Tag: National Bank of Ethiopia



Directives No. SBB/ 48/2010     DOWNLOAD (PDF)


1. Issuing Authority

These Directives are issued by the National Bank of Ethiopia pursuant to the authority vested in it by articles 21 and 22 of Banking Business Proclamation No. 592/2008.

2. Short Title

These Directives may be cited as “Asset Classification and Provisioning for

Development Finance Institutions Directives No. SBB/ 48/2010”.

3. Purpose

The purpose of these Directives is to provide guidelines to development finance institutions to assure that:

3.1loans are regularly reviewed and prudently classified in a manner that appropriately reflect credit risk;

3.2loans which are not performing in accordance with contractual repayment terms are timely recognized and reported as past due ;

3.3accrued but uncollected interest on loans is properly accounted for; and

3.4timely and adequate provisions are made to the “Provisions for Loan Losses Account” in order to ensure that disclosed capital and earnings performance are accurately stated. Continue reading “ASSET CLASSIFICATION AND PROVISIONING FOR DEVELOPMENT FINANCE INSTITUTIONS Directives No. SBB/ 48/2010”

The Requirements to Carry on Insurance Business in Ethiopia

(Taken from Law of Banking, Negotiable Instruments and Insurance

Prepare by Fasil Alemayehu and Merhatbeb Teklemedhn
Sponsoredby Justice Justice and Legal System Research Institute)

           The Requirements to Carry on Insurance Business
Art 656 of the Commercial Code provides that the law shall determine the conditions under which physical persons or business organizations may carry on insurance business.
Therefore, we have to refer to other parts of the commercial code and other laws to find out as to who may undertake insurance business and the conditions under which it may be undertaken. Accordingly, Art 513 of the code provides that banks and insurance companies cannot be established as private limited companies, i.e., a private limited company cannot engage in banking, insurance or any other business of similar nature. Similarly, Art 6(1) of the Licensing and Supervision of Insurance Business Pro No 86/1994 provides that no person may engage in insurance business of any type unless it applies to and acquires a license from the National Bank
of Ethiopia for the particular class or classes of insurance. Furthermore, Art 4(1) and Art 2(3) of the same proclamation provide that such person has to be a share company as defined under Art 304 of the commercial code.
These requirements / conditions in effect prevent foreigners from engaging in insurance business and foreign banks from opening branches and operating in Ethiopia. The most probable reason for this position is the need to protect infant domestic insurance companies which do not have the desired financial strength, knowhow and human resources to be able to compete with foreign banks which have superior capacity in these areas.
The other condition that a person must fulfill to obtain a license relates to the minimum capital of the company, i.e., it must have a minimum capital of 3 million Birr if it is applying for license to undertake general insurance business i.e., insurances other than insurance of persons, and 4 million Birr if it is applying for a license to undertake long term insurance business, i.e., insurance of persons and 7 million where the application is to undertake both classes of insurance. Such capital has to be paid up in cash and deposited in a bank in the name of the company to be established as an insurance company.