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ECA, FSD Ethiopia, ESX and ECMA strive to strengthen the credit rating capabilities of Ethiopian financial institutions, regulators, and professionals

7 March, 2024
ECA, FSD Ethiopia, ESX and ECMA strive to strengthen the credit rating capabilities of Ethiopian financial institutions, regulators, and professionals

Addis Ababa, 07 March 2024 (ECA) – The United Nations Economic Commission for Africa (ECA) and FSD Ethiopia in collaboration with the Ethiopian Securities Exchange (ESX) and the Ethiopian Capital Market Authority (ECMA) organized a day-two workshop on “Understanding credit risk ratings and green, social and sustainability financing opportunities in Ethiopia”. The workshop forms part of the support provided by the two organisations to Ethiopia in setting up its first securities exchange. As the new exchange will enable market players to raise capital, it is essential to understand the credit rating process, as one of the main tools used to assess the creditworthiness of issuers. The main objective of this workshop is therefore to strengthen the credit rating capabilities of Ethiopian financial institutions, regulators and professionals, to ensure active participation in the exchange.

In his opening remarks, Dr. Brook Taye, Director General at the Ethiopian Capital Market Authority (ECMA), welcomed the organisers' initiative, stressing the importance of the subject and the need for ratings that reflect the economic potential of the African continent and are based on a good understanding of African dynamics.

Along the same lines, Dr. Tilahun Kassahun and Mr. Michael Habte, CEO and Chief Operating Officer of ESX respectively, stressed the need for quantitative credit analysis, as well as local knowledge, i.e. qualitative analysis on the ground and engagement with company management.  Mr Habte emphasised the value of an independent rating, stating that "ratings serve as a barometer not only for individual companies, but also for sectors. They should be forward-looking by nature".

Ms Sonia Essobmadje, Chief of the Innovative Finance and Capital Markets Section (IFCMS) at the ECA, highlighted that credit ratings are an important factor in the development of capital markets, as they provide a standardised and objective assessment of the credit risk of different issuers and securities. It helps investors compare the risks and returns of different investment options and make informed decisions about where to allocate their capital. Credit ratings also influence market prices and yields on bonds and other debt instruments, as well as the availability and cost of credit for borrowers.

Mr. Ikechukwu G. Iheagwam, Associate Director at Agusto & Co. animated the workshop while by Mr.Fassil Gebretsadik, FSD Ethiopia acted as moderator. Over the two days, various aspects were covered, including a presentation of the different types of credit rating and associated methodologies, the credit rating process and its implications for issuers and investor and opportunities for green and sustainable financing. Case studies were also discussed with participants.  The workshop was enriched by presentations from ECMA on the Credit Rating Regulations in Ethiopia, a presentation from ESX on the exchange's product offering and a presentation from ECA on its research, training programs and technical support to countries in the field of credit rating.

More than 70 representatives from the Ethiopian Capital Market Authority, the Ethiopian Stock Exchange, FSD Ethiopia, financial institutions and intermediaries attended the workshop, which was held in a hybrid format.

The collaboration between the ECA, FSD Ethiopia, ECMA and ESX represents a crucial step in building a resilient credit rating framework in Ethiopia. By fostering expertise and cooperation, this initiative aims to build the foundations of a thriving financial sector that can effectively support economic growth and development.

Issued by:
Communications Section
Economic Commission for Africa
PO Box 3001
Addis Ababa
Tel: +251 11 551 5826