The African Development Bank (AfDB) has approved a $400,000 grant to bolster Ethiopia’s capital market infrastructure, marking a significant shift in efforts to deepen financial systems across the continent. The funding, awarded through the Capital Markets Development Trust Fund (CMDTF), is aimed at strengthening the Ethiopian Capital Market Authority (ECMA) and expanding the capabilities of the Ethiopian Securities Exchange (ESX).
Beyond the borders of Ethiopia, this move signals a wider continental shift, where Africa’s nascent capital markets are increasingly being seen as tools for financing long-term sustainable development. With growing emphasis on green bonds, sukuks, and exchange-traded funds (ETFs), the development lays critical groundwork for countries to diversify their economies and unlock private and institutional finance for climate-smart growth.
Launched in 2021, ECMA is Ethiopia’s financial market regulator, while the ESX is tasked with running the national securities exchange. Both institutions are relatively young, reflecting Ethiopia’s recent embrace of liberalized economic reform. The new grant will support ECMA in developing a public disclosure platform to improve transparency and boost investor confidence. For ESX, the grant will support the diversification of its product offerings—including the much-anticipated entry of green bonds and Islamic finance instruments into the market.
According to Hana Tehelku, Director General of ECMA, the partnership with AfDB “reflects a shared vision for a vibrant and resilient Ethiopian capital market.” She emphasized that the initiative is expected to improve market integrity and draw both domestic and international investment into Ethiopia’s economy.
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While Ethiopia is the immediate beneficiary, the impact of the grant resonates more widely across Africa’s evolving financial landscape. This is the first CMDTF-funded project outside West Africa, signaling the AfDB’s broader intent to build resilient capital markets across the continent. As African countries face growing pressure to secure climate finance, such developments present an opportunity to reduce dependency on donor aid and tap into capital market instruments tailored for sustainability goals.
“Robust capital markets are no longer a luxury; they are a necessity for sustainable development,” said Ahmed Attout, Director for Financial Sector Development at the AfDB. He noted that the intervention is aligned with the Bank’s broader vision of transforming African economies into financial hubs capable of efficiently mobilizing long-term resources.
Indeed, the inclusion of green bonds in Ethiopia’s upcoming market expansion is especially timely. Across Africa, public and private institutions are increasingly turning to green bonds to finance renewable energy, resilient infrastructure, water systems, and other climate adaptation and mitigation priorities. However, many countries lack the institutional frameworks to support such instruments—making AfDB’s technical assistance a vital piece of the puzzle.
Africa’s financial markets remain underdeveloped compared to global standards, often constrained by shallow investor pools, limited products, and weak regulatory infrastructure. However, initiatives like this one are changing that narrative. From Kenya’s green bond issuances to Nigeria’s growing ETF market, and now Ethiopia’s move into diversified financial instruments, the trend is clear: capital markets are becoming a frontline tool in financing Africa’s green transition.
The Capital Markets Development Trust Fund, established in 2019, now manages a growing $6 million portfolio across 16 African countries. With initial projects concentrated in West Africa, the Ethiopia Capital Market Development Support Project signals a continental expansion that aligns financial market growth with broader development objectives—including inclusive finance, climate resilience, and private sector development.
For African countries, the path to climate-aligned economic transformation will require more than climate pledges, it demands strong institutions, robust policy frameworks, and dynamic financial ecosystems. Ethiopia’s latest milestone, supported by AfDB, could be a model for others to follow.
