By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Khest MediaKhest MediaKhest Media
  • Sport
    Sport
    Show More
    Top News
    Preview: PAOK vs. FCSB thumbnail
    Preview: PAOK vs. FCSB
    2 octobre 2024
    Preview: Rennes vs. Monaco thumbnail
    Preview: Rennes vs. Monaco
    4 octobre 2024
    Brighton 3-2 Tottenham: Highlights, man of the match, stats as Seagulls complete remarkable comeback thumbnail
    Brighton 3-2 Tottenham: Highlights, man of the match, stats as Seagulls complete remarkable comeback
    7 octobre 2024
    Latest News
    Ajax release seven players via WhatsApp, including two former Premier League players
    1 juillet 2025
    Fulham ‘closing in’ on new Tete deal in blow to Toffees
    1 juillet 2025
    Seventh heaven! Brits enjoy epic-breaking opening day at Wimbledon
    1 juillet 2025
    Staunch Madrid receive major injury boost ahead of Juventus clash
    1 juillet 2025
  • Politique
    Politique
    Show More
    Top News
    Diplomatie: la crise entre Alger et Abou Dhabi prend une nouvelle dimension
    10 février 2024
    Macron prévient à son tour que reconnaître un Etat palestinien n’est plus ‘un tabou’ | TV5MONDE
    16 février 2024
    Présidence LR : Défait à plates coutures, Laurent Wauquiez a-t-il encore un avenir politique ? thumbnail
    Présidence LR : Défait à plates coutures, Laurent Wauquiez a-t-il encore un avenir politique ?
    21 mai 2025
    Latest News
    Présidence LR : Défait à plates coutures, Laurent Wauquiez a-t-il encore un avenir politique ?
    21 mai 2025
    Etats-Unis : « J’aimerais être pape », Trump fait de l’humour (et un peu de politique aussi) avant le conclave
    1 mai 2025
    Etats-Unis : Donald Trump est-il complètement zinzin ou bien fin stratège politique ?
    12 avril 2025
    EN DIRECT Droits de douane annoncés par Trump : Face à la politique américaine, L’UE se dit « prête à défendre ses intérêts »…
    6 avril 2025
  • Economie
    EconomieShow More
    La Mauritanie prend la présidence de l’Union Africaine
    17 février 2024
    Burkina Faso : Mali, invité d’honneur du Salon international de l’agriculture
    17 février 2024
    La BAD prête à financer la réhabilitation de la route Ngaoundéré-Garoua
    16 février 2024
    Rwanda: le bureau local du Mécanisme en charge des derniers dossiers du TPIR fermera bientôt ses portes
    16 février 2024
    Financement des PME camerounaises : la Société financière internationale réfléchit à de nouvelles pistes 
    17 janvier 2024
  • Actu
  • My Bookmarks
  • Services
    • Social SphereChat
    • Hercael SuiteWork
    • TswanWeb
      • Web Creator
      • Web Hosting
      • Web Agency
Search
  • Advertise
© 2024 Khest Media. All Rights Reserved.
Reading: Ethiopia: Ethiopia’s Financial Sector At Risk
Share
Sign In
0

Votre panier est vide.

Notification Show More
Font ResizerAa
Khest MediaKhest Media
0
Font ResizerAa
  • Sport
  • Politique
  • Economie
  • Santé
  • Congossa
  • Arnaqueur
  • Job
  • Technologie
  • Voyage
Search
  • Acceuil
    • Actualité
    • Dernières sorties
  • Catégories
    • Sport
    • Politique
    • Economie
    • Congossa
    • Societe
    • Arnaqueur
    • Technologie
    • Job
  • My Bookmarks
  • Khest Media
    • Sphere
    • Khest Video
    • StoreBox
    • Hercael Suite
    • Tswan Agency
    • Tswan Hosting
Have an existing account? Sign In
Follow US
  • Advertise
© 2024 Khest Media. All Rights Reserved.
Khest Media > Actu > All > Ethiopia: Ethiopia’s Financial Sector At Risk
All

Ethiopia: Ethiopia’s Financial Sector At Risk

AllAfrica
Last updated: 08/10/2024
AllAfrica All
Share
6 Min Read
Ethiopia: Ethiopia's Financial Sector At Risk thumbnail
SHARE

Financial distress is often defined as the looming threat of bankruptcy, which hinges on a company’s liquid assets and access to credit. It typically arises when a business posts consecutive losses–negative pre-tax operating income or net income–for at least three years. Empirical analysis reveals that once a company enters financial distress, it faces severe cash flow constraints and is often forced to halt dividend payments. Sharp dividend cuts, combined with sustained negative income, serve as early warning signs of looming financial instability.

The financial health of a nation, much like a corporation, depends on a robust and resilient financial system. This system is an intricate web of institutions, markets, instruments, and–perhaps most importantly–customer-centric services. The stability of a financial system, and the risk of a crisis within it, hinges on a deep understanding of systemic risks.

Financial institutions, especially banks and insurance companies, act as conduits, directing cash flows from savers to investors. They help bridge gaps between surplus and deficit economies, striving for balanced regional development. In this context, a nation’s banking sector plays a pivotal role in judiciously allocating resources that fuel economic growth and enhance global competitiveness. Consequently, financial development is a critical predictor of future economic growth, capital accumulation, and technological progress. However, when financial distress disrupts these flows, it can stifle economic activity and curtail growth prospects.

The collapse of major global corporations–Enron, WorldCom, Xerox, Lehman Brothers, AIG, and Freddie Mac–has propelled financial distress to the forefront of corporate finance debates. In sub-Saharan Africa, countries like Nigeria, Kenya, Uganda, and Tanzania have faced their own financial crises, where banks experienced severe distress. This resulted in closures, mergers, and national takeovers, demonstrating that no region is immune to the challenges of financial instability.

The banking sector is the backbone of Ethiopia’s economy. It serves as a crucial pillar within the financial system, providing essential capital to produce goods and services, which in turn raises the standard of living. Banks play a key role in fostering economic development by facilitating the flow of resources from savers to investors. However, the lack of access to financial services remains a significant contributor to poverty in Ethiopia. Formal financial institutions often fail to provide sufficient credit facilities to the poor, highlighting the need for alternative mechanisms to bridge this gap.

While informal credit markets are prevalent in rural Ethiopia, they come at a high cost–moneylenders frequently charge exorbitant interest rates, discouraging the rural poor from making productive investments. The failure of formal financial institutions to meet the needs of impoverished households, coupled with the exploitative nature of informal lending, exacerbates income inequality across the country.

The issue of financial distress within the banking industry is of paramount concern, not only for Ethiopia but for stakeholders across the global economy. A banking crisis in any nation can easily spiral into a broader economic crisis, underlining the critical importance of maintaining a healthy financial system. In Ethiopia, where the financial sector has witnessed rapid economic growth and has focused on poverty alleviation, the stakes are particularly high.

Despite opportunities presented by trade liberalization, rapid population growth, untapped resources, and increased privatization, the country’s financial sector remains vulnerable to financial distress. Challenges such as limited outreach, inefficient operations, insufficient funding, high leverage, low liquidity, and poor resource mobilization continue to impede its stability. Ineffective management practices and the sector’s inability to mobilize resources effectively exacerbate these vulnerabilities. Key determinants of financial distress in Ethiopia include liquidity issues, low profitability, high leverage, firm size, capital adequacy, inflation, and fluctuating interest rates.

Addressing these challenges requires a comprehensive understanding of the root causes of financial distress, both at the company and macroeconomic levels. This will enable stakeholders to develop strategies to mitigate the risks and preemptively address issues before they escalate.

Sign up for free AllAfrica Newsletters

Get the latest in African news delivered straight to your inbox

To improve the sector’s resilience, the government must take active steps to support the banking industry. This includes providing adequate funds and incentives to boost efficiency, enhance access to financial services, and cultivate a culture of saving and credit. Banks, in turn, should focus on strengthening their management teams, hiring experienced personnel, and improving governance practices. Institutions with weak financial health must reduce nonperforming loans, bolster capital adequacy by raising minimum capital requirements, and enhance loan recovery mechanisms.

In sum, policymakers and industry leaders must consider both company-specific factors and broader economic conditions when crafting strategies to address financial distress. A proactive and coordinated approach will be essential to safeguard Ethiopia’s financial future and prevent crises from derailing its development trajectory.

(Ameha Hailemariam holds a Master of Arts in Economics from Indira Gandhi National Open University, with experience in the banking sector and as a financial analyst.)

Contributed by Ameha Hailemariam

Read More

You Might Also Like

Christophe Gleizes condamné en Algérie: “Nous allons nous mobiliser pour obtenir sa libération”, déclare Jean-Noël Barrot

Mort de l’académicienne Florence Delay

La météo pour ce mercredi 2 juillet 2025

Quel est l’impact économique de la canicule?

Embraer, le “petit” avionneur qui monte: le constructeur vend 55 avions à SAS et joue des coudes entre les géants Airbus et Boeing

Sign Up For Daily Newsletter

Be keep up! Get the latest breaking news delivered straight to your inbox.

By signing up, you agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.
Share This Article
Facebook Twitter Whatsapp Whatsapp LinkedIn Telegram Copy Link
Share
Previous Article Malawi: Malawi Presidents Aloof Have Too A lot Unregulated Vitality, Says Correct Pupil Prof. Mwiza Nkhata thumbnail Malawi: Malawi Presidents Aloof Have Too A lot Unregulated Vitality, Says Correct Pupil Prof. Mwiza Nkhata
Next Article Uganda: Uganda At 60 thumbnail Uganda: Uganda At 60
Leave a review Leave a review

Leave a review Annuler la réponse

Votre adresse e-mail ne sera pas publiée. Les champs obligatoires sont indiqués avec *

Please select a rating!

Restez Connecté

23.5kFollowersLike
6.4kFollowersFollow
19.5kMembersFollow
- Sponsorised -

Publications Récentes

Netflix annonce une nouveauté astronomique et vraiment pas comme les autres thumbnail
Netflix annonce une nouveauté astronomique et vraiment pas comme les autres
GameBlog Entertainment 1 juillet 2025
PS Plus : les jeux gratuits de juillet 2025 disponibles, il y a du très lourd thumbnail
PS Plus : les jeux gratuits de juillet 2025 disponibles, il y a du très lourd
GameBlog Entertainment 1 juillet 2025
Monster Hunter Wilds déploie une nouvelle mise à jour d'urgence, voici ce qui change thumbnail
Monster Hunter Wilds déploie une nouvelle mise à jour d’urgence, voici ce qui change
GameBlog Entertainment 1 juillet 2025
LEGO : deux sets de licences cultes et adorés ont leaké, ça sent le carton thumbnail
LEGO : deux sets de licences cultes et adorés ont leaké, ça sent le carton
GameBlog Entertainment 1 juillet 2025
//

Nous touchons près de 40 mille internautes en tant que réseau d’informations business au Cameroun.

 

Accès Rapide

  • Sport
  • Politique
  • Economie
  • Santé
  • Congossa
  • Arnaqueur
  • Job
  • Technologie
  • Voyage

Categories Top

  • BUSINESS
  • TECHHot
  • HEALTH

Sign Up for Our Newsletter

Subscribe to our newsletter to get our newest articles instantly!

Khest MediaKhest Media
Follow US
© 2024 Khest Media. All Rights Reserved.
Join Us!

Subscribe to our newsletter and never miss our latest news, podcasts etc..

Zero spam, Unsubscribe at any time.
khest media retina logo khest media retina logo
Welcome Back!

Sign in to your account

Register Lost your password?