Thursday, July 25, 2024
PoliticsHouse approves Diaspora involvement in finance sector

House approves Diaspora involvement in finance sector

Customs, Land Compensation proclamations amended

The House of People’s Representatives (HPR) has approved a new bill that seeks to amend the existing Banking Business Proclamation to provide for the participation of Ethiopians in the Diaspora in the domestic financial sector a couple of years after a controversial campaign by the National Bank of Ethiopia (NBE) thoroughly purged any member of the diaspora from the country’s financial sector.

The bill was tabled before the House, first in June, before the parliament went into recess. It was remanded to the Revenues, Budget and Finance Standing Committee of the House for further reading.

Presenting the a resolution,Lemlem Hadgo, chair of the Committee, told the House that,in addition to providing the Ethiopian diasporas with a chance to invest in the banking business, it will also contribute to the ongoing reform as well as the transfer of knowledge in the financial services sector.

The former proclamation, which considers Ethiopian-born diaspora as foreign citizens, bars foreign nationals from investing or acquiring shares in an Ethiopian bank or its subsidiaries.However, the newly approved bill has removed this major restriction by allowing the diaspora to participate in the financial sector.

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According to the bill, having diaspora directly participate in the banking sector conforms to Ethiopia’s effort in the negotiations with the World Trade Organizations (WTO).

The purchase of shares,as indicated in the bill,has to be done only in Ethiopia and the shareholders will be paid for (or earn their dividends) in birr like any other Ethiopian citizen.

But, if a foreign national of an Ethiopian origin holds shares directly or indirectly by holding a share in another organization that holds a share in a bank, the foreign national of Ethiopian origin or the organization in which he/she is a shareholder shall pay the value in an acceptable foreign currency.

Furthermore, in addition to removing this restriction,the bill has offered another new provision which would allow the private sector to operate digital-based financial services.

Additionally, the bill grants NBE more regulatory roles; granting it the right to issue directives to regulate banking businesses related to interest-free deposit mobilizations and utilization.Furthermore, the NBE can demand correction or impose bans on commercial advertisement on the media when it deems it to be harmful.

The additional provisions also include restriction on bank lending activities, especially loans against the security of its own share. According to the explanatory document attached together with the draft bill, the main reason to restrict banks from lending against the security of own shares is because their shares are their capital.

The bill further stipulates that the minimum conditions for outsourcing “critical or important functions in the banking sector,” would be determined by directives to be issued by the National Bank.

The new law was approved unanimously by MPs.

In a related development, the House, in the same session, has approved two other separate bills mainly amending customs and land expropriation and provision proclamations, based on an actual price of the people whose houses are to be relocated for public use.

The new customs proclamation,also unanimously approved in the same session,that to be instrumental to avoid hardships of customs administration and accelerate simple and time efficient service delivery for customers.Moreover, it will scrap economic mischiefs done by abusing duty-free privileges and enhance the follow-up mechanism for smooth services.

As part of his reform agenda and realizing the efforts to bringing about an ease of doing business, PM Abiy Ahmed (PhD) last weekhas indicated that his government has carried out several revisions to the existing legislation.

Similarly, the HPR has approved a proclamation for compensation for persons relocated from their land for public use.The bill has passed with a majority vote.

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