesfaye, chief of staff at the ECMA, the surge in filings shows the Authority is carrying out its mandate without distraction.

“The review of prospectuses and documents submitted as part of licensing applications is a core mandate and legal responsibility of the Authority,” she told Fortune.

To reduce delays, the Authority directed by Hana Tehelku, has begun working more directly with transaction advisers, seeking to avoid repeated exchanges and documentation gaps. This approach has not satisfied all market participants, however. Some found the oversight as detailed and restrictive, while criticising the Authority "for showing little appetite for easing standards."

Mekdes insisted that the Authority benchmarked "international standards and the regulatory frameworks of other jurisdictions, particularly peer jurisdictions,” when designing directives. She argued the rules are not unusually rigid but protective safeguards for prospective investors and financial stability in a market still forming its habits.

The regulator also wants more products. Beyond Ethio telecom and early bank listings, nearly 50 companies are preparing to enter the market, supported by initiatives such as the IPO Clinic, which helps private firms go public. The Authority is exploring sustainable finance instruments, including Green Bonds, Gender Bonds, and Islamic finance products, as part of a broader effort to diversify the range of instruments available to investors.

For Mekdes, durability depends on ordinary people becoming participants rather than spectators.

“Increased retail investor participation is essential for the growth of the capital market and for promoting financial inclusion,” she said.

The Authority’s Investor Awareness Strategy includes roadshows, financial literacy campaigns and training programmes designed to explain the shift from a bank-dominated system to a risk-bearing investment culture.

Adualem Hailu (PhD), chief executive of Awash Capital Investment Bank, sees education as a limitation. He wants to reach out to three categories of people.

"Shareholders should come first because they already know investment products," Andualem told Fortune. "Bank account holders form the next layer. The largest opportunity may be among people who keep money informally in safes or trunks.”

The Ethiopian Deposit Insurance Fund (EDIF) showing that about 97pc of accounts hold less than 100,000 Br, revealing the narrow base of savers from which the market hoped to draw. One expected catalyst is the planned listing of major state-owned enterprises, including Ethio telecom, which is scheduled to enter the secondary market on Tuesday.

High-value depositors are few, but he believes a larger pool of liquidity lies outside banks and can be inferred from data on broad money circulation.

“Bringing money outside the banking system into this investment space is the way forward,” he said, calling “money in the cushion” a future source of market depth. He also pointed to the Ministry of Finance data showing private savings as a share of GDP on a gradual upward trend.

"Redirecting even a small part of those savings could expand liquidity and strengthen private investment," said Andualem.

The ESX presents the slow start less as failure than institution-building. It is engaging private firms and state-owned enterprises preparing to list, while government-linked companies are moving in line with privatisation plans and policy approvals. Its five-year roadmap is less a near-term forecast than a structural guide.

According to Wongel Tamene, a senior figure at the Exchange, the market is in its “early stages,” where credibility, governance and infrastructure matter more than rapid expansion. Newly listed companies are confronting formal listing standards, audited reporting requirements and governance obligations, including an operating Exchange, a regulatory framework, licensed intermediaries, and trading and settlement systems.

But liquidity is constrained by the limited number of securities. The same data that showed 54 million Br in trades in the second week of May showed 15.8 million Br the following week. Awash Bank’s dominance reveals both demand and narrow choice.

Wongel hopes that ongoing investor education at universities, media platforms, and public outreach initiatives would help citizens understand the shift from a bank-centric system to a diversified capital market. The Exchange is also working to improve listing readiness, expand the broker network and strengthen digital access. She called this the “long game.”

For Dashen Bank's President, Asfaw Alemu, the transition is "pioneering but difficult," as all participants are on a learning curve with a new operating system. Under the previous and less regulated environment, share sales would have moved faster. The current framework is demanding, but he sees it as necessary for long-term development.

“It's a process,” he said, likening the work to implementing a new policy across a 900-branch network.

Asfaw defended the scrutiny applied to Dashen’s prospectus, calling a “correct and straight” regulatory approach necessary to protect the public and strengthen confidence, especially after past cases in other sectors in which investors were misled during share sales. However, his larger concern is market readiness. Brokers and investment banks have obtained licences, but many are “not yet fully prepared” to guide share buyers.

Public understanding of the capital market is grossly inadequate. Some prospective investors remain unsure whether banks are issuing capital or selling ownership stakes. Even so, Asfaw credited the ECMA for adjusting deadlines to operational realities and was convinced that the market is “on the right track.”

Gemechu Berhanu, a capital-market expert and former business lecturer at Haramaya University, is more cautious. He called the current phase a “normalisation stage,” marked by structural bottlenecks and weak investor awareness. Targets of 15pc liquidity, 50 listed companies, and three million brokerage accounts look ambitious for him in early trading, pointing to a fall from 54 million Br to 15 million Br in a week as evidence of "shallow depth."

His sharper criticism is of service providers.

"Investment banks remain trapped in a 'high-end' communication space dominated by English-language messaging and social media updates, leaving the wider public behind," he told Fortune. "Some shareholders are still unaware they can trade their holdings, while many retail participants place orders without understanding mechanisms such as bid-ask spreads."

Gemechu argued that lasting liquidity will depend more on institutional investors, such as pension and mutual funds, than retail buyers. These create a “daily chain of transactions” through portfolio rebalancing. He urged the National Bank of Ethiopia (NBE) to finalise policies that allow such institutions to reallocate part of their allocations from Treasury bills (T-bills) to risk-based assets, such as equities. He also sees Collective Investment Schemes and Real Estate Investment Trusts as possible turning points.

PUBLISHED ON May 23,2026 [ VOL 27 , NO 1360]