Capital Market Regulator Eases Pressure After Share Registration Deadline Ends

Dec 17 , 2025. By BEZAWIT HULUAGER ( FORTUNE STAFF WRITER )

While ECMA has shown a willingness to accommodate companies struggling to comply with the share registration requirement, high advisory fees, limited access to licensed service providers, and an undeveloped secondary market are among the issues facing the emerging capital market. However, signs of progress are evident. Microfinance institutions are collaborating to lower costs, and the imminent rollout of mobile trading platforms and expanded advisory services is helping the market take its next steps.

The capital market is entering a critical moment as regulators ease enforcement for companies that missed a share registration deadline.

The move denotes a notable shift in tone for the Ethiopian Capital Market Authority (ECMA) that, until recently, had placed mounting pressure on firms to comply with new rules intended to bring order and transparency to the fledgling market for shares. The deadline, which expired two weeks ago, had left many companies concerned about the risk of penalties. However, Hana Tehelku, director general of the ECMA, signalled a more flexible approach.

“There is no one-size-fits-all rule,” Hana told Fortune. "Each case will be evaluated individually, with exemptions granted to newly formed companies, those facing financial difficulty, and firms that reported losses in the past year."

While the directive governing initial public offerings (IPO) does not specify penalties for missing the registration deadline, the most severe consequences remain for companies that sell shares before registering with the Authority. Such actions, according to ECMA, could trigger criminal liability. Under the current regulations, share registration is mandatory for companies with more than 50 shareholders or capital exceeding 100 million Br. The penalties for selling unregistered shares are among the strictest, subjecting violators to prison terms of up to 15 years and fines of 150,000 and 300,000 Br.

For companies and, in particular, microfinance institutions (MFIs), the pressure to comply has come with a price. Compliance costs have emerged as a barrier for the sector. Out of approximately 60 microfinance institutions nationwide, around 35pc have yet to meet the minimum paid-up capital requirement of 75 million Br, a threshold that should be achieved by 2028.

Zegeye B. Kebede, CEO of Meklit Microfinance Institution S.C., described the financial strain in no uncertain terms. Advisory fees for share registration reached as high as 11 million Br, a figure that created “major financial pressure.” Founded in February 2000 with a paid-up capital of 200,000 Br, 191,000 Br of which came from Progynist, a local NGO focused on women’s empowerment, Meklit’s capital has since grown to 458 million Br. It now counts over 511 shareholders, manages a loan portfolio exceeding one billion Birr, holds savings of more than 300 million Br, and operates 35 branches with a staff of over 280.

According to Zegeye, the share registration deadline arrived before the licensing of capital market service providers such as Wegagen Investement Capital, CBE Investment Capital, and Ethio Fidelity.

“Had licensed service providers existed before the deadline, companies wouldn't have faced high costs of 10 million to 11 million Br,” he told Fortune.

Microfinance institutions have banded together through industry associations, splitting into two groups to hire advisors collectively. The result was a substantial reduction in spending for each. Meklit’s fees, for instance, fell by nearly 70pc, to 3.3 million Br. For smaller firms, the cost was even lower, sometimes as low as 800,000 Br, depending on company size. Meklit now expects to complete its share registration in the coming weeks, a milestone in a sector that has struggled with the regulatory transition.

Support for companies still awaiting share registration has come from licensed securities investment advisers such as I-Capital Institute Plc. According to its CEO, Gemechu Waktola (PhD), his firm’s services cover companies that filed registration documents before the deadline and those still lagging behind.

“Some may not be able to avoid penalties entirely,” he said.

The capital market remains modest in scale but evolving. Around 2,000 investment accounts are now used to trade three securities, Wegagen Bank, Gadaa Bank, and Treasury Bills, after yields on government paper climbed to 16pc. Nonetheless, Hana cautioned that the number of accounts is far from sufficient to sustain a robust secondary market. She disclosed that only two companies are listed, representing a combined 20,000 shareholders, all of whom are expected to have investment accounts. According to Hana, the market needs at least 300,000 investment accounts to accommodate all the shareholders in its banking industry alone.

Investment banks, for instance, have yet to streamline account creation for individuals. The Ethiopian Securities Exchange (ESX) is preparing to launch a mobile trading application designed to simplify access and encourage broader participation. Market confusion, however, persists.

Yoseph Alemayehu, a consultant and financial market trainer, described ongoing uncertainty among companies, especially those in formation, which often submit only initial documentation rather than the full prospectuses required by the regulator. He called for greater public awareness and guidance from ECMA, especially for firms in the construction sector still in the process of formation.

Under the capital market directive, companies in the process of formation should register before selling shares, and individuals unable to meet the contribution requirements are similarly barred from selling shares. Yoseph urged ECMA to issue directives to standardise advisory fees, proposing a pricing structure based on company capital to help alleviate financial pressure.

“They need a win-win solution,” he said.

Yoseph argued that while Ethiopia is committed to free-market principles, regulatory intervention is necessary to support new firms and prevent market distortions.

Yoseph also called for the launch of a derivatives market, convinced that it is essential for financial sector development. He warned that businesses are increasingly turning to the parallel market as the Birr continues to depreciate, and suggested that derivatives could offer an effective hedge against currency risks. He stated the knowledge gap that persists among potential investors and companies.

“In other countries, firms become share companies as they grow," Yoseph said. "In Ethiopia, it often occurs the other way around.”

According to Yoseph, stability, trust, and transparency are essential for the capital market to thrive.

“The market needs knowledge, stability, trust, and peace to thrive,” he added, emphasising the importance of both clear regulation and investor education.

PUBLISHED ON Dec 17,2025 [ VOL 26 , NO 1337]