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13 February 2007
Vice Governor of the National Bank of Ethiopia (NBE), Alemseged Assefa, and Mr. Ishac Diwan, the World Bank Country Director for Ethiopia, Thursday launched a USD 15 million financial sector capacity building project that seeks to strengthen the financial system and increase access to finance for the private sector.
"Financial sector reforms take a long time," said Alemseged, "but ultimately, our goal is to increase the availability and lower the cost of credit to productive enterprises and to extend the reach of basic savings, payments, credit and insurance services for low income people and for the smallholder farms and micro enterprises which provide their livelihood."
The financial sector capacity building project will contribute to the development of a more transparent, well governed, well regulated, and competitive financial sector that allocates resources to the private sector more effectively and efficiently. When completed, it will have laid the foundations for increased access to finance for all, the World Bank said.
"By strengthening the financial system, this project will create a more stable, deeper, and more effective financial sector," said Ishac Diwan. "The activities included in this project will contribute to better access to finance for all and, over the medium-to-longer term, to sustained, pro-poor growth."
Specifically, the program will support activities like enhancing professional skills in the financial sector by investing in skills training for bankers, insurers, leasing experts, mortgage specialists, securities brokers and issuers, accountants and auditors, amongst others, and by strengthening the capacity of financial sector professional associations, including the bankers association, insurers association, microfinance association, accountants association etc. Improving the skills of financial sector actors is a core aspect of financial sector development.
It also helps developing new financial products by supporting the development of new financial products that are critical to improving access to finance and fostering financial sector broadening and deepening. Broadening access to housing finance, leasing finance, small and medium enterprise financing and other products enables more people to acquire their own homes, which provides them - in addition to the housing itself -with a means of accumulating wealth, and enterprises to expand their operations.
The World Bank further said that the program also supports the strengthening of financial sector infrastructure by investing in activities aimed at payment system modernization; improving the credit information center; developing the capital markets infrastructure; and setting up an asset/collateral registry to facilitate secured loan transactions. The effectiveness of financial institutions will be greatly improved if there were stronger underlying infrastructures, including in the payments system, credit information facilities, and capital market infrastructure - all contribute to greater transaction efficiency and reliability.
Strengthening the human and institutional capacity of the NBE by providing financial and technical assistance includes the following main areas: banking and insurance regulation and supervision and corporate governance of financial institutions: economic research, policy formulation and implementation functions; internal audit and finance; legal; IT; human resource management; and bank modernization. Effective regulation and supervision increases the level of confidence in domestic financial institutions thus attracting both savers and investors. In time, a strong, efficient and well regulated sector will provide entrepreneurs with more investment resources.
"Making finance work for the Ethiopian private sector is essential for national economic development," said Samuel Munzele Maimbo, World Bank senior financial sector specialist. "A strong financial sector is key to boosting growth and competitiveness, and reducing poverty."
The World Bank said that the project launch provided an opportunity to the NBE, the financial sector and the World Bank to discuss the challenges and successes of financial sector development in Ethiopia. It also voiced the hope that the launch would represent the opening conversation in what would become a more continuing dialogue in the collective effort to deepen the financial sector.