Ethiopia: Diaspora Contributing Tremendously in the Financial Sector

Recently, the contribution of Ethiopian Diasporas has been increasing in every direction. The government also established the diaspora agency so as to create conducive environment for diaspora who would like to contribute to their nation. Hence, they are doing different activities that helps their county. Accordingly, the diasporas have been contributing in all walks of life. Their contributions have been observed in health center, Grand Ethiopian Renaissance Dam (GERD), education sectors and the like.

Ethiopian Diaspora Agency Director-General Selamawit Dawit said that in this Ethiopian fiscal year the Ethiopian diaspora have contributed a lot to their nation. They have contributed about 192.1 million Birr for the construction of the Grand Ethiopian Renaissance Dam (GERD), more than 30 million Birr for Dine for the Nation, about 282.8 million Birr for Covid-19, about 600 million Birr for Ethiopian Defense Forces and to support rehabilitation efforts in Tigray State. Furthermore, around 103 million Birr for voluntary services, and over 1.1 billion dollars as remittance. They have been also fighting against foreign intervention in Ethiopia via different mechanisms.

Notwithstanding, they contribute to their country, the previous government (EPRDF) put restrictions for diasporas who would like to invest in financial sectors, especially, establishing bank business. For instance, Ethiopian Ministry of Foreign Affairs adopted Diaspora Policy in 2013 which explained the duty of the Ethiopian mission abroad to gather data on investment and promote the same to the diaspora nonetheless, the policy does not fully encourage the Ethiopian diaspora to participate in finance sector.

Because the policy encourages the Ethiopian diaspora to involve in investment in collaboration with domestic investors. Additionally, the policy allows the diaspora to take part in businesses like import-export, to establish tour organization, market intelligence, brokerage, and sales businesses.

However, the policy asserts a special policy promotion package and credit package to be set aside for members of diaspora with the desire to engage in the manufacturing and distribution of Ethiopian products, especially Ethiopian artifacts but many diaspora communities complains as it is not enough. Hence, they have been showing their zeal to participate in financial sectors especially, establishing bank business.

Realizing this fact, the new leadership that assumed power since mid-2018 has started taking economic reform measures. Among others, the amendment of proclamation No. 592/2008 is a milestone achievement for those diasporas who would like to establish banking business in Ethiopia.

Because the proclamation had asserted that foreign nationals or organizations fully or partially owned by foreign nationals are not allowed to open banks or branch offices or subsidiaries of foreign banks in Ethiopia or acquire the shares of Ethiopian banks.

However, this situation has changed since 2018. On July 31, 2019 under banking business amended proclamation No. 1159/2019 Ethiopian parliament passed a bill which permits the Ethiopian diasporas, who have taken up nationalities in other countries, to invest, buy shares, and set up lending businesses in the country's state-dominated financial sector.

Furthermore, the proclamation enables the Ethiopian born diaspora to take part in the economic growth of the country. Hence, in the last two years the contribution via the diaspora in Ethiopia's economy has shown a significant growth. Consequently, Ethiopian diaspora are in the verge of opening two banks with an aggregate capital of 400 million dollars.

Ethiopian Diaspora Bank S.C project manager, Gashaw Yatele once told local media that the involvement of diaspora in the banking business had been closed by the previous government. This affects the diaspora interest to participate in banking business.

But the coming of new leadership in Ethiopia in mid-2018 along with the amended proclamation opened the door to diaspora to take part in banking sector. Investment adviser Ato Zemedeneh Nigatu in his part noted that unlike the past, these days the diasporas are investing significantly in the financial sectors since they have the legal security of ownership. Hence, new financial services companies including the establishment of diaspora banks underway.

Selamawit explains that diaspora's contribution in investment sectors have increased. In this Ethiopian annual year 83 Diaspora-owned investment projects with a total capital of 3.9 billion have also become operational. The projects created jobs for over 13,000 people. Hence, their contribution is immense.

According to Samuel Getachew, writer of the African Report, articulated that two commercial banks with an aggregate capital of 400 mln. dollars are under formation by Ethiopian-born foreign nationals living abroad.

In the last two years since Abiy Ahmed became Prime Minister, the contribution via the diaspora in Ethiopia's economy has shown a significant growth. Ethiopian Diaspora Bank S.C project manager, Gashaw Yatele, the diaspora owned bank would help not only the development of the finical sector but also the nations mega projects since the bank alleviates foreign currency shortages of the country.

Scholars in the field of financial sector advised the significance of incorporating diasporas in the countries development journey. For instance, Leeds University of UK Business School Scholar Professor Nick Williams in 2018 his academic article entitled "Mobilizing Diaspora to Promote Homeland Investment: The Progress of Policy in Post-Conflict Economies" stated that a coordinated response to mobilize the diaspora to create a positive impact on the economy with the aims being to better coordinate policy, reduce the risks associated with investment, increase support, improve the institutional environment and involve the diaspora in policy making.

Through the effective coordination and implementation of policy, governments are seeking to improve economic growth through increased investment and increased levels of remittances, the transfer of knowledge to the country of origin, enhancements in human and social capital, and a more skilled workforce, all of which can be impacted by effective mobilization of the diaspora and return the economies to the "norm" of positive growth.

Local scholars also agree with the significant contribution of diasporas participation in the financial sector. Accounting and Finance Assistant Professor at Wollega University told to The Ethiopian Herald, the Diaspora's participation in the financial sector would supplement Ethiopia's forex reserves and plays an important role in easing the existing chronic forex crunch.

On the other hand, the establishment of Diaspora Banks have a role to provide significant number of jobs for the educated youth. Another economist with the experience in banking industry, Mushe Semu remarks that the Diaspora's rich knowledge and experience is significant to ensure technological transfer and ease of doing business whilst the financial sector could benefit from their management skills.

The Ethiopian herald July 6/2021

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